Market drivers and catalysts
Equities: US-China tariff truce; significant global equity rally; megacap tech gains; pharmaceuticals weaker
Volatility: VIX sharply lower post-trade truce; CPI data crucial for direction
Digital assets: Bitcoin near highs; Coinbase joins S&P 500; significant BTC withdrawals suggest bullish accumulation
Fixed Income: Yields have leaped higher globally on surge in risk sentiment on hopes US trade policy set to soften from here.
Currencies: USD has rallied hard, CNH even harder, on US-China trade war pause
Commodities: Wheat prices slump. Gold rebounds after weathering bearish storm.
Macro events: Germany May ZEW Survey, US April NFIB Small Business Optimism, US April CPI
Macro data and headlines
The US and China agreed to a massive de-escalation in tariffs announcing yesterday morning that the US will slash duties on Chinese products to 30% from 145% for a 90-day period, and Beijing dropping its levy on most US goods to 10%. The deal included the suspension of the elevated "reciprocal" tariff, the establishment of a point person for talks, and agreements on fentanyl and tariffs.
The FT reports that the European Commission is laying the groundwork for capital controls and tariffs against Russia in the event Hungary blocks the extension of the existing sanctions regime
UK April Payrolled employees fell -33k vs. -32k expected, while the Jobless Claims Change for the month was +5.2k, although the March claims number was revised lower to -16.9k versus the original +18.7k. This took the revised March claimant count rate down to 4.5% from 4.6% and April’s rate was also at 4.5%. The ILO 3-month average unemployment rate rose to 4.5% from February’s 4.4% as expected. Average Weekly Earnings in March rose 5.5% YoY vs. 5.2% expected, vs. 5.7% in Feb.
UK retail sales rose by 6.8% in April 2025, the fastest growth in over three years, exceeding the expected 2.4%. This contrasts with a 4.4% decline in April 2024, aided by favourable spring weather and Easter falling in April. Food sales increased by 8.2%, compared to a 1.6% drop last year.
Trump signed an executive order asking drug makers to lower prices voluntarily to levels paid abroad or face regulatory measures. The order, however, was considered vague and weaker than expected with pharmaceutical companies bouncing following an early Monday slump.
Macro calendar highlights (times in GMT)
0600 – UK March Unemployment Rate
0900 – Germany May ZEW Survey
0900 – Eurozone May ZEW Survey
1000 – US April NFIB Small Business Optimism
1230 – US April CPI
Earnings events
Today: Softbank, Nu Holdings
Wednesday: Tencent, Cisco Systems, Sony
Thursday: Walmart, Deutsche Telekom, Allianz, Mitsubishi Financial, Deere, Applied Materials
Friday: Richemont
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
US: US stocks surged Monday as investors cheered the US-China trade truce, reducing tariffs significantly for 90 days. The Nasdaq soared 4.35%, S&P 500 climbed 3.26%, and Dow jumped 2.81%. Consumer discretionary (+5.5%) and megacaps like Tesla (+6.8%), Amazon (+8.1%), and Apple (+6.2%) led gains, while pharmaceuticals lagged amid Trump's drug price cut plans. However, futures dipped early Tuesday as optimism slightly faded, reflecting concerns over economic impacts despite tariff relief. Investors now await key CPI data for inflation clues under the new trade conditions.
Europe: European markets rallied strongly Monday, buoyed by significant tariff cuts in the US-China trade agreement. STOXX 50 rose 1.56%, STOXX 600 added 1.1%, both at highs unseen since March. Luxury firms surged, notably LVMH (+7.5%) and Kering (+6%). Germany's DAX saw moderate gains (+0.29%), and France’s CAC 40 hit a six-week high (+1.37%). Markets cautiously held steady early Tuesday ahead of German ZEW economic sentiment data and UK retail and employment figures.
UK: FTSE 100 climbed 0.59% Monday to close at its highest in over a month, driven by optimism around the US-China tariff truce. Mining giants such as Rio Tinto and Anglo American rose notably (3.5%-7%), while pharmaceuticals underperformed. Early Tuesday indicators pointed slightly lower amid cautious sentiment despite upbeat UK retail and housing data, reflecting broader uncertainties.
