Key points
Equities: US stocks fell; Fed signals rate cut pause; Walmart outlook weak; Nvidia earnings ahead
Volatility: VIX jumped; VVIX above 100; Nvidia & PCE report key catalysts
Digital Assets: Bitcoin < $96K; Bybit hack impacts sentiment; Coinbase -8.3%
Currencies: Euro firms on German election results. JPY strength eases in late Asian session
Commodities: Crude slump challenging support. Rising copper stocks point to consolidation
Fixed Income: US treasuries rallied hard Friday as risky assets sold off badly
Macro events: Germany Feb. IFO Survey, US 2-year Treasury auction
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
Macro data and headlines
German election: Germany's CDU/CSU bloc secured 28.6% of the vote in the federal election on Sunday, and importantly, as the BSW party just missed the 5% threshold for representation in the Bundestag, the CDU/CSU will be able to form a majority government with the SPD if both sides can agree on a platform, as they would take 328 of the 630 seats. In a victory speech yesterday, CDU leader Friedrich Merz, who will become the next Chancellor, said that Germany will "achieve independence" from the US as President Donald Trump is "largely indifferent to the fate of Europe".
US business activity grew this month at its slowest rate since September 2023, primarily due to the service sector. The S&P Global preliminary composite index for services and manufacturers fell to 50.4, a 17-month low, amid uncertainty about the Trump administration's policies. Values above 50 indicate growth.
US consumers' long-term inflation expectations have peaked at a nearly 30-year high, due to concerns over Trump's tariffs. The University of Michigan's February reading shows an expected annual price rise of 3.5% over the next five to ten years, the highest since 1995, mainly driven by Democratic respondents.
Macro calendar highlights (times in GMT)
0900 – Germany Feb IFO Business Climate
1000 – Eurozone Jan (Final) CPI
Earnings events
Today: Oneok, Zoom
Tuesday: The Home Depot, Intuit, Workday, Coupang, Keurig Dr. Pepper
Wednesday: Nvidia, Salesforce, Deutsche Telekom, Lowe’s, TJX, AB Inbev, Synopsys, CRH, Snowflake, Monster Beverage, Danone, Stellantis, Ebay
Thursday: Axa, Dell, EOG Resources, Autodesk, Eni, Swiss Re, HP, Warner Brothers
Friday: BASF, Holcim
Equities
US: US stocks ended last week with sharp losses as economic data and inflation concerns fueled a broad selloff. The S&P 500 (-1.7%), Nasdaq 100 (-2.1%), and Dow Jones (-748 pts, -1.7%) all tumbled on Friday, marking the Dow’s worst weekly performance since October. Weak consumer sentiment, a DOJ probe into UnitedHealth (-7.2%), and Walmart's (-8.9%) disappointing outlook pressured equities. The Fed’s meeting minutes signaled a pause in rate cuts amid persistent inflation and tariff uncertainty. Futures are rebounding this morning, with S&P 500 futures up 0.56%, as investors await the PCE price index and key earnings from Nvidia, Home Depot, and Lowe’s.
Europe: European equities edged higher on Friday, with the STOXX 50 (+0.3%) and STOXX 600 (+0.5%) as strong PMI data offset cautious positioning ahead of Germany’s elections. Novo Nordisk (+5.5%) surged after the FDA resolved drug shortages, while Air Liquide (+3%) climbed on upbeat earnings. However, DAX (-0.2%) lagged due to election uncertainty, with polls showing a right-wing lead. French markets gained (CAC 40 +0.4%), led by STMicroelectronics (+1.4%), while Airbus (-3.1%) fell on weaker guidance. Swiss stocks also closed higher, with Sika (+0.85%) rising on record earnings and a positive outlook.
Asia: Asian markets showed mixed performance. Hong Kong's Hang Seng (+0.3%) extended gains, driven by property and tech stocks, despite renewed US-China trade tensions. Alibaba and state funds expressed interest in DeepSeek, lifting AI optimism. Korea’s KOSPI (-0.9%) fell, tracking Wall Street’s decline, with Samsung (-1.2%) and SK Hynix (-3.8%) under pressure. Meanwhile, China ADRs surged last week, with Bilibili (+6%) and PDD (+5.6%), as AI and e-commerce stocks rallied.
Volatility
The VIX spiked to 18.21 (+16.3%) on Friday as market nerves intensified over economic slowdown fears and the monthly options expiry. The VVIX surged 11.3% to 105.71, surpassing 100, a sign of heightened risk aversion. This morning, VIX futures are cooling (-3%) to 17.75, while equity futures are rebounding. Nvidia’s earnings on Wednesday will be a key catalyst for volatility, alongside the PCE inflation data on Friday.
Digital Assets
Crypto markets slumped over the weekend. Bitcoin (-0.6%) dropped below $96K, failing to reclaim the $100K level, while Ethereum (-3.2%) struggled after the Bybit hack ($1.4B loss). Despite Bybit replacing stolen ETH, investor sentiment remains shaky. Altcoins underperformed, with Solana (-4.7%) and XRP (-3.6%) retreating. Crypto-related stocks tumbled, with Coinbase (-8.3%), Marathon Digital (-8.1%), and Riot Platforms (-9.8%) among the biggest losers.
Fixed Income
US Treasuries rallied sharply Friday as risk sentiment suffered badly on Wall Street, with a steep sell-of in US equities. Both the 2-year and 10-year US treasury benchmark yields were pushed about 7 basis points lower, with the 10-year closing at a 4.43%.
While US yields dropped sharply Friday on weak risk sentiment and soft US data, bond traders and investors are arguably skeptical of Trump's assertion that tariffs will not lead to inflation and lower growth. US breakeven yields have recently increased across the board, with the two- and five-year tenors reaching a two-year high.
- Japan’s markets were closed overnight due to a holiday.
Commodities
Crude prices trade near key support, in Brent at USD 74, after falling around 3% on Friday on a combination of weak US economic data adding some concerns to the demand outlook and the prospect of rising supplies from Northern Iraq and speculation about what OPEC+ will do next in terms of supply as most need to maximise revenues
Gold recorded its eight weekly rise, supported by ongoing geopolitical and trade tensions boosting demand for haven assets. It’s worth noting that while hedge funds have been net sellers for the past two weeks, ETF holdings have risen to their highest level since last January.
Copper stocks held at warehouses monitored by the three major futures exchanges have seen a strong build-up in the past three weeks, with the total hitting a five-year high at 616.4k tonnes. Highlighting the risk, recent price actions have been mostly about COMEX-related buying to preempt tariffs, more than actual end-user demand, raising the risk of consolidation.
Currencies
The Euro rose overnight on the German election results, as the two largest centrist parties, the CDU/CSU bloc and the SPD, narrowly enjoyed sufficiently strong results to form a majority government without help from any third party. EURUSD poked above 1.0500 again, eyeing the key range high and high of the year of 1.0533. EURJPY rose back above 157.00 overnight after dipping below 156.00 on Friday.
The JPY strengthened late Friday in a sharp reversal of the weakness in the Asian session on a BoJ warning about the rise in Japanese government bond yields, as US treasury yields fell sharply in a bout of ugly risk aversion. USDJPY dipped below 149.00 overnight before recovering toward 149.50. The next level of note for USDJPY to the downside is the range low since October at 148.65.
