Market drivers and catalysts
Equities: S yields surge; stocks tumble; tech outperforms in EU; UK inflation up; Asia follows Wall St.
Volatility: VIX spikes to 20.87; short-term jitters; hedging robust; backwardation signals event risk
Digital assets: BTC all-time high; IBIT inflows; US crypto legislation; mainstream adoption grows
Fixed Income: Long US treasury yields jump to new highs after soft auction of 20-year treasuries
Currencies: USD trades sideways, JPY firms again after brief stumble overnight
Commodities: Gold, silver and platinum’s run of gains continues amid US debt worries
Macro events: Eurozone Flash May PMI, ECB Meeting Minutes, US Weekly Jobless Claims
Macro data and headlines
Concerns regarding Trump’s tax bill with an agreement on SALT deductions. Some Republican hardliners remain concerned about insufficient spending cuts, while the CBO estimates the bill will add USD 2.3 trillion to deficits over the next decade, raising fiscal fears.
- Investors are pushing back against Trump's tax-cut plans on concerns it would add trillions of dollars to already bulging deficits, and through their recent actions, which have sent long-end Treasury yields, gold, and Bitcoin higher, and the dollar and equities lower, they are signaling that sustainability issues cannot be ignored.
Japan's core machinery orders rose 13% to ¥1.01 trillion in March 2025, surpassing expectations and reaching a two-decade high due to strong demand. The Jibun Bank Japan Manufacturing PMI increased to 49.0 in May, marking the eleventh consecutive month of contraction but the softest decline since February.
The average interest rate for 30-year fixed-rate mortgages in the US increased by 6bps to 6.92%, the highest in three months, due to higher Treasury yields amid inflation and deficit concerns. A year ago, rates were 7.08%. Jumbo loan rates rose to 6.94%, and FHA-backed mortgage rates went up to 6.6%.
UK's inflation rate rose to 3.5%, the highest since January 2024, from 2.6% in March, surpassing the forecast of 3.3%. Housing and utilities prices drove the increase, with electricity and gas prices rising due to the new Ofgem energy price cap. Housing rents rose by 6.3%, slower than March's 7.2%.
Macro calendar highlights (times in GMT)
0715-0800 – France, Germany, Eurozone Flash May Manufacturing and Services PMI
0800 – Germany May IFO Business Climate Survey
0830 – UK Flash May Manufacturing and Services PMI
1130 – ECB meeting minutes
1230 – US Weekly Initial Jobless Claims and Continuing Claims
1345 – US May Flash Manufacturing and Services PMI
1400 – US Apr. Existing Home Sales
1430 – US Weekly Natural Gas Storage Change
1500 – US May Kansas City Manufacturing Survey
1800 – US Fed’s Williams to Speak
2301 – UK May GfK Consumer Confidence2330 – Japan Apr. National CPI
Earnings events
Today: Intuit, Analog Devices, Workday, Autodesk, Copart
Next Week
Tuesday: Xiaomi
Wednesday: Nvidia, Salesforce, Synopsys, Veeva Systems, Agilent, HP
Thursday: Dell, Marvell Technology, Lululemon, Zscaler, Netapp
Friday: Costco
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
US: US equities tumbled Wednesday as the S&P 500 fell 1.61%, Nasdaq 1.41%, and Dow 1.91%. The selloff followed a spike in Treasury yields after a weak 20-year bond auction, with the 30-year yield reaching 5.08%. Fiscal worries intensified as Trump’s tax-cut bill threatened to widen the deficit, with blue-state Republicans pushing for higher SALT deductions. Target sank 5.2% on weak earnings, while UnitedHealth fell 5.8% on controversy over nursing home payments. Alphabet rose 2.9% after unveiling new AI tools. Futures stabilized overnight, with Lumen Technologies surging in after-hours on M&A news. Key data to watch: weekly jobless claims and S&P PMI.
Europe: European stocks closed flat Wednesday, with the STOXX 50 and STOXX 600 holding at two-month highs. Tech led gains—Infineon rose 2.5% on Nvidia partnership; Deutsche Telekom, ASML, and Nokia also performed well. Consumer discretionary names like Hermes, LVMH, and Kering dropped over 2% on weak Asian demand. German DAX hit a fresh record (+0.36%) as fiscal stimulus outweighed stagnant GDP projections. Premarket Thursday: Eurozone equities seen opening lower, mirroring US losses amid deficit fears. Focus on PMI data and earnings from EasyJet, BT Group, and British Land.
