Market drivers and catalysts
Equities: Trump confirms tariffs; S&P 500 -1.76%, Nasdaq -2.6%; defense stocks surge in Europe; Asia lower on tariff fears
Volatility: VIX +16% to 22.78; VIX futures stable; market stabilization possible
Digital Assets: Bitcoin -10% to < $84K; Ethereum -14%; crypto stocks slump; Trump’s crypto summit in focus
Currencies: JPY rebounds on Trump criticism on its currency policy. CAD lower on fresh Trump tariffs
Fixed Income: Huge divergences as US yields plunge on tariffs after spike in European yields yesterday on anticipation of German fiscal expansion.
Commodities: Tariff focus lifts gold while corn and crude slump
Macro events: US President Trump to speak before US Congress, China Feb. Caixin Services PMI
Macro data and headlines
Trade War begins. US President Trump said 25% tariffs on Canada and Mexico will go forward today (no word on whether an order has been signed to that effect) and signed an order to double the new 10% tariffs on China to 20% at the last moment. Both Canada and China moved with retaliatory tariffs. China said it would apply 15% tariffs on some US food imports, including chicken, pork, beef, wheat and soy, among other products. The tariffs would take effect March 10. Canada responded with a package of tariffs on USD 107 billion of US imports to go into effect immediately.
US President Trump spoke out against countries that have excessively weak currencies and threatened tariffs against those countries, specifically naming Japan and China. Japan’s PM Ishiba denied intentional currency weakening.
US President Trump said he would consider a free trade agreement with Argentina
US President Trump announced a suspension of military aid to Ukraine, while also saying that he didn’t think the minerals deal with Ukraine is dead, with an update to come “tonight”, US time.
US President Trump claimed that Taiwanese chipmaker TSMC will build five additional chip factories in the US with investments totaling USD 165 billion.
Earnings events
Today: Crowdstrike, Autozone, Target
Wednesday: Marvell Technologies, Adidas, Veeva Systems, Zscaler
Thursday: Broadcom, Costco, Merck, Canadian Natural Resources, Deutsche Post,
Friday: Constellation Software
Equities
US: US stocks plunged Monday as President Trump confirmed new tariffs on Canada, Mexico, and China, reigniting economic fears. The S&P 500 fell 1.76%, while the Nasdaq 100 dropped 2.6%, led by a sharp 8.7% decline in Nvidia due to an investigation. Broadcom, Tesla, and Amazon also slid. The ISM report signaled a manufacturing slowdown and rising price pressures. Futures stabilized overnight, with S&P 500 futures up 0.32% and Nasdaq 100 futures rising 0.50%, indicating a possible recovery attempt today. Investors are now focused on earnings from AutoZone, Best Buy, CrowdStrike, and Target.
Europe: European markets surged Monday as leaders pledged to increase defense spending and advance Ukraine ceasefire talks. The STOXX 50 hit a record 5,551 (+1.6%), while the STOXX 600 climbed 1.2%. Defense stocks soared, with Leonardo and Dassault up over 15%, and Thales and Rheinmetall adding more than 16%. Airbus gained 6%, and Nokia jumped 5.8% after announcing a military 5G partnership with Lockheed Martin. Germany’s DAX rose 2.64%, led by Rheinmetall (+15.8%) and Airbus (+5.8%), while France’s CAC 40 closed at 8,210 (+1.33%).
Asia: Asian stocks fell Tuesday, mirroring Wall Street’s selloff after Trump confirmed tariffs. The Nikkei 225 dropped 1.9%, while the Hang Seng declined 1.4%. South Korean shares slipped as battery makers plunged due to tariff concerns, with LG Energy Solution (-5.1%) and Samsung SDI (-4.7%) leading losses. However, South Korean defense stocks surged amid expectations of increased European military spending, with Hanwha Aerospace jumping 11%. China’s NPC is expected to set a 5% growth target, while Beijing prepares countermeasures against US tariffs.
