Market Quick Take - 31 January 2025

Market Quick Take – 31 January 2025

Key points

• Equities: Apple beats earnings, IBM +13%; ECB cuts rates, DAX, IBEX hit records
• Volatility: VIX falls, markets confident ahead of PCE, Apple eases uncertainty
• Digital Assets: Bitcoin flat, Trump tariffs pressure risk, El Salvador adjusts Bitcoin law
• Currencies: USD firmer on Trump threats he will impose tariffs this weekend.
• Commodities: Strong months for sector led by coffee, silver, copper and gold
• Fixed Income: Weak Q4 growth figures, ECB take European yields lower. US 10-year treasury benchmark survives test of 4.50%
• Macro events: US December PCE Inflation

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.

Macro data and headlines

• US officials are investigating whether Chinese AI startup DeepSeek circumvented US restrictions on Nvidia chip sales by buying them through third parties in Singapore. DeepSeek's chatbot, R1, has raised suspicions that it may have been built using Western technology, and the investigation highlights concerns about the effectiveness of US attempts to cut China off from advanced technology
• President Trump declared he would impose 25% tariffs on goods from Canada and Mexico this Saturday, a move that could lead to a trade war, causing price surges for consumers and increased costs for American manufacturers reliant on imported materials. However, the scope of the duties remained unclear after Trump declined to say if they, as an example, would also apply to much-needed Canadian oil imports.
• President Trump later (after above comments on Mexico and Canada) added that he would move forward with tariffs on China as well. He also demanded commitments from BRICS countries that they would not seek to replace the US dollar, saying in a social media post that if they attempted to do so “they will face 100% Tariffs, and should expect to say goodbye to selling into the wonderful US Economy. They can go find another sucker Nation.”
• ECB: after cutting its policy rates 25 basis points yesterday as expected, taking the deposit rate to 2.75%, sources at the ECB cited by Bloomberg suggest that the central bank may stop calling its policy rate “restrictive” after another 25 basis point cut in March as the bank tries to determine the neutral point for policy rates, estimated somewhere between 1.75%-2.5%. The market has fully priced the ECB to take its policy rate some 75 basis points lower through the December meeting this yar.

Macro events (times in GMT)

January CPI France (0745) & Germany (1300), US 4Q Employment Cost Index, Dec Personal Spending & Core PCE Price Index (1330).

Mainland China, Hong Kong and Taiwan still shut for Lunar New Year

Earnings events

• Today: ExxonMobil, Abbvie, Chevron, Samsung, Novartis, Eaton
• Next week: Alphabet, Amazon.com, Eli Lilly, Novo Nordisk, Toyota, Merck , AstraZeneca, Linde, Pepsico, Disney, Philip Morris, L’Oreal, Advance Micro Devices, Qualcomm, Palantir, Amgen, Pfizer, Spotify, Ferrari, Paypal, Fortinet

For all macro, earnings, and dividend events check Saxo’s calendar.

Equities

• US: US equities gained, with S&P 500 +0.53%, Nasdaq +0.45%, Dow +0.38%, driven by Apple’s strong earnings (+3% after hours). The tech giant posted revenue growth despite weaker iPhone sales, boosting sentiment. Intel (+4%) and KLA (+3%) also rallied on earnings beats. IBM surged 13%, while Mastercard rose 3.1% on strong consumer spending. Investors are now focused on today’s PCE inflation report, a key Fed indicator, as Trump’s tariff threats loom. Futures point higher, with Nasdaq +0.64% pre-market.
• Europe: European stocks hit record highs, with STOXX 50 +0.7% and STOXX 600 +0.6%, as the ECB cut rates by 25bps and signaled more easing. DAX reached an all-time high (+0.4%), while Spain’s IBEX hit its highest since 2008. Tech rebounded from the AI selloff, led by Nokia (+6.7%) and STMicro (-10.7%), while Deutsche Bank (-4%) fell on weak profits. Traders now turn to US PCE inflation data for global market direction.
• Asia: Asian markets traded mixed, as Trump’s tariff threats against BRICS nations rattled sentiment. Japan’s Nikkei was flat, despite a rise in Tokyo inflation, reinforcing BOJ rate hike bets. SK Hynix (-11%) and Samsung (-2.6%) slumped as South Korea’s KOSPI fell 1.3%, reacting to global AI weakness. Australia’s ASX hit record highs (+0.3%) on rate cut optimism, while Singapore’s Straits Times (+2%) outperformed, fueled by a post-Lunar New Year rally in banks and industrials.

Volatility

Volatility dropped, with VIX at 15.84 (-4.35%), as markets showed confidence ahead of PCE data. Short-term measures (VIX1D: -8.74%, VIX9D: -8.71%) also fell below the standard VIX, signaling low fear. S&P 500 and Nasdaq futures are up 0.30% and 0.64%, suggesting positive momentum. Earnings from Apple contributed to the decline in volatility, as markets shrugged off recession concerns.

Digital Assets

Bitcoin fell slightly (-0.21% to $104,506), staying in a tight range between $100K-$105K as traders await PCE inflation data. Trump’s tariff threats against BRICS added pressure, overshadowing optimism on crypto regulation. El Salvador passed a Bitcoin law amendment to secure an IMF relief deal, reducing mandatory Bitcoin acceptance. Altcoins were mixed, with Ethereum (+0.42%) and Solana (-0.31%) trading flat. Crypto sentiment remains cautious, with high volatility expected post-PCE report.

Fixed Income

• US yields dipped yesterday, with the 10-year treasury benchmark briefly testing just below the critical 4.50% on a weak preliminary US Q4 GDP estimate before rising to close the day within the recent range at 4.52%.
• The ECB meeting was read as slightly dovish relative to expectations, with short European yields testing multi-week lows, but the slide in yields started earlier in the day on weak Q4 GDP estimates from France, Germany and the Eurozone. The German 10-year bund tested the key 2.50% level before closing the day at 2.52%

Commodities

• Commodity markets are poised for a monthly gain, with all sectors—energy, metals, and agriculture—showing positive performance. The Bloomberg Commodity Index is up approximately 4.5%, driven by strong performances in precious metals (8.3%) and soft commodities (4.9%). Leading the individual commodities are Arabica coffee, platinum, silver, HG copper, and gold.
• Spot gold reached a new record high, just under USD 2800, as investors seek safety amid a turbulent stock market week and potential global trade war threats from Trump's tariff announcements, which could fuel inflation and slow growth. Silver was the standout performer on Thursday, with a rush to secure deliveries to the NY futures exchange before potential tariffs are implemented.
• Crude oil's recent significant correction has paused, with prices finding support after Trump reiterated his plans to impose tariffs on Canada and Mexico. If these tariffs were to include the roughly 4 million barrels per day of Canadian crude flowing south, it could disrupt supplies to Midwest refiners, potentially driving up gasoline and diesel prices.

Currencies

• The US dollar firmed late yesterday on President Trump’s threats to tariff Mexico, Canada and China on persistent trade deficits with the former two and on fentanyl-related accusations for all three. The price action was sharp but relatively contained, as USDMXN rose a bit over 1% but peaked within this week’s range, while USDCAD squeezed to new multi-year highs above 1.4550 before retreating back well below 1.4500 late yesterday and easing lower still in the Asian session overnight.
• The euro traded choppily over the ECB announcement and the President Lagarde press conference, but ended the day on the lows of the session below 1.0400 after a spike to 1.0467 during the press conference and as the US dollar firmed broadly on Trump’s latest tariff threats, though Europe didn’t appear in his comments.