Market drivers and catalysts
Equities: Tariff-driven plunge; recession fears escalate; severe tech and financial sector losses; major earnings ahead
Volatility: Extreme VIX spike; short-term indicators show panic; crucial economic data this week
Digital Assets: Bitcoin below $80k; altcoins sharply lower; crypto stocks mixed amid macro pressures
Currencies: Pro-cyclical currencies weaken on risk aversion, JPY and CHF stronger in chaotic session overnight but weaken sharply off highs
Fixed Income: Meltdown in risk sentiment boost sovereign bonds as emergency rate cut odds rise half-heartedly
Commodities: A recession-driven deleveraging shock extended into Monday’s session, led by copper and crude
Macro events: Fed’s Kugler to speak, Australia Mar. NAB Business Confidence
Macro data and headlines
Japan’s Prime Minister Ishiba said he would seek a “package” deal with the US on trade that might take some time to put together, as he aimed to talk to Trump later this week. The package would involve LNG, autos, agricultural products and national security, according to local media in Japan.
Goldman Sachs raised their recession probability to 45% from 35% and lowered their 2025 Q4-to-Q4 GDP growth forecast to 0.5% from 1%. They expect the Fed will deliver three 25-basis point cuts which could rise to 200 bp over the next year in a recession scenario. This follows “a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed,”
Federal Reserve Chairman Jerome Powell stated on Friday that he anticipates President Donald Trump's tariffs will increase inflation. However, the central bank will not adjust interest rates until it has a clearer understanding of the tariffs' effects.
- US NEC Director Hassett expects job numbers to fluctuate with tariffs in place. Over 50 countries have approached the White House for trade talks. President Trump opted not to impose tariffs on Russia due to ongoing Ukraine war negotiations.
Trump doubles down on the tariff narrative by indicating that he is not prepared to claw back any tariffs despite the market selloff. China said they would take “resolute measures” to safeguard its interests, including immediately restricting exports of seven types of rare earths. The EU has also retaliated to the Trump tariffs, placing tariffs on $28b worth of US goods. Both Taiwan and Vietnam have also offered to reduce their US tariffs to 0%, with Vietnam asking for a delay on the implementation of the tariffs against them.
Macro calendar highlights (times in GMT)
1430 – US Fed’s Kugler to speak on inflation dynamics
1900 – US Feb. Consumer Credit
0030 – Australia Apr. Westpac Consumer Confidence
0130 – Australia Mar. NAB Business Confidence
Earnings events
Wednesday: Delta Airlines
Thursday: Tesco, Progressive Corporation
Friday: JP Morgan, Wells Fargo, Morgan Stanley, Blackrock, Bank of New York Mellon, Fastenal
Equities
US: US equity futures plunged sharply early Monday, continuing a brutal sell-off sparked by aggressive tariffs imposed by the Trump administration. Futures indicate Dow -4%, S&P 500 -4%, and Nasdaq 100 -5%, following losses last week of around 7.9%, 9.1%, and 10% respectively. On Friday, the S&P 500 closed -5.97%, Nasdaq -5.82%, and Dow -5.50%, with tech giants like Tesla (-10.42%), Nvidia (-7.36%), and Apple (-7.29%) facing severe pressure. Retaliatory tariffs from China and the looming threat from Canada and the EU amplify recession fears. Energy and financials led sector losses amid collapsing oil prices (-6%), with Chevron -7.5% and Exxon -6.6%.
Europe: European markets brace for further turmoil Monday after deep losseslast week triggered by US tariffs. The STOXX 50 closed down -5.3%, and the STOXX 600 -5.1%, marking their worst weekly performance since March 2022. Banks led the sell-off (-8.5%), notably Deutsche Bank (-10.1%), Societe Generale (-11%), and Santander (-11%). German DAX lost -4.95%, driven by Deutsche Bank (-9.77%) and Infineon (-7.26%). The CAC 40 fell -4.26%, with major hits to Societe Generale (-11%) and ArcelorMittal (-9.18%). European leaders weigh countermeasures as recession concerns mount.