UK: The FTSE 100 ended flat on Wednesday after recovering from early losses. Marks & Spencer surged 5% on strong earnings, while JD Sports fell sharply (-10%) on tariff worries. UK inflation rose to 3.5% in April, complicating Bank of England rate-cut plans. Thursday’s open is set lower, with focus on BT, EasyJet, and British Land results. Commodity headlines: BP signed a major LNG deal; gold touched a two-week high on US debt concerns; copper edged up on a softer dollar.
Asia: Asian stocks fell Thursday, following Wall Street’s drop and higher US yields. Nikkei lost 0.9% as May PMI data disappointed, and trade tariffs weighed on sentiment. Hong Kong’s Hang Seng slid 0.8%, snapping gains, while mainland Chinese equities were flat as banks and miners outperformed. China’s recent rate cuts aim to support smaller lenders, but uncertainty persists. Tech led declines across Asia, with concerns over US chip controls on China and profit-taking after strong IPOs. Gold miners and EV battery stocks were bright spots.
Volatility
Volatility spiked Wednesday. VIX closed at 20.87 (+15.4%), its highest in two weeks. Short-term measures surged: VIX1D +31.5% to 18.07, VIX9D +18% to 19.56. The VIX futures curve went into backwardation (May at 19.12 vs spot), reflecting immediate risk ahead of key data but normalization further out. VIX options saw brisk trading, signaling robust but contained hedging—no outright panic. Focus now on Nvidia results and Thursday’s macro data.
Digital Assets
Bitcoin ripped to a fresh ATH above $111,800 before settling near $110,800. Crypto market cap hit $3.47T as BlackRock’s IBIT set a new daily inflow record, marking six weeks of no outflows. Ethereum gained 2.4% to $2,612, Solana +1.1%, while meme and altcoins joined the rally. Regulatory optimism rose after the US Senate advanced the GENIUS Act for stablecoins. Wall Street’s acceptance grew as JPMorgan will allow Bitcoin purchases.
Fixed Income
US long treasury yields jumped to new local highs yesterday on a US treasury auction of 20-year notes that saw weak demand, with the bid/cover ratio at the low end of the most recent auctions and the yield at this high-point on the US yield curve (The 30-year maturity is generally more popular so often trades a bit lower) rose well clear of 5.0%, rising to 5.12%, with the 30-year benchmark closing at 5.09%, which is just shy of the 5.18% level that is the highest yield since 2007 (and 5.07% is the highest weekly close since then, in late 2023).
Japan’s government bond yields were relatively quiet, although the jump in US yields likely helped prompt the further rise in 10-year JGB yields overnight, with the benchmark rising another couple of basis points to 1.55% (cycle high ther was near 1.60% in late March.
- High yield credit spreads in the US widened in the largest move thus far in May, with the Bloomberg high yield credit spread to US treasuries we track widening 8 basis points yesterday to 319 basis points. This after the recent low on May 13 at 299 basis points.
Commodities
Crude’s Israel-Iran related risk premium deflated quickly on Wednesday due to concerns about an oversupplied market, and after US stockpiles rose while implied demand across the “big three” refined products – gasoline, distillates and jet fuel – sunk to their lowest seasonal level since 2012.
Gold and other investment metals extending a three-day run of gains on concerns about Washington’s ballooning deficit driving declines in US stocks, government bonds and the dollar. Platinum trades near a one-year high, up 8.7% on the week, with the next level of major resistance being the 2024 peak at USD 1095, while silver is challenging resistance at USD 33.68
Currencies
The US dollar continued to trade on the weak side, as the move above 1.1300 in EURUSD held and the USD Index challenged below the psychologically important 100.00 level (trading 99.60)
The biggest mover since late yesterday among major currencies was the Japanese yen, which firmed across the board. USDJPY fell for the fourth straight session after a brief sharp squeeze overnight that was prompted by Japan’s trade negotiator Kato confirming that currency levels should be determined by the market and that FX was not discussed with US Treasury Secretary Scott Bessent.
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