Market Quick Take - 26 February 2025

Market Quick Take – 26 February 2025

Key points

• Equities: US stocks mixed; Tech under pressure; Europe flat; China, HK rally on AI
• Volatility: VIX rises; Nvidia earnings key; VIX futures ease; SPX, NDX futures up
• Digital Assets: BTC < $89K; ETH at Nov lows; $1B ETF outflows; Crypto stocks drop
• Currencies: JPY edges lower after attempt at USDJPY breakdown. CAD weak on Trump tariff concerns
• Fixed Income: US treasury yields plunge on weak Feb. Consumer Confidence
• Commodities: Gold rebounds; Oil near 2-month lows; Trump targets copper tariffs
• Macro events: US New Home Sales, US 7-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

• The US House of Representatives passed a budget bill which would slash spending on social safety-net programs, especially Medicaid and food stamps, which would enable up to USD 4.5 trillion in tax cuts over the next 10 years. The bill would also raise the US debt ceiling by USD 4 trillion, which would avoid compulsory spending cuts and the theoretical risk of a default, which are a risk as soon as this summer if no ceiling raise is agreed. Senate Republicans have said that they are seeking larger tax cuts and some are against the deep cuts to safety-net programs. No bill becomes law until a version is agreed by both the House and the Senate and the President then signs it into law. The vote in the House passed by a margin of 217 to 215, with only one Republican not voting in favour and all Democrats against.
• Australia Jan. CPI out at 2.5% YoY vs. 2.6% expected and 2.5% in Dec., but the core, “trimmed mean” CPI rose to 2.8% YoY vs. 2.7% in Dec.
• Ukraine agreed yesterday to sign a deal on jointly exploring natural resources with the US that is seen as critical for any US willingness to provide long-term security commitments to the embattled country. Ukraine managed better terms than the original deal, which would have required the rights to USD 500 billion in revenue.
• US consumer confidence saw its biggest drop since August 2021 in February, amid concerns about the economic outlook and uncertainty over Trump administration policies. The Conference Board's index fell 7 points to 98.3 in February, its third consecutive decline, and below all Bloomberg survey estimates.

Macro calendar highlights (times in GMT)

• 0700 – Germany GfK Consumer Confidence
• 1500 – US Jan. New Home Sales
• 1530 – US DoE Crude Oil and Product Inventories
• 1800 – US Treasury to auction 7-year notes

Earnings events

• Today: 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

For all macro, earnings, and dividend events check Saxo’s calendar.

Equities

• US: US equities ended mixed on Tuesday, as the S&P 500 (-0.47%) and Nasdaq 100 (-1.24%) extended their losing streak to four days, while the Dow Jones (+0.37%) managed to gain. Tech stocks led declines, with Nvidia (-2.7%), Palantir (-3.2%), and Tesla (-8.1%), which fell below a $1 trillion market cap. Super Micro Computer surged over 24% after hours as it submitted overdue SEC filings, avoiding a Nasdaq delisting. Futures indicate a potential rebound ahead of Nvidia’s earnings, which could act as a market catalyst. Investors await GDP revisions and the PCE inflation report later this week.
• Europe: European markets remained muted, with the STOXX 50 (-0.11%) and CAC 40 (-0.49%) closing lower, while STOXX 600 (+0.15%) edged higher. German automakers rallied, with Volkswagen, BMW, and Mercedes up 1.5%-3.6%, despite Trump reaffirming tariffs on Mexico. However, semiconductor stocks ASML and Infineon dropped ~3% after the US hinted at new Chinese tech restrictions. France’s Schneider Electric (-3.6%) continued to slide on US trade policy concerns, while STMicroelectronics (-2.4%) faced pressure from Italian political uncertainty. In Switzerland, SIG Group (-13.86%) fell after reporting lower 2024 profits, despite revenue growth.
• Asia: Hong Kong and China stocks surged, with the Hang Seng Index (+3.57%) and HSTECH (+4.87%) rebounding as tech stocks rallied on AI optimism. Alibaba (+3.85%) gained on plans to release a new AI model, while DeepSeek’s next-gen AI launch fueled sector momentum. South Korea’s KOSPI (+0.41%) rose as Hyundai (+1.7%) and Kakao (+3.8%) advanced, though Samsung Electronics (-0.52%) dragged the index. Japan’s Nikkei (-0.97%) lagged, weighed down by risk-off sentiment. Chinese banks gained after Morgan Stanley upgraded financials, citing reduced credit risk cycles.

Volatility

The VIX rose 2.37% to 19.43, as uncertainty persists ahead of Nvidia’s earnings and key macro data. Short-term volatility (VIX9D +5.41%) spiked, indicating hedging demand. VIX futures eased to 18.22 (-1.43%), while SPX and NDX futures gained 0.35% and 0.54%, respectively, pointing to a potential market bounce. With economic data (PCE inflation) and earnings from Nvidia and Salesforce on deck, swings in risk sentiment remain likely.

Digital Assets

Bitcoin fell below $88,000, dropping 12% in February from its peak above $100,000. Ethereum (-4.76%) to $2,510 hit its lowest level since November. US Bitcoin ETFs saw record outflows of $1 billion, led by Fidelity ($344M) and BlackRock ($164M), as hedge funds unwound basis trades. Crypto stocks tumbled, with MicroStrategy (-12%), Coinbase (-7.8%), and Riot Platforms (-8%). Despite outflows, analysts point to post-halving supply constraints as a long-term bullish factor.

Fixed Income

• US treasury yields nosedived yesterday on the weak US Consumer Confidence survey, taking the 10-year US treasury falling as low as 4.28% yesterday before rebounding overnight and the 2-10 bull flattening two basis points.
• UK Gilt yields at the short end of the curve fell, with the 2-year Gilt yield down over five basis points yesterday to 4.17%, after the BoE’s known dove Swati Dhingra said that the bank could cut rates at a quarterly pace for the rest of the year, the Bank’s policy rate would still be in restrictive territory. BoE Chief Economist Pill speaks later today.

Commodities

Gold rebounded to $2,916 after a 2% drop on Tuesday, as Trump’s trade war rhetoric spurred safe-haven demand. WTI crude (-0.29%) near $69 and Brent (-0.27%) near $73 held near two-month lows, weighed by US economic concerns and China’s slow recovery. Copper surged after Trump ordered an investigation into tariffs on US imports, potentially tightening supply. OPEC+ is expected to delay output hikes, offering some support to oil prices.

Currencies

• The JPY rallied hard in the wake of the weak US confidence data yesterday, but alas USDJPY was unable to stick a move below the key 148.65 range low from early December and rebounded to above 149.50 overnight.
• CAD is the weakling among G10 currencies as USDCAD zipped well above 1.4300 on concerns that US President Trump will follow through with the threatened 25% tariffs against Canada (10% for energy products) next week when the 30-day delay in the tariff imposition runs out.