Key points
Stocks dropped, USD rose on Trump tariffs and concern on retaliatory tariffs. The 25% duties on all aluminium and steel imports to the US were announced yesterday and are set to go in effect on March 12. Canada is the largest supplier of aluminium to the US, which relies on imports for more than 40% of its consumption. Trump also threatened retaliatory tariffs on any country assessing new tariffs against the US. One of the top beneficiaries of the tariff move was US steel-maker Cleveland Cliffs, which jumped nearly 18% yesterday.
Fed Chair Powell’s Testimony & Inflation Data – Powell’s Congressional testimony today will be closely monitored for rate policy guidance, especially with US January CPI data due tomorrow. A hot inflation print could disrupt expectations of two Fed rate cuts in 2025, influencing market sentiment and rate-sensitive assets.
Market Volatility & Policy Uncertainty – Investors are navigating rising geopolitical risks, trade uncertainty, and central bank policy shifts. With the ECB’s Lagarde and the BoE’s Bailey and Catherine Mann speaking today, European markets will react to any new monetary policy signals amid ongoing economic headwinds.
Earnings events
Today: Coca-Cola, S&P Global, Shopify, Gilead Sciences, Marriott International, BP, DoorDash, Southern Copper, Unicredit
Wednesday: Softbank, CME Group, Williams Companies, CVS Health, Robinhood, Siemens Energy, Heineken
Thursday: Siemens, Applied Materials, Unilever, Sony Group, Palo Alto Networks, Deere & Company, Moody’s, AirBnB, Coinbase, Adyen, Datadog
Friday: Hermes, Safran, Enbridge
Equities
US Markets: US stocks rose Monday, led by tech and steel stocks despite heightened trade war fears. The S&P 500 closed +0.67%, Nasdaq 100 gained 1.2%, and Dow Jones added 0.38%. Nvidia (+2.9%), Broadcom (+4.5%), and SMCI (+17.6%) led the charge, while McDonald’s jumped 4.8% on strong sales. Steelmakers surged after Trump’s 25% steel and aluminum tariff, with Cleveland-Cliffs +17.9% and Nucor +5.6%. Futures fell slightly as traders await Fed Chair Powell’s testimony and Wednesday’s inflation report.
European Markets: Europe extended gains as DAX hit a record 21,933 (+0.7%), FTSE 100 rose 0.5%, and CAC 40 gained 0.4%. Tech, industrials, and energy outperformed, with Siemens Healthineers, MTU Aero Engines, and Zalando leading. BP soared 7.3% after Elliott Management’s activist stake. Investors remained cautious about Trump's tariffs and China’s retaliation, but European stocks continued to benefit from lower valuations relative to US peers.
Asian Markets: Asian equities had a mixed session. Hong Kong's Hang Seng lost 0.4%, snapping a three-day winning streak as markets reacted to Trump's global 25% steel and aluminum tariffs. However, AI optimism lifted tech stocks, with Meituan +5.4% and Xiaomi +3.1%. South Korea’s KOSPI gained 1%, with chipmakers and autos benefiting from trade optimism. BYD surged 4.5%, hitting an all-time high as it launched low-cost autonomous driving features, escalating the EV price war.
Volatility
The VIX fell 4.41% to 15.81, indicating stabilized sentiment despite tariff fears. The VIX1D (-30%) and VIX9D (-6.2%) show that short-term risk expectations eased. However, VIX futures rose 5.08%, signaling possible volatility ahead of Powell’s testimony. Put/call ratios declined, with equities seeing more call buying, suggesting continued bullish positioning. Market watchers expect increased swings during Powell’s Q&A session.
Digital Assets
Bitcoin rebounded +0.88% to $98,304, Ethereum +1.55%, XRP +3%, and Solana +2.14%. Crypto-related stocks followed, with COIN +2.09% and MSTR +2.16%. Florida and North Carolina proposed bills to invest state funds in Bitcoin, adding bullish momentum. Meanwhile, analysts see a 90% chance of Litecoin ETF approval this year, with XRP and Solana ETFs also gaining traction.
Fixed Income
Japanese government bond yields rose all along the curve in a bear steepening move as the 10-year yield rose to a new cycle high of 1.32%
US treasury yields backed up slightly yesterday on the tariff announcements, with the 10-year trading at the pivotal 4.50% level ahead of Fed Chair Powell testimony today and tomorrow, US January CPI tomorrow and a 3-year Treasury auction today, 10-year auction tomorrow and 30-year T-Bond auction on Thursday.
Commodities
Gold hit a record $2,942.70/oz, fueled by inflation concerns and trade war risks. Silver firmed at $32.16/oz, while oil remained steady, with WTI at $72.46 (+2.1%) and Brent at $76.08 (+1.6%), supported by tightening Russian supply and geopolitical risks. Trump’s tariffs could disrupt the US energy sector, particularly oil drillers reliant on imported specialty steel.
Arabica coffee futures surged almost 25 cents to a new record high above $4.21/lb. on ongoing concerns of supply shortages, chiefly from Brazil.
Currencies
The US dollar traded sideways against a soft euro and somewhat firmer Japanese yen, with less reactivity to Trump’s posturing on tariffs than in previous episodes. Key event risks this week await, including Fed Chair Powell testimony today before a Senate Panel and tomorrow before a House Panel, but as the Fed Chair has taken pains to remove forward guidance from the Fed’s playbook, it is tough to see this as a major catalyst. The CPI data tomorrow, further tariff announcements, and the direction in US treasury yields are likely the focus for USD traders
The Scandies SEK and NOK strengthened further yesterday, led by NOK, which powered higher on a hot January core inflation data point from Norway yesterday. EURNOK trades near 11.56 this morning, not far from the 7-month low at 11.52, while EURSEK likewise trades just above its 7-month low of 11.25.
The Aussie firmed in the crosses yesterday, with AUDNZD rising to the highest level of the year, hitting 1.1138 overnight before easing back, perhaps in part as surging copper prices weighed. Australian leaders are already moving to ask Trump to consider tariff exemptions.
