Market drivers and catalysts
Equities: Stocks rebounded sharply Friday; futures down ahead of Fed decision
Volatility: VIX fell significantly; caution persists ahead of economic data and Fed decision
Digital Assets: Crypto stable; MicroStrategy leads crypto-stock gains; cautious mood ahead of Fed meeting
Currencies: US dollar rebounds again versus the JPY
Fixed Income: European yield largely unchanged despite German moves to secure new stimulus measure.
Commodities: Gold pauses near $3000, Crude up on China stimulus and geo-risks
Macro events: US Feb. Retail Sales
Macro data and headlines
China announced new stimulus measures aimed at boosting consumption, saying it would “vigorously boost consumption” and “expand domestic demand in all directions”. The plan is to focus on raising incomes, stabilising the real estate- and stock markets and improving the social safety net. The announcement was accompanied by few details.
US University of Michigan consumer sentiment fell to 57.9 in March 2025, the lowest since November 2022, from 64.7 in February, missing the forecast of 63.1. The expectations component plunged to 54.2 vs. 63.0 expected. This is the third monthly decline, with consumers worried about policy and economic uncertainty.
US University of Michigan long term inflation expectations for the next 5 to 10 years spiked to 3.9% from 3.5% in February. This is the highest reading in the survey since 1993. The year-ahead inflation expectations rose to 4.9% in March 2025, the highest since November 2022, up from 4.3% in February, according to the University of Michigan Consumer Survey's preliminary estimate.
German chancellor-in-waiting Friedrich Merz agreed with the Green and Social Democrat parties on borrowing reforms, allowing a parliamentary vote over the next week. The changes exempt defence spending from debt limits and create a €500 billion infrastructure fund. Investors lowered expectations for ECB rate cuts as policymakers turned hawkish, with President Lagarde warning that trade disruptions and increased spending could affect inflation stability.
President Donald Trump will speak with Russian President Vladimir Putin on Tuesday to discuss an end to fighting in Russia's war in Ukraine. Trump mentioned that the discussion would involve territory and power plants. Putin has so deflected efforts to halt the fighting and has insisted on conditions that would be difficult for Ukraine to accept.
Macro calendar highlights (times in GMT)
0700 – China holds press conference on measures to boost consumption
1230 – US Feb Retail Sales
Earnings events
Wednesday: General Mills, Williams Sonoma
Thursday: Accenture, Nike, Micron, Fedex, Lennar, Hapag-Lloyd, Darden Restaurants
Friday: Carnival Cruise
Equities
US: US stocks rallied on Friday, recovering from correction territory amid optimism over avoiding a government shutdown. The S&P 500 rose 2.1%, Nasdaq +2.5%, and Dow +1.7%. Tech stocks bounced sharply, with Nvidia surging 5.3% ahead of CEO Jensen Huang’s anticipated keynote at this week's GTC conference. Tesla rose 3.9% on reports of a lower-cost Model Y planned for Shanghai. Today, futures indicate weakness as investors await critical retail sales data and Wednesday’s Fed policy decision.
Europe: European markets closed higher Friday, boosted by news of Germany's anticipated debt reform vote and increased state borrowing. The DAX (+1.9%) outperformed, driven by defense and materials stocks; Rheinmetall (+6.3%), Heidelberg Materials (+3.8%), and Airbus (+3.9%) led gains. CAC 40 (+1.1%) and FTSE 100 (+1.1%) also advanced, with defense stocks like Thales (+4.9%) and BAE Systems (+4.1%) leading gains. Investors focus on Tuesday’s German parliament vote.
Asia: Asian equities rose Monday, buoyed by China's targeted consumption stimulus plan. Hong Kong’s Hang Seng advanced 1.6%, extending gains from last week, amid positive economic data including stronger-than-expected industrial output. South Korea’s KOSPI surged 1.5%, driven by tech gains and optimism about China's stimulus measures. Japan’s Nikkei rose 1.1%, with eyes on Wednesday's Bank of Japan meeting. Regional sentiment remains cautious, however, amid ongoing trade tensions with the US
Volatility
Volatility retreated Friday, with VIX down sharply (-11.7%) to 21.77 as markets rebounded. Futures today suggest caution, with S&P and Nasdaq futures down 0.6%-0.7%, and VIX futures up 2%. The week's volatility hinges on key macro events, including today's US retail sales and Wednesday’s Fed rate decision and press conference. Market liquidity conditions and geopolitical developments, especially Trump's upcoming call with Putin, will be closely watched.
Digital Assets
Crypto markets showed cautious optimism, with Bitcoin slightly higher at $82,966 (+0.5%) and Ethereum stable at $1,888 (+0.1%). XRP and Solana also rose modestly. Crypto stocks like MicroStrategy surged 13.0% amid positive sentiment. Traders await the Fed’s upcoming meeting amid tariff-related economic uncertainties.
Fixed Income
European bonds bounced back Friday from an intraday sell-off when Germany’s coming chancellor Merz suggested a path to a massive fiscal spending deal has been agreed with other parties. The German 10-year Bund peaked above 2.93%, testing the cycle highs once again, only to fall back to close the week at 2.88%.
Japan’s government bond yields dropped sharply at the front end of the curve, with the 2-year trading at 0.81% late in the Tokyo session today. This is perhaps on uncertainty over the impact of US tariff threats.
Commodities
Gold briefly breached USD 3,000 on Friday before profit-taking emerged despite weak University of Michigan sentiment data, with key support now at USD 2,956. Growth concerns, sticky inflation, combined with global economic and geopolitical tensions, and fiscal debt concerns continue to support prices. While hedge funds have been net sellers in recent weeks, total ETF holdings have climbed to an October 2023 high.
Crude prices trade firmer but well below key resistance near USD 74, supported by China's plans to boost consumption and fresh Red Sea risks after the US launched attacks on Iran-backed Houthi militants in Yemen. The risk of tightening sanctions on Iran and weak positioning in the futures market continues to offset demand concerns and rising OPEC+ production
Currencies
USDJPY rebounded again to the 149.00 area, perhaps as US University of Michigan survey data on Friday suggested strong inflation concerns and a weak growth outlook, pointed to the risk of stagflation, with US treasury yields at the front end of the yield curve pulling higher into the Friday close.
The Australian dollar weakened overnight, with the AUDNZD cross falling below 1.1000 for the first time since early February. The pair has not posted a daily closed below that level since December
