Market Quick Take - 21 February 2025

Market Quick Take – 21 February 2025

Key points

• Equities: US markets fell; Walmart (-6.5%) led retail slump; Chinese tech surged; Europe mixed on earnings
• Volatility: VIX rose 2.55%; VIX1D up 20.17%; traders hedging risk amid uncertainty
• Digital Assets: Bitcoin near $100K; SEC relaxes oversight; crypto stocks mixed.
• Currencies:
• Commodities:  Fourth weekly gain led by natural gas, aluminum and crude
• Fixed Income: JGB slump halted by intervention threat. US yields fall on Bessent comments
• Macro events: Eurozone, UK and US Feb PMIs, US University of Michigan Sentiment

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

Macro data and headlines

• The British Pound rose after UK retail sales including auto fuels exceeded all estimates after rising 1.7% m/m in January, the biggest increase since May.
• Markets turned risk off after Walmart’s outlook disappointed. Risk sentiment was further dampened by weaker-than-expected data and geopolitical uncertainty due to tensions between the US and Ukraine. White House National Security Advisor Waltz criticised Ukraine's negative remarks about the US, urging them to reconsider and consider making a deal with the US on access to minerals in Ukraine and stating that differences could be resolved through shuttle diplomacy for peace talks.
• Japan's annual inflation rate rose to 4.0% in January 2025 from 3.6%, the highest since January 2023. The monthly CPI increased by 0.5%, following December's 0.6% rise. The core CPI, excluding fresh food but including fuel, rose 3.2% year-on-year, surpassing expectations of 3.1% and marking the highest since June 2023.
• US Philly Fed Business Index for Feb was out at 18.1 vs. Exp. 14.3 expected and the US Leading Index Change MM for January out at  -0.3% vs. Exp. -0.1% (Prev. -0.1%, Rev. 0.1%)

Macro calendar highlights (times in GMT)

• Feb PMIs from France (0815), Germany (0830), Eurozone (0900), and UK (0930)
• 1445 – US Feb preliminary S&P Global PMI
• 1500 – US Final Feb University of Michigan Sentiment
• 1500 – US Jan Existing Home Sales

Earnings events

• Today: Air Liquide , Leonardo, Standard Chartered

Next Week

• Monday: Oneok, Zoom
• Tuesday: The Home Depot, Intuit, Workday, Coupang, Keurig Dr. Pepper
• Wednesday: Nvidia, Salesforce, Deutsche Telekom, Lowe’s, TJX, AB Inbev, Synopsys, CRH, Snowflake, Monster Beverage, Danone, Stellantis, Ebay
• Thursday: Axa, Dell, EOG Resources, Autodesk, Eni, Swiss Re, HP, Warner Brothers
• Friday: BASF, Holcim

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

Equities

• US: US stocks fell Thursday as Walmart's weak outlook triggered a broad selloff. The S&P 500 (-0.43%), Nasdaq 100 (-0.48%), and Dow Jones (-1.01%) dropped, with Walmart (-6.5%) dragging Target (-2%) and Costco (-2.6%) lower. Financial stocks slumped, with Goldman Sachs (-3.8%), JPMorgan (-4.4%), and Morgan Stanley (-4.5%) leading losses. Palantir (-5.2%) fell on defense budget concerns. Celsius Holdings surged 34% post-market on strong earnings. Investors now focus on PMI data and home sales.
• Europe: European stocks ended mixed as earnings reports and trade concerns pressured sentiment. The STOXX 50 closed flat, while the STOXX 600 (-0.2%) edged lower. The DAX (-0.5%) extended losses, with Mercedes-Benz (-2.5%) falling on weak guidance. Airbus (-2.3%) warned of potential US tariff impacts. Schneider Electric (+3%) posted record revenue, lifting sentiment. In France, the CAC 40 (+0.2%) rebounded, led by STMicroelectronics (+1.9%) and Eurofins Scientific (+5.7%), while Carrefour (-8.3%) plunged on disappointing results.
• Asia: Asian markets surged as Chinese tech stocks hit multi-year highs. The Hang Seng Index (+2.9%) jumped, led by Alibaba (+8.1%) after a strong earnings report. The Hang Seng Tech Index (+4.7%) posted its longest winning streak since 2020, fueled by AI optimism and DeepSeek’s market impact. Lenovo (+12%) hit a 10-year high, and Nissan (+11%) extended gains on Tesla partnership rumors.

Volatility

VIX rose to 15.66 (+2.55%) as market uncertainty increased. VIX1D spiked 20.17%, reflecting near-term risk hedging. Traders piled into VIX call options, raising concerns of a potential volatility squeeze. Analysts warn that dealers are heavily short gamma, which could amplify market swings if volatility spikes further.

Digital Assets

Bitcoin nears $100K as SEC softens crypto oversight. BTC traded at $98,395 (+0.10%), while Ethereum (ETH +0.67%) remained steady. XRP (-1.29%) and Solana (-0.17%) lagged. Crypto stocks saw mixed action, with IBIT (+2.54%), Marathon Digital (+1.08%), and Riot Platforms (+0.35%) gaining. The SEC’s decision to scale back its crypto enforcement unit lifted sentiment, pushing crypto market capitalization to $3.23 trillion (+1.49%).

Fixed Income

• Treasuries traded higher for a third day after Treasury Secretary Scott Bessent said that any move to boost the share of longer-term Treasuries in government debt issuance is some way off given current hurdles that include elevated inflation and the Federal Reserve’s quantitative tightening program. US 10-year benchmark at 4.49% this morning.
• JGBs rose after Bank of Japan Governor Kazuo Ueda signaled readiness to intervene in the bond market to quell a surge in yields, reiterating the central bank's long-standing commitment to supporting stability. Earlier in the session benchmark yields touched a fresh 15-year high of 1.455% after CPI accelerated in January.

Commodities

• The commodities sector is heading for a fourth weekly gain with all sectors except softs trading higher, led by surging US natural gas on strong winter demand and record exports, and robust gains in crude oil. Despite seeing some light profit-taking, the precious metals continue to find demand with gold heading for its eighth consecutive weekly gain. Industrial metals are trading mixed, with a recent New York-led squeeze in copper running out of steam while the Russian sanctions threat lifted aluminium prices.
• Gold shows sign of consolidating, and despite the biggest weekly inflows to ETFs since 2023, prices softened after US Treasury Secretary Scott Bessent's dismissed speculation of a government revaluation of its gold holdings. The non-stop rally since December remains unchallenged unless prices drop to around USD 2850.

Currencies

The US dollar traded on the weak side yesterday on Secretary of Treasury comments on issuing longer term debt and Fed QT policy as US long yields fell. EURUSD teased above 1.0500 and USDJPY traded as low as 149.29 overnight before rallying sharply on BoJ comments on intervening in the Japanese Government bond market overnight (see above in Fixed Income).