Volatility
Markets reacted strongly to tariff news, with the VIX jumping 16% to 22.78, its highest level since December. VIX futures remain stable at 20.70, indicating some cooling. SPX options trading surged 4.6%, with a put-call ratio of 1.3. Despite the selloff, futures indicate stabilization, with S&P 500 and Nasdaq 100 futures in the green. No major economic releases are expected today, meaning volatility will hinge on tariff developments and global reactions.
Digital Assets
Crypto markets plunged as risk appetite crumbled following Trump’s tariff confirmation. Bitcoin fell 10.1% to $83,950, while Ethereum slumped 14%. Solana (-18.9%) and Cardano (-22.7%) erased all gains from Trump's prior crypto reserve comments. The global crypto market cap fell 10%, with trading volume up 10% to $178.2 billion. Crypto-exposed stocks like Coinbase (-4.6%), MicroStrategy (-1.8%), and Riot Platforms (-4.5%) also tumbled. Investors now await Trump’s White House Crypto Summit on Friday for further regulatory clarity.
Fixed Income
US Treasury yields fell sharply yesterday after an earlier rise on as it became clear that US President Trump would move ahead with the new tariffs on major trading partners. The 10-year treasury benchmark yield briefly dipped below the December low of 4.13% before rebounding slightly, while the 2-year yields slipped below 4.0%, even hitting 3.9% before rebounding to 3.94% overnight.
European yields leaped higher, especially at the longer end of the curve in a sharp bear steepening move as CDU leader and next Chancellor Friedrich Merz urgently seeks a large military funding deal with the SPD before the new Bundestag sits at the beginning of next month. The 10-year German Bund rose as much as 11 basis points at one point yesterday before falling back to just below 2.50% by later in the session.
Japanese government bond yields rose again overnight, with the 2-year edging close to 84 basis points, the cycle high, while 10-year JGB yields also rose overnight. Will the BoJ consider Trump’s threats on the tariffs to punish Japan for its “weak currency policy” in its deliberations on coming policy moves?
Commodities
Crude oil dropped to a 12-week low after the Trump administration went ahead with tariffs against its main trading partners, and OPEC+ confirmed a gradual production increase from April. While the latter potentially could be offset by fresh sanctions against Iran limiting supply, the overall sentiment remains weak on fears a global trade war may hurt growth and demand. Focus now on the key USD 70 area in Brent.
Gold’s mini correction once again helped attract enough demand to drive a rebound towards USD 2,900, supported by geopolitical tensions, a trade war raising inflation concerns, and tepid economic news in the US raising the risk of a gold-supportive period of stagflation.
Corn and soybean futures trade lower with US agriculture exports being threatened by China’s countermeasures against Trump tariffs. CBOT corn futures slumped 3% on Monday, extending a two-week loss to 12% amid China demand fears, forcing hedge funds to exit a very extended long position.
Currencies
CAD and MXN saw measured weakness after Trump moved forward with the threatened tariffs.
The US dollar was mixed, mostly sideways versus the Euro while falling sharply against the Japanese yen late yesterday on the fresh plunge in US treasury yields and Trump’s calling out Japan by claiming it had a weak currency policy that is to the US’ disadvantage. USDJPY touched the key 148.60 chart support area overnight before rebounding.
The Aussie weakened against fellow Antipodean the kiwi as US President Trump moved to double the latest tariff on China. Perhaps Trump’s warning on China’s weak currency policy prevented a more significant sell-off in the Aussie, as USDCNH remained sideways, settling below 7.30 and well away from the key 7.37 resistance.
The Swedish krone (SEK) added on to its recent strength with a move in EURSEK all the way below 11.02 at one point (a rare move of more than 1.5%) as Sweden is seen as a strong benefactor of coming European fiscal expansion. The 10.99-11.02 area in EURSEK has only been touched twice since 2022, so this is a major chart area for support.
