Key points
Equities: Trump tariffs hit markets; futures sharply lower; major earnings week ahead
Volatility: VIX jumps; VIX futures +9.46%; heavy put buying signals risk aversion
Digital Assets: Bitcoin -3.4%; Ethereum -12.7%; crypto stocks drop as risk-off takes hold
Currencies: USD jumps higher to absorb Trump tariff news.
Commodities: WTI-led crude jump as tariffs add to costs; gold declines as dollar strength outweighs haven demand
Fixed Income: US treasuries flat after Trump tariff announcement. European yields plunged Friday on German CPI
Macro events: Eurozone Jan. CPI estimate, US Jan. ISM Manufacturing
Macro data and headlines
- Read about Trump’s tariff announcement at the weekend and what to look for next here.
US President Donald Trump announced comprehensive tariffs this weekend, including 25% tariffs from all goods imported from Mexico, 25% tariffs on some imports from Canada, with others like crude oil and other energy imports getting a 10% tariff. All imports from China would receive an additional 10% tariff as well, and the “de minimis” exception for shipments of less than USD 800 was removed. The tariffs go into effect after midnight tonight.
The response thus far from Canada was already comprehensive as Canada said it will assess 25% tariffs on USD 105 billion of US imports, starting with tariffs on USD 20 billion of imports in alcohol, coffee, clothing, furniture and household appliances and later on USD 85 billion of imported cars and trucks, agricultural products, steel, aluminium and aerospace products.
- Mexico has responded that it will also respond with tariff and non-tariff measures, with details not yet forthcoming.
- China denounced the tariff increases, saying they violated international trade rules and that it will challenge the tariffs at the WTO, and also declared it would take “countermeasures” that are not yet specified.
- Trump also said at the weekend that he will “absolutely” also impose tariffs on EU, saying that “we’ll be doing something very substantial with the European Union. We’re going to bring the level up to where it should be.”
Macro events (times in GMT)
Final Jan. Eurozone Services and Manufacturing PMI (0900), Eurozone Jan. CPI Estimate (1000), US Jan. ISM Manufacturing (1500), US Fed non-voter Bostic to speak (1730), US Fed voter Musalem to speak (2330), OPEC+ alliance JMMC meeting
Mainland China is back from Lunar New Year celebrations on Wednesday
Earnings events
Today: Palantir, Southern Copper
Tuesday: Alphabet, Merck, PepsiCo, AMD, Amgen, Pfizer, KKR, UBS, Spotify, Ferrari, Paypal, Mondelez, Intesa Sanpaolo, BNP Paribas, Nintendo
Wednesday: Novo Nordisk, Toyota, Disney, Qualcomm, Boston Scientific, Uber, TotalEnergies, Fiserv
Thursday: Amazon.com, Eli Lilly, AstraZeneca, Linde, Philip Morris, L’Oreal, Honeywell, ConocoPhillips, Bristol-Myers Squibb
Equities
US: US futures plunged Monday as markets reacted to Trump’s surprise tariffs on Canada, Mexico, and China, announced over the weekend. S&P 500 futures -1.93%, Nasdaq futures -2.46%, Dow futures -1.0%, signaling a sharply lower open. The tariffs—25% on Canada and Mexico, 10% on China—triggered retaliatory measures from all three countries, raising concerns over inflation and economic growth. Friday’s session ended lower, with S&P 500 -0.50%, Dow -0.75%, Nasdaq -0.28%, but the full impact of the tariffs is yet to be priced in. Investors are also bracing for a major earnings week, featuring Alphabet, Amazon, AMD, and Palantir, as well as the January Nonfarm Payrolls report on Friday, which could impact Fed rate expectations.
Europe: European markets are set for a sharp drop, with STOXX 50 futures down 2.4%, following Trump’s tariffs and possible retaliatory measures from Canada, Mexico, and China. DAX closed slightly higher (+0.02%) on Friday, as German inflation unexpectedly slowed to 2.3%, fueling expectations for further ECB rate cuts. However, Trump confirmed that tariffs on the EU "will definitely happen", adding to downside risks.
