Market Quick Take - 4 February 2025

Market Quick Take – 4 February 2025

Key points

• Equities: Trump delays Mexican and Canadian tariffs, stocks recover, earnings in focus
• Volatility: VIX spikes, then retreats, short-term indicators remain high
• Digital Assets: Bitcoin and altcoins rebounded yesterday, China’s tariffs keep risk high and cause crypto's to retreat this morning
• Currencies: US dollar in climax reversal as Mexico and Canada avoid tariffs for now
• Commodities: Gold holds near record highs. Oil tanks as trade war focus shifts to China
• Fixed Income: Short European yields drop sharply on Eurozone CPI. US 10-year yield benchmark rebounds from test below 4.50%
• Macro events: US Dec. JOLTS job openings, New Zealand Q4 employment data, Japan Dec. earnings data

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

Macro data and headlines

• US President Trump delayed tariffs on Mexico and Canada for 30 days. US President Trump announced that after a conversation with Mexican President Sheinbaum, she agreed to deploy 10,000 Mexican soldiers immediately at the US-Mexico border. They also agreed to pause the anticipated tariffs for one month to allow for further negotiations. Additionally, Canada’s Prime Minister Trudeau announced a series of measures on border security, which will likewise see Trump’s threatened 25% tariffs against the country’s imports delayed for 30 days to determine if a final economic agreement with Canada can be reached.
• The new 10% tariffs on US imports of all Chinese goods (with no exception this time for shipments of under USD 800) went into effect this morning at 0501 GMT, and China announced a series of countermeasures on select US imports like oil, coal, LNG and agricultural equipment, while also announcing export controls on tungsten-related materials. China also added a couple of US companies to its unreliable entities list and announced an investigation into Google for antitrust violations.

Macro events (times in GMT)

US Dec. JOLTs Job Openings (!500), US Dec. Factory Orders (1500), New Zealand Q4 Employment Data (2145), Japan Dec. Earnings Data (2330), China Jan. Caixin Services PMI (0145)

Mainland China is back from Lunar New Year celebrations tomorrow.

Earnings events

• Today: Alphabet, Merck, PepsiCo, AMD, Amgen, Pfizer, KKR, UBS, Spotify, Ferrari, Paypal, Mondelez, Intesa Sanpaolo, BNP Paribas, Nintendo
• Wednesday: Novo Nordisk, Toyota, Disney, Qualcomm, Boston Scientific, Uber, TotalEnergies, Fiserv
• Thursday: Amazon.com, Eli Lilly, AstraZeneca, Linde, Philip Morris, L’Oreal, Honeywell, ConocoPhillips, Bristol-Myers Squibb

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

Equities

• US: US stocks fell Monday, but recovered some losses after President Trump postponed Mexican import tariffs by a month following discussions with President Claudia Sheinbaum. The S&P 500 -0.76%, Nasdaq -1.2%, Dow -0.28%, initially plunged on trade war fears before rebounding from deeper declines. Tech stocks led losses, with Apple (-3.4%), Nvidia (-2.8%), and Tesla (-5.2%) struggling amid uncertainty over tariffs. Defensive sectors like healthcare and consumer staples outperformed as investors rotated into safer assets. Palantir surged 23.5% post-market after strong earnings and revenue guidance, fueling optimism for today’s earnings-heavy session, featuring Alphabet, AMD, and PayPal.
• Europe: European markets slumped Monday, with STOXX 50 -1.4% and STOXX 600 -0.9%, as Trump’s tariffs on China, Canada, and Mexico rattled sentiment. However, stocks pared losses after Trump delayed Mexican tariffs by a month. Auto stocks were hit hardest, with Stellantis (-4.5%) and Volkswagen (-4.3%) falling due to their North American exposure. Industrials and banks also faced selling pressure, with Schneider Electric, Siemens, Santander, and BBVA down between 2.5%-3%. Meanwhile, DAX (-1.5%) and CAC 40 (-1.2%) closed lower, as investors braced for potential tariffs on the EU.
• Asia: Asian equities had a mixed session as markets digested Trump’s tariffs and their implications for global trade. Japan’s Nikkei -0.8%, South Korea’s KOSPI +2.2% (rebounding from losses), and Australia’s ASX 200 -1.9% all moved on tariff-related uncertainty. Hong Kong’s Hang Seng surged +2.3%, buoyed by tech and EV stocks, as investors speculated that Trump might negotiate with China after postponing tariffs on Canada and Mexico. China’s markets remain closed, but offshore Chinese equities rose as investors anticipated stronger stimulus from Beijing.

