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Market Quick Take – 7 May 2025

Market drivers and catalysts

• Equities: Trump trade comments unsettle markets; healthcare sector weak; AMD positive earnings
• Volatility: VIX edges up; low options volume ahead of Fed and earnings
• Digital assets: Bitcoin stable; crypto sentiment boosted by US-China trade talks; mixed crypto stocks
• Fixed Income: Long US treasury yields dipped yesterday after strong US 10-year treasury auction
• Currencies: USD rebounded overnight after a weak day yesterday ahead of FOMC meeting tonight
• Commodities: Trade talks lift grains and pro-cyclicals led by crude while gold drops
• Macro events: US FOMC meeting and Fed Rate Decision

Macro data and headlines

• US-China Trade Talks set to kick off later this week. Treasury Secretary Scott Bessent and trade official Jamieson Greer will meet Chinese counterparts in Switzerland, lifting investor sentiment before the Federal Reserve's expected decision to hold interest rates.
• Investors will watch today’s FOMC monetary policy statement and any guidance from Fed Chair Jerome Powell at the FOMC press conference late today for hints on future rate changes amid pressure to ease policy from President Trump.
• Among several other measures targeting support for private sector credit, China’s central bank cut its key policy rate and the reserve ratio requirement for banks to support its economy. The 7-day reverse repo rate was lowered to 1.4% from 1.5%
• The US trade deficit reached a record $140.5 billion, surpassing the forecast of $137 billion. Imports rose 4.4% to $419 billion due to expected tariffs, with increased purchases of pharmaceuticals, passenger cars, and computer accessories. Exports grew by 0.2% to $278.5 billion, led by passenger cars, natural gas, and computer accessories, while civilian aircraft exports declined.
• UK-India trade deal cuts tariffs on 90% of UK imports, with 85% tariff-free within a decade, and reduces whisky, gin, and auto tariffs. It's expected to boost UK GDP by GBP 4.8 billion and trade by GBP 25.5 billion annually by 2040.
• Tensions are running high between India and Pakistan after India launched strikes on seven alleged terror camps in Pakistan after a militant attack in Kashmir killed 26. Pakistan responded, claiming it downed five Indian jets and called the strikes an "act of war,".

Macro calendar highlights (times in GMT)

0730 – Germany April Construction PMI
1430 - EIA's Weekly Crude and Fuel Stock Report
1800 – US Fed Rate Decision

Earnings events

• Today: Novo Nordisk, Uber, Disney, Applovin, Unicredit, Doordash, Fortinet
• Thursday: Toyota, Shopify, Mercado Libre, ConocoPhillips, Nintendo, McKesson, Enel, Rheinmetall, Siemens Energy
• Friday: Enbridge

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

Equities

• US: US equities fell Tuesday with S&P 500 down 0.77%, Nasdaq -0.87%, and Dow Jones -0.95%, amid rising uncertainty from Trump's ambiguous stance on trade deals and record trade deficit ($140.5B in March). Healthcare sector dragged, with Moderna down 12.3% and Eli Lilly off 5.6%. After-hours saw AMD rise 2% on strong earnings, while Rivian and Palantir slipped on outlook concerns. Futures gained slightly as optimism builds around upcoming US-China trade negotiations in Switzerland.
• Europe: European stocks closed lower (STOXX 50 -0.4%, STOXX 600 -0.2%) despite Friedrich Merz's election as German chancellor. Consumer discretionary weighed heavily, led by declines in L'Oreal and EssilorLuxottica. Novo Nordisk fell nearly 4% ahead of earnings, while Intesa Sanpaolo and Ferrari gained on positive results. DAX recovered partly after early heavy losses linked to German political uncertainty.
• UK: FTSE 100 ended flat (+0.01%), marking its 16th straight session of gains, longest streak on record. Investors cautious ahead of the Federal Reserve decision, with mixed corporate news: CRH declined 4.4% following disappointing results, while Associated British Foods slipped 1.5% amid strategic review of Allied Bakeries. UK-US trade deal nearing finalization, potentially easing steel and automotive tariffs.
• Asia: Asian markets mostly rose Wednesday on optimism surrounding US-China trade talks and China’s monetary easing. Hang Seng led gains (+0.7%), bolstered by strong economic data and reduced reserve requirements from China's central bank. India's markets cautious yet resilient amid heightened tensions with Pakistan. Japanese Nikkei (+0.3%) and Australian ASX 200 (+0.2%) edged up modestly ahead of the Fed decision.

Volatility

Volatility rose slightly with the VIX closing up 4.74% at 24.76. Futures modestly lower at 23.75. Market awaits clarity from Fed’s interest rate decision and press conference. Lower-than-average options trading volumes suggest cautious positioning ahead of significant earnings reports (Uber, Walt Disney, ARM).

Digital Assets

Cryptos showed resilience as optimism from upcoming US-China trade talks boosted sentiment. Bitcoin stable around $96,523, Ethereum up slightly at $1,829. Strategy's additional $180M Bitcoin purchase supported markets. Crypto-linked stocks mixed; Coinbase slightly down, while CIFR rose 2%

Fixed Income

• Long US treasury yields dipped late yesterday on a strong US 10-year treasury auction, with the benchmark dipping to 4.3% from a high of 4.37% earlier in the session before rising slightly after hours. The Treasury will auction 30-year T-bonds today as the 30-year treasury yield spread to 10-year treasuries has widened above 50 basis points recently for the first time since late 2021 (back then, 10-yaer yields were only about 1.6%).
• US High yield credit spreads widened slightly yesterday amidst a somewhat downbeat session on Wall Street, with the Bloomberg High Yield spread to US treasuries we track widening 6 basis points off of the one-month lows of the prior day to 357 basis points.

Commodities

• Gold fell more than 1% from a high of USD 3,435 in Asia as attention shifted from India-Pakistan tensions to upcoming US-China trade talks in Switzerland. Having surged 6% in two sessions ahead of the Chinese market reopening, a setback was expected, and while trade talks may ease demand in the short term, a deal may still be difficult to strike.
• Crude rose for a third straight day, initially boosted by short covering after markets priced in the OPEC+ production hike. Gains were supported by reduced US shale drilling, a lowered EIA production forecast, and news of renewed US-China trade negotiations. Ahead of EIA’s weekly stock report, the API reported US stockpiles shrunk by 4.5 million barrels last week.

Currencies

• The US dollar was weak yesterday, with EURUSD rallying above 1.1375 at one point and USDJPY selling off to as low as 142.36 before the USD rose sharply overnight on the news that US-China trade talks will kick off in Switzerland late this week. The market will be on watch for forward guidance from the Fed monetary policy statement released later today at the FOMC meeting, which is not expected to deliver a cut, while probability is at 30% for the FOMC to deliver a 25-bp cut at its June meeting. AUDUSD briefly teased new 5-month highs above 0.6500 before dipping back into yesterday’s range. Key support there at 0.6440.
• EURGBP sold off to new local lows below 0.8465 yesterday as the German Bundestag failed to pass a vote to make Friedrich Merz the next Chancellor but rallied later to trade above 0.8500 as he passed the second vote. Sterling will watch the Bank of England meeting closely on Thursday for forward guidance on the June meeting

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