Asia: Asian markets mostly rose Tuesday, following strong overnight gains from the US-China tariff reduction news. Japan’s Nikkei (+1.7%) and Australia's ASX 200 (+0.7%) led regional gains. However, Hong Kong’s Hang Seng retreated (-1.54%) due to profit-taking and deflation concerns resurfacing in China. Mainland Chinese markets saw limited gains (CSI 300 +0.2%), as stimulus expectations moderated with easing trade tensions.
Volatility
Volatility fell sharply Monday, with the VIX dropping to 18.39 (-16.03%), signaling reduced market fear after the US-China tariff truce. Short-term indicators, VIX1D and VIX9D, plunged dramatically, reflecting decreased immediate market anxiety. However, uncertainty remains regarding longer-term tariff impacts. Investors watch Tuesday's CPI release closely, anticipating possible volatility swings depending on inflation outcomes.
Digital Assets
Bitcoin traded near its all-time high, around $102,489, despite a minor pullback. The crypto market saw notable withdrawals from exchanges like Binance, indicating investor accumulation amid improving macro sentiment following the US-China tariff truce. Coinbase surged (+3.96%) as it prepares to join the S&P 500, reflecting growing mainstream acceptance of digital assets. Crypto stocks were mixed, with strong performances from Riot (+2.59%) and CleanSpark (+4.57%).
Fixed Income
US treasury yields rose further amidst broad positive risk sentiment yesterday on the 90-day suspension of US-China tariffs, with the 10-year treasury benchmark trading this morning up some 8 basis points from the Friday close after not quite threatening the key 4.50% psychological level. The short end of the yield curve rose as well, as the 2-year yield hit the 4.0% level for the first time in over a month.
Sovereign bond yields around the world jumped on the rise in US treasuries and on higher growth hopes as the US and China stepped away, at least temporarily, from the high tariff levels. The German two-year Schatz leapt 13 basis points to close at 1.91% yesterday, with the 10-year German bund rising over 8 basis points to close at 2.65%. Japan’s government bond yields also rose sharply, with the 10-year JGB benchmark up some 8 points yesterday and another couple of basis points today, trading near 1.46% in mid-afternoon in Tokyo today.
US high-yield corporate credit spreads tightened sharply yesterday, suggesting strong appetite for the riskiest debt. The Bloomberg High Yield spread to US treasuries indicator we track collapsed 38 basis points to close at 305 basis points, near a two-month low.
Commodities
Grains: CBOT wheat futures fell to near a five-year low; soybeans rose, while corn held steady following yesterday’s session, which saw US-China trade tensions deescalate, supporting soybeans, while the USDA gave its monthly status report on supply and demand. Wheat fell in response to forecasts pointing to a bigger-than-expected world and US stockpiles.
Gold trades higher after once again finding support near USD 3,200, thereby managing to weather a storm of potential price-negative news. Support was once again provided by Asian investors, while rising US bond yields may shift the focus from easing trade tensions back to fiscal debt concerns.
Crude’s week-long rebound has run out of steam, confirming a range-bound market, with the focus moving from easing trade tensions support to the Middle East and Trump’s upcoming visit, and progress in Iran nuclear talks that may boost supply. Immediate attention now turns to monthly oil market reports from OPEC on Wednesday and the IEA on Thursday.
Currencies
The US dollar rallied hard yesterday as the massive reduction, at least temporarily, of the embargo-like US-China mutual tariff levels sparked hope that trade war détente will continue and leave the window open to recycling US deficits into US asset markets, as well as lifting the outlook for the US economy. EURUSD traded all the way down to 1.1072 yesterday before bouncing modestly above 1.1100 overnight, while USDJPY ripped all the way to 148.65 yesterday on the combination of a stronger US dollar and higher US treasury yields. USDJPY consolidated back below 148.00 overnight. Elsewhere, USDCAD touched 1.4000 yesterday briefly for the first time in a month.
Swimming very much against the stream overnight, the Chinese yuan has been strengthening modestly against a very strong US dollar and therefore has strengthened sharply across other major currencies since Friday’s close. EURCNH, for example, is down at 7.99 this morning after an 8.15 close on Friday.
- Key data from the US this week includes the April CPI report up today and the April Retail Sales report on Thursday.
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