UK: The FTSE 100 posted its worst weekly decline since March 2020, dropping -4.95% on Friday alone amid intensifying trade war fears. Key decliners included Rolls-Royce (-10.78%), Fresnillo (-10.37%), and Glencore (-9.68%). Banking stocks suffered heavily with Barclays (-8.6%) and HSBC (-6.2%), while energy and mining sectors reeled from falling crude prices and recession anxieties. Investor confidence remains shaken as global tensions escalate.
Asia: Asian equities saw severe losses Monday, extending Friday’s declines amid worsening trade war tensions. Japan’s Nikkei plunged around -8.7%, while Hong Kong’s Hang Seng sank -12.64%, led by severe drops in tech and financial stocks, including HSBC (-13%) and Standard Chartered (-16%). China’s CSI300 index also suffered, falling over -7%. South Korea’s KOSPI declined -5.45%, marking its lowest point since November 2023. Fears of a deep global recession are high, with markets anxious over additional retaliatory measures.
Volatility
Market volatility surged dramatically, with the VIX hitting 45.31 (+50.93%) on Friday—its highest since the COVID pandemic’s early days. Short-term volatility indicators spiked sharply, with VIX1D reaching 81.89 (+142.06%) and VIX9D at 57.17 (+67.65%), indicating extreme anxiety. Futures remain heavily negative Monday morning, signaling continued panic. Traders brace for key economic data this week, including US CPI figures, jobless claims, and the FOMC meeting minutes, all of which could trigger further volatility. Volumes surged with heavy call options trading, highlighting ongoing market concerns.
Digital Assets
Cryptocurrencies experienced sharp losses over the weekend amid global risk-off sentiment. Bitcoin fell -3.43% to $75,699, Ethereum plunged -4.64% to $1,506, and XRP dropped -11.70%. Solana lost -5.50%, indicating widespread selling pressure. Crypto-linked stocks were mixed, with MicroStrategy (+4.01%) and IBIT (+2.45%) outperforming, while Coinbase (-5.98%) and Cipher Mining (-9.09%) retreated significantly. The crypto market remains closely tied to broader macroeconomic volatility.
Fixed Income
US treasuries and Japanese Government bonds saw a strong bid on safe haven demand overnight as risk sentiment cratered further. Yields posted fresh local lows as the market begins to raise odds of a Fed rate cut sooner rather than later. The moves are large and choppy across all markets.
US Junk Bonds came under further pressure on Friday amidst profound weakness across risky assets. A Bloomberg measure of the spread of high yield debt to US treasuries widened a further 40 basis points to 427 basis points, the widest since late 2023.
Commodities
Last week's recession-driven deleveraging shock extended into Monday’s session with copper briefly slumping 7%, and WTI trading below USD 60 before staging a comeback as US stocks attempted a bounce back from an overnight loss of 5%.
The Bloomberg Commodity Index slumped 5.7% last week, its biggest weekly drop since June 2022, as major growth-dependent commodities suffered double-digit losses, with WTI crude, copper, and silver leading the decline.
While some of these losses are now overdone, deleveraging episodes tend to ignore valuations. In such environments, forced selling will continue until positions are either cut back to more manageable levels, or volatility stabilises.
Crude oil prices have now slumped to supply destruction levels, which over time will stabilise prices, while copper’s bull run turned to a rout led by a slump in the New York tariff-led premium over London, down to 9% from 15% last week.
- Gold’s correction remains a relatively shallow one with key support levels holding, most notably the trendline from the January low at USD 2,975 ahead of the February highs around USD 2,955.
Silver saw its year-to-date gains wiped out overnight after briefly slumping below USD 28.80, an 18% top-to-bottom reversal. The metal has been the hardest hit on a combination of a collapse in the COMEX-London arbitrage, exacerbating price pressure amid plunging demand expectations tied to recession fears.
Currencies
A chaotic session overnight saw the JPY and CHF sharply stronger before much of the move was reversed later in the session as USDJPY traded below 145.00 at one point before rallying above 146.50 in a choppy session. EURCHF dropped over 100 pips, trading as low as 0.9300 overnight before rebounding sharply.
Pro-cyclical currencies were generally weak, although most had rebounded at least partially from their overnight plunges – AUDUSD hitting 0.5933 before rising back above 0.6000, for example.
The US dollar was mixed, recovering from a sell-off versus safe havens overnight while coming about flat against many pro-cyclical currencies later in the session after only serving momentarily as a safe haven overnight.
