Key points
Equities: US closed for Presidents' Day; European defense stocks surge; Asia rallies on Xi's pro-business shift
Volatility: VIX stable; S&P 500 futures green; Trump press conference could shake markets
Digital Assets: Bitcoin -0.50%; ETH -2.99%; XRP -4.06%; BTC-S&P 500 correlation hits zero
Currencies: A “hawkish cut” from the RBA boosts the Aussie
Commodities: Political jitters boost gold. Crude up on potential OPEC+ delay
Fixed Income: 10-year JGB jumps to new cycle high. US 10-year opens week near key 4.50%
Macro events: Germany Feb. ZEW Survey, Canada Jan. CPI, New Zealand RBNZ Rate Announcement
Equities
US: US stock markets were closed on Monday for Presidents' Day, but futures edged higher in light trading. Investors anticipate the latest FOMC minutes and upcoming economic data, including February’s manufacturing and services PMIs. Fed Governor Christopher Waller reinforced the case for delaying rate cuts, citing stronger economic data. This week, earnings from Arista Networks, Occidental Petroleum, Analog Devices, Walmart, and Constellation Energy will be closely watched. Last week, the Dow +0.55%, S&P 500 +1.47%, Nasdaq +2.58%, buoyed by easing tariff concerns.
Europe: European stocks reached fresh record highs, driven by surging defense stocks, as expectations of increased military spending intensified ahead of Ukraine peace talks. The STOXX 600 +0.6%, with Rheinmetall +14%, SAAB +16%, BAE Systems, and Leonardo surging. The DAX +1.3%, also closing at a record high. Meanwhile, US-Russia peace negotiations are set to begin in Saudi Arabia, though Ukraine’s participation remains uncertain. The UK Supreme Court ruling on motor finance hit Close Brothers (-8%) and Lloyds (-1.9%).
Asia: Asian equities rallied, led by tech stocks after President Xi’s rare meeting with business leaders, including Alibaba (+4.3%), Tencent (+3.4%), and Xiaomi (+6%). The Hang Seng Tech Index +3% to a three-year high, while the Hang Seng Index +2%, hitting its highest since October. Investors see the meeting as a potential end to China's regulatory crackdown. Hong Kong stocks surged further amid pro-business signals and PBoC Governor Pan Gongsheng’s call for policies boosting household income.
Volatility
Volatility indicators rose slightly post-holiday. VIX futures at 17.20 (+0.11%), while SKEW +2.8% and VVIX +1.5% suggest cautious positioning. Futures indicate a green open for equities, with S&P 500 futures +0.35% and Nasdaq 100 futures +0.45%. President Trump’s upcoming press conference could inject volatility, given his market-moving remarks. With no major economic data releases today, traders are focused on earnings and geopolitical developments.
Digital Assets
Bitcoin -0.50% to $95,305 as crypto markets declined, following a strong run-up. Ethereum -2.99%, XRP -4.06%, Solana -6.87%. Crypto stocks saw mixed moves, with Coinbase -7.98%, MicroStrategy +3.94%, Riot +0.33%. Bitcoin’s correlation with the S&P 500 hit zero, indicating potential independence from equity markets. Regulatory developments remain key, as the SEC is reportedly considering pausing its appeal in the Ripple case, signaling a possible shift in its crypto enforcement strategy.
Fixed Income
US yields opened higher overnight with the 10-year yield hovering just above the key 4.50% level after last week produced a spike to 4.65% on hot January CPI data followed by a plunge to 4.45% on weak January Retail Sales
Japan’s government bond yields continued their march higher in a bear steepening move, with the 2-year rising another basis point to a cycle high of 0.83% and the 10-year jumping nearly 4 basis points, trading above 1.43%
Commodities
Gold trades back above $2900, up 11% year-to-date, as traders continue to seek shelter amid concerns over tariffs, US policy uncertainty and growing tensions between the US and the EU. Silver meanwhile is keeping up with gold despite an overnight drop in copper prices where a recent and premature rally has run out of steam.
Crude prices rose on speculation OPEC+ may decide once again to delay a planned April production increase, in response to global demand concerns and recent soft price action. Meanwhile, a Kazakhstan oil export pipeline was operating at a reduced rate after an attack by drones, offsetting a potential resumption of exports from Kurdistan that has been halted since March 2023
The commodities sector remains strong, with the Bloomberg Commodity TR Index showing a YTD gain of 7.6%, outperforming the S&P 500 and MSCI World by a decent margin. All sectors are in the black, led by softs and precious metals, with the top five BCOM members being coffee, natural gas, copper, silver and gold
Currencies
The Aussie jumped on the RBA’s “hawkish cut”, jumping back well north of 1.1100 in AUDNZD and eyeing local resistance there near 1.1150, with the post-2022 high of 1.1180 the next area of note ahead of the RBNZ’s own rate decision tonight, with the bank expected to cut the Official Cash Rate another 50 basis points to take it to 3.75%.
The US dollar firmed slightly as US treasuries opened on a weak note overnight after yesterday’s holiday.
EURGBP posted its lowest daily close since January, trading near 0.8300 ahead of this morning’s overall strong batch of UK earnings, employment and claims data.
