Global Market Quick Take Europe - 29 January 2025

Global Market Quick Take: Europe – 29 January 2025

Key points

• Equities: Tech rebounds; Nvidia +8.9%; Fed meeting in focus; Europe hits record highs
• Volatility: VIX drops; market stabilizes ahead of Fed, ECB, and earnings catalysts
• Digital Assets: : Bitcoin recovers; Czech central bank eyes BTC reserves
• Currencies: USD mixed ahead of FOMC, AUD hit by weak CPI readings
• Commodities: Crude and copper keep dancing to the rhythm of Trump's tariff orchestra
• Fixed Income: US yields trading near key lows ahead of FOMC
• Macro events: Sweden’s Riksbank, Bank of Canada, FOMC Rate Decision

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

Macro data and headlines

• OpenAI says it has found evidence that Chinese AI startup DeepSeek used OpenAI’s models to train its models, which could represent intellectual property theft. The technique of “distillation” could have allowed a smaller AI model like DeepSeek’s to learn from the output of larger models like OpenAI’s ChatGPT. White House AI czar David Sacks said that “it is possible” that this is a form of intellectual property theft. Could the Trump administration use this as grounds for imposing tariffs?
• Australia’s Q4 CPI came in slightly below expectations for headline and core numbers, with the QoQ headline at +0.2% QoQ and +2.4% YoY vs. +0.3%/2.5% expected, respectively and 2.8% YoY in Q3. The core “trimmed mean” figure was out at +0.5% QoQ and 3.2% YoY vs. +0.6%/3.3% expected, respectively. December headline CPI was out at 2.5% YoY as expected and trimmed mean CPI at 2.7% YoY vs. 3.2% in Nov.

Macro events (times in GMT)

Sweden Riksbank Interest Rate Announcement (0830), US Dec. Advance Goods Trade Balance (1330), Canada Bank of Canada Rate Decision (1445), US Weekly DoE Crude Oil and Product Inventories (1530), US FOMC Rate Decision (1900), US Fed Chair Powell Press Conference (1930)

Earnings events

• Today: ASML, Microsoft, Meta, Tesla, T-Mobile US, ServiceNow, IBM, Danaher
• Thursday: Apple, Visa, Mastercard, Roche, Blackstone, Thermo Fisher Scientific, Shell, Caterpillar, Comcast, UPS, ABB
• Friday: ExxonMobil, Abbvie, Chevron, Samsung, Novartis, Eaton

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

Equities

• US: US equities rebounded Tuesday as tech stocks surged, recovering from the AI-driven selloff triggered by DeepSeek. The Nasdaq jumped 2.03%, S&P 500 gained 0.92%, and Dow added 0.31%, with Nvidia (+8.9%) leading the recovery after its record single-day loss. Royal Caribbean (+12%) soared on upbeat guidance, while General Motors (-8.9%) dropped despite strong earnings. Investors now focus on today’s Fed rate decision, where rates are expected to remain steady, but Powell’s guidance will be key. Futures indicate a cautious open ahead of the announcement.
• Europe: European stocks closed at record highs, with the STOXX 600 up 0.4% as AI-related selloff fears eased. Tech (-0.3%) remained under pressure, with ASM International (-3.7%) and Schneider Electric (-7.5%) extending losses. In contrast, Sartorius (+11.5%) and Siemens Energy (+7.5%) rallied on strong earnings. Retail stocks (+2.1%) led gains, and Spain’s IBEX hit a 15-year high as unemployment fell. With the ECB decision tomorrow, traders anticipate rate-cut guidance amid improving sentiment.
• Asia: Asian stocks bounced back, with Japan’s Nikkei up 0.5% as tech names recovered. Advantest (+2.7%), Tokyo Electron, and SoftBank steadied after the DeepSeek-driven plunge. Sony (+4.1%) surged after appointing a new CEO. Australian markets hit a two-month high on soft inflation data, raising rate cut expectations. Hong Kong’s Hang Seng (+0.14%) closed slightly higher in a short session before the Lunar New Year holiday. China, South Korea, and Taiwan remain closed for the week.

Volatility

Market volatility eased significantly, with the VIX falling to 16.41 (-8.32%), while short-term volatility also dropped (VIX1D -8.21%, VIX9D -9.81%). VIX futures softened (-0.53%), reflecting market confidence ahead of today’s FOMC decision and Powell’s remarks. Put/Call ratios dropped to 0.746 (-18.14%), signaling lower hedging activity. With earnings from Microsoft, Meta, Tesla, and ASML due, alongside the Fed statement, traders remain cautious, though market sentiment appears more stable than earlier in the week.

Digital Assets

Bitcoin rebounded 1.19% to $102,530, recovering from recent weakness, while Ethereum (+2.05%) and Solana (+2.71%) outperformed. Crypto stocks struggled, with MicroStrategy (-3.45%) and Riot (-4.37%) lagging. Markets are on edge over Trump’s unclear crypto policies and his looming trade tariffs against China, Canada, and Mexico. Meanwhile, the Czech National Bank is considering a 5% Bitcoin allocation, marking a potential breakthrough for institutional adoption.

Fixed Income

• US 2-year and 10-year treasury benchmark yields remain near recent lows ahead of the FOMC meeting tonight as the path of Fed rates beyond today’s assumed pause remains uncertain. Watch for President Trump’s response to the Fed decision today and Fed Chair Powell’s press conference as reporters will inevitably be asked about the pressure on the Fed to cut rates from Trump. The 4.50% level on the US 10-year is an important level.
• German yields traded higher yesterday, with the 10-year Bund closing well above the important 2.50% level ahead of tomorrow’s ECB meeting.

Commodities

• Crude prices keep dancing to the rhythm of Trump's tariff orchestra, with Canada tariffs in focus as they go into effect on Saturday. Overall prices trade a tad softer after Libya said exports have resumed and API reported a weekly increase in US stockpiles. In addition, OPEC+ is expected to stick to their already announced production increase from April.
• Gold resumed its rally to trade around $30 below its all-time high as investors continue to seek shelter from an unpredictable US government, with tariffs potentially lifting inflation, as well as concerns about the US economy’s spiraling debt, which few believe can and will be brought under control. Focus on today's FOMC meeting and the subsequent press conference.
• Copper prices in London and New York diverged again on Tuesday after Trump said he would place tariffs on copper and aluminum produced overseas. The announcement supported US High Grade prices amid fears over the cost of importing copper to meet short sellers' commitments.
• The BCOM agricultural Total Return index trades up 4.4% this month, led by Arabica coffee (+12.8%) and live cattle (+8%), both hitting record highs, followed by corn (7.3%) which trades near a 15-month high. Tight supply amid production worries being the main driver.

Currencies

• The Aussie weakened on the back of the CPIdata overnight, with AUDNZD touching its lowest level of the year below 1.1010 at one point as the market price in firmer odds of a cut from the RBA this month, with more cuts to follow later this year.
• The US dollar traded flat after starting the week with a jolt higher on the latest Trump comments on wanting to assess “much bigger” broad tariffs than the 2.5% level suggested by Secretary of Treasury Bessent.