Asia: Asian equities slumped as Trump’s tariffs reignited trade war fears. Japan’s Nikkei -3%, South Korea’s KOSPI -3%, and Australia’s ASX 200 -1.9% all tumbled, while Hong Kong’s Hang Seng fell 1.3%, but offshore yuan stabilized on expectations of stronger Chinese stimulus. South Korean chipmakers SK Hynix (-11%) and Samsung (-2.6%) were hit hard, as trade tensions threaten supply chains. Chinese markets remain closed for Lunar New Year and are set for a volatile reopening on Wednesday.
Volatility
Volatility spiked as Trump’s tariffs rattled global markets. The VIX rose to 16.43 (+3.72%) on Friday, and VIX futures surged to 19.00 (+9.46%) this morning, signaling elevated risk concerns. Put-call ratios already soared on Friday (PCCI: +55.9%), highlighting strong demand for downside protection. This week will be highly volatile, with the impact of tariffs, a packed earnings calendar, and key economic data releases including ISM, JOLTS, ADP, and NFP reports.
Digital Assets
Crypto markets tumbled as Trump’s tariffs triggered a global risk-off move. Bitcoin -3.44% ($94,321), Ethereum -12.72% ($2,517), XRP -10.06%), with crypto stocks like Coinbase (-3.31%) and MicroStrategy (-1.56%) also under pressure. Altcoins saw even steeper losses, with Ethereum down as much as -16% intraday. The crypto fear index plunged into "Fear" territory, signaling uncertain sentiment heading into a volatile week.
Fixed Income
US yields were rangebound on the initial reaction to President Trump’s tariff announcements at the weekend, perhaps frozen between the inflationary implications on the one hand, but their safe haven appeal preventing an initial sell-off.
European yields nosedived on Friday ahead of today’s Eurozone Jan. CPI estimate after German CPI figures came in lower than expected at -0.2% MoM and 2.3% YoY vs. +0.1%/+2.6% expected, respectively. The 2-year German Schatz yield fell 9 basis points to 2.12%, the lowest close since January 2. The 10-year Bund yield dropped 6 basis points to close at 2.46%
Commodities
Oil prices surged, led by US WTI, after Trump imposed significant tariffs on various imports, including crude oil from Canada and Mexico, raising concerns about higher gasoline and diesel costs for US consumers. Meanwhile, gold attracted fresh haven demand, reaching record highs in several currencies, though the dollar's broad strength limited gains in USD terms. The risk of a global trade war and a stronger dollar could create short-term headwinds for growth-sensitive commodities and tariff-affected sectors, including US-produced grains.
Currencies
The US dollar gapped higher to absorb US President Trump’s tariff announcements at the weekend, with the Canadian dollar more than 1.5% weaker at one point overnight before finding some support. After closing Friday at 1.4541, USDCAD posted a 21-year high at 1.4793 before drifting back toward 1.4700 by early European hours today. The Mexican peso also gapped lower, trading as much as 3% lower overnight, with USDMXN posting a high of 21.293 before drifting lower to 21.10 by early European trading.
The Euro was more than 2% lower at one point overnight versus the US dollar before shaving that move nearly in half after Trump also threatened that tariffs against EU countries are also coming.
The Japanese yen at times outpaced the US dollar’s strength overnight as the currency seems to performs as a kind of safe haven.
The Chinese renminbi tested the key levels versus the US dollar overnight – with USD/CNH trading 7.373 at one point, just a hair away from the critical double-top at 7.375. Mainland China is back from holiday on Wednesday.
The next focus is how much currencies have now absorbed this news and what additional USD upside might await if the tariffs go into effect tonight (midnight US Eastern, so 0500 GMT) after Trump calls with Canadian and Mexican leaders.