Volatility

Volatility spiked Monday, with the VIX rising to 18.62 (+13.33%), hitting an intraday high of 20.42, before retreating after Trump delayed tariffs on Mexico and Canada. Short-term indicators (VIX1D +10.54%, VIX9D +22.27%) remain elevated, signaling ongoing market anxiety. VIX futures (+0.61%) suggest cautious positioning ahead of a busy earnings week and key economic data releases, including JOLTS Job Openings today and Nonfarm Payrolls on Friday. Options activity remains high, particularly in Mag-7 stocks, reflecting increased hedging and speculation.

Digital Assets

Bitcoin and major cryptocurrencies rebounded as Trump’s delay of tariffs on Canada and Mexico calmed risk-off sentiment. BTC initially rebounded back to $102K, this morning -2.32% at $98,947, Ethereum this morning at $2,722, while altcoins surged, with XRP, Solana and Dogecoin all showing strong rebounds. This morning they are all retreating back below opening levels of yesterday (XRP -5.61%, Solana -4.17%, DOGE -8.25%). Crypto markets initially plunged after Trump’s tariffs, triggering up to $10B in liquidations, but dip buyers stepped in, stabilizing prices. However, uncertainty remains, as China’s tariffs take effect today, with further retaliation possible, as seen in this morning trade.

Fixed Income

• US yields traded quietly at the front end of the yield curve, reacting little to Trump tariff drama, while longer yields rebounded after a test lower intraday, as the 10-year benchmark trades this morning at 4.55% after a test below the key 4.50% level yesterday.
• European yields dropped further yesterday, falling heaviest at the short end of the curve despite the flash January Eurozone CPI estimate coming in slightly firmer than expected. France-Germany spreads hit a new local low of 73 basis points for 10-year debt as the French Socialist party saying it would not support a no confidence vote of the latest government.

Commodities

• Gold hit a fresh record high on Monday, surpassing USD 2,830, as ongoing tariff uncertainty bolstered demand for safe-haven assets. A softer dollar also provided support. Currently, gold remains within a well-defined technical range between USD 2,770 and USD 2,835.
• Crude oil initially surged on concerns over Canadian supply but quickly reversed lower after a one-month tariff delay and escalating trade tensions between the US and China—both major energy consumers. This underscores the market's sensitivity to policy shifts and demand uncertainty.
• Attention now shifts to copper, a key indicator of global growth, as focus turns to China’s potential domestic response to Trump’s 10% tariff on imports. Chinese markets remain closed for the Lunar New Year holiday and are set to reopen on Wednesday.
• European natural gas prices rose to near EUR 55/MWh on Monday, a 15-month high, supported by trade tensions with Europe’s biggest supplier of LNG. In addition, European gas prices are also surging due to depleting inventories, now 52.6% full compared with 69% this time last year, raising restocking challenges ahead of next winter.

Currencies

• The US dollar sold off steeply after its sharp gains on Trump’s weekend tariff threats, creating a climax reversal on most USD charts, especially USDCAD and USDMXN.
• The JPY’s broad strength on risk aversion yesterday also mostly reversed, though USDJPY never really left its rather tight range as US long-end bond yields have also remained rangebound.
• USDCNH remained sideways after its test of the critical 7.375 that China is defending as Trump’s 10% tariffs on Chinese imports went into effect on schedule yesterday.