Market Quick Take - 27 March 2025

Market Quick Take - 27 March 2025

Market drivers and catalysts

• Equities: US auto tariffs; tech selloff; European autos decline; Asian tech and auto stocks hit
• Volatility: VIX spikes significantly; heightened short-term risk; cautious outlook
• Digital Assets: Cryptocurrencies steady; mining stocks sharply lower; GameStop's Bitcoin move
• Currencies: EUR pressured by tariff threats; GBP declined on weak CPI and budget update
• Fixed Income: US Treasuries edged lower, reversing recent gains
• Commodities: Gold supported by fresh haven demand; Oil drillers warn about Trump chaos hurting output
• Macro events: Norway rate decision, US trade, initial jobless claims and home sales

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

Macro data and headlines

• Tariff news: Trump floated more tariffs on the EU and Canada if they worked against the US, and signed an order to slap a 25% tariff on all cars not made in the US, effective April 3
• US factory orders for business equipment unexpectedly fell in February amid tariff and tax policy uncertainty. Core capital goods orders dropped 0.3%, while shipments rose 0.9%. Machinery and equipment investment is set to rebound this quarter, but GDP growth may still slow.
• Trump said he would consider lowering tariff rates imposed on China to secure Beijing's support for a sale of TikTok's US operations to an American company.
• Mixed Fed signals: Neel Kashkari from the Federal Reserve Bank of Minneapolis expects interest rates might decrease in the next year or two as inflationary pressures ease. Meanwhile, Alberto Musalem from the Federal Reserve Bank of St. Louis warns that tariff-related inflation could persist, possibly keeping rates steady, and stresses the importance of stable inflation expectations.
• Industrial profits in China fell 0.3% in the first two months of 2025 compared to the same period last year, suggesting the recovery in China's economy remains fragile and may be hurt by rising tariffs and deflationary risks. A turnaround in profits is essential to encourage companies to invest and hire, thereby boosting domestic consumption

Macro calendar highlights (times in GMT)

0900 – Norway Rate Decision
1230 – Revised US 4Q GDP, Core PCE Price Index
1230 – US Feb Trade Balance
1230 – US Initial Jobless Claims
1400 – US Feb Pending Home Sales
1430 – EIA's Natural Gas Storage Change

Earnings events

• Wednesday: Paychex, Cintas, Exor, Dollar Tree
• Thursday: Lululemon, Hennes & Mauritz, Walgreens Boots

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

Equities

• US: US stock futures dropped sharply after President Trump announced a 25% tariff on foreign-made cars, effective April 2. General Motors (-6%) and Ford (-5%) led declines, with the S&P 500 falling 1.12%, Nasdaq 100 down 2.04%, and Dow off 0.31% amid tech selloff concerns. Major losers included Tesla (-5.6%), Nvidia (-5.7%), Meta (-2.5%), Palantir (-4.4%), and Amazon (-2.2%). Market sentiment remains cautious, anticipating broader economic repercussions and retaliatory measures. Barclays revised its 2025 S&P 500 target downward from 6,600 to 5,900.
• Europe: European markets declined in reaction to US auto tariffs, with the Stoxx 50 down 1.4% and Stoxx 600 losing 0.7%. Auto stocks (-2.5%) significantly impacted by tariffs announcement, notably German automakers Porsche, BMW, Mercedes, Volkswagen, and Audi. DAX (-1.14%) and CAC 40 (-0.97%) also ended lower, impacted by tariff concerns and disappointing corporate earnings, including Michelin (-6.08%) and Infineon (-3.60%). Investors remain cautious ahead of Eurozone credit and money supply data releases.
• Asia: Asian stocks mostly fell due to renewed trade tensions from US auto tariffs. Japan’s Nikkei declined 1.1% due to losses in major automakers like Toyota, Honda, and Nissan. South Korea’s KOSPI fell 1%, impacted similarly. Conversely, Hong Kong’s Hang Seng (+0.6%) and China’s markets showed resilience, driven by optimism around Chinese tech and anticipated stimulus. Significant tech losses hit TSMC (-1.8%) and Advantest (-7%) amid US data center concerns.

Volatility

VIX jumped significantly (+7%), reflecting increased market anxiety following Trump's tariff announcement, reaching 18.45. Short-term volatility measures surged (VIX1D +31.48%, VIX9D +10.83%) indicating heightened immediate market fears. VIX futures slightly elevated, suggesting cautious trading ahead of GDP and jobless claims data

Digital Assets

Cryptocurrencies edged higher despite broader market tension. Bitcoin rose slightly (+0.47% to $87,329), Ethereum gained (+0.77%), and altcoins XRP (+0.24%) and Solana (+1%) advanced modestly. Crypto mining stocks notably dropped after Microsoft scrapped AI data center investments, causing steep declines in Riot (-7.17%) and CleanSpark (-6.99%). GameStop shares fell (-8%) after announcing plans for a $1.3 billion Bitcoin investment via convertible notes.

Fixed Income

• US Treasury losses spread across the curve following the sale of $70 billion 5-year notes, while SOFR options demand grew for Fed-on-hold strategies. US 10-year yields trades at 4.35% and with the 2-year holding steady around 4%, the 2s-10s curve has seen a small bear-steepening to 33.7 bps. A roller coaster day in Gilts saw 10-year yields decline in a bull flattening move after the DMO's gilt remit fell short of predictions.

Commodities

• Crude futures rose after US inventories fell by the most since December, reinforcing expectations of tighter conditions in the short term. Also, a Dallas Fed survey showed Trump tariff chaos and quest to drive down prices were threatening producers' drilling plans, warning US production may decline as companies rein back spending plans.
• Gold rose with haven demand picking up after Trump unleashed a fresh set of tariffs, leading to fresh declines in the equity market. Also, Goldman Sachs lifted their year-end price forecast to USD 3,300—in line with Saxo’s outlook—driven by central bank demand and solid inflows to bullion-backed ETFs.
• Grain and soybeans traders await Monday’s Prospective Planting and Quarterly Stocks reports from the US government. Corn acreage is expected to increase, while it is expected to be lowered for both soybeans and wheat. The stocks report, meanwhile, is expected to show a year-over-year drop in corn, with soybeans and especially wheat both rising

Currencies

• USD gained strength due to headlines related to tariffs, stronger-than-expected Durable Goods data, and a subdued risk sentiment, with the DXY reaching a two-week high at 104.65.
• EUR faced pressure from tariff threats, with reports indicating that EU Trade Chief Sefcovic anticipates President Trump will impose tariffs of approximately 20% on all 27 EU member states next week. EURUSD experienced a volatile day before declining due to the FT article, ending trading lower for a sixth consecutive day.
• GBP declined following weaker-than-expected UK CPI data and Chancellor Reeves's Spring Statement, which avoided new tax hikes. The OBR cut GDP forecasts and maintained a "very small" fiscal headroom of GBP 9.9 billion. GBPUSD reached a 1.2870 low before bouncing overnight.
• CAD strengthened past 1.43 against USD. BoC Minutes showed a 25bps rate cut was made due to tariff threats and uncertainty, despite some members preferring to keep rates stable until more clarity emerged.
• JPY weakened as the USD was favoured due to higher US yields, despite support from weak Japanese services PPI data. USDJPY remains around 150.50, with BoJ Governor Ueda expecting inflation to align with the 2% target as cost-push factors fade.