Market Quick Take - 21 March 2025

Market Quick Take - 21 March 2025

Market drivers and catalysts

• Equities: US stocks cautious; European stocks sharply lower; tariff concerns dominate sentiment
• Volatility: Calm ahead of triple witching; 0DTE options volume at record highs
• Digital Assets: Bitcoin flat; altcoins retreat; muted reaction to Trump’s crypto speech
• Currencies: USD is heading for a small weekly gain
• Fixed Income: Treasury yields trade softer following dovish Fed
• Commodities: Silver drags gold lower, crude rises on sanction risks
• Macro events: Eurozone Consumer Confidence

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.

Macro data and headlines

• Japan's inflation rate fell to 3.7% in February 2025 from 4.0% in January. Core inflation decreased to 3.0%, above the forecast of 2.9%, decelerating from a 3.2% print in January, staying above the BOJ’s 2% target for a 35^th month, supporting the case to stay on a gradual rate hike path.
• BoE voted 8-1 to keep the Bank Rate at 4.5% in March, citing persistent inflation and global uncertainties. The bank stressed a gradual approach to easing monetary policy.
• ECB President Lagarde warned that EU retaliation against US tariffs could weaken growth but downplayed inflation risks. A 25% US tariff might reduce euro area growth by 0.3 pp, with counter-tariffs worsening it to 0.5 pp. The initial impact would be strongest, with inflation pressures fading, suggesting no rate hikes.
• SNB reduced its key policy rate to 0.25%, the lowest since September 2022. Although expected, the bank did not commit to a specific policy path, stating that lower borrowing costs are suitable to align with low inflationary pressure.
• President Donald Trump has signed an executive order to boost the US's ability to produce critical minerals, potentially including coal, to reduce import-reliance on at least 15 critical minerals of which 70% are imported from China.

Macro calendar highlights (times in GMT)

0745 – France March Manufacturing Confidence
1230 – Can Jan Retail Sales
1500 – Eurozone March Consumer Confidence

Earnings events

• Friday: Carnival Cruise
• Next week: Dollar Tree, Lululemon Athletica, Walgreen Boots

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

Equities

• US: US equities edged lower Thursday, retreating after Wednesday's rally as markets weighed economic data against Fed policy. The S&P 500 dipped 0.22%, Nasdaq -0.33%, and Dow marginally lower by 0.03%. Investor caution persisted after the Fed maintained interest rates but raised inflation forecasts while trimming growth expectations. Broadcom (-2%) led tech losses; Accenture plunged 7.4% after contract cancellations; Nike and FedEx dropped around 5% post-market due to weak earnings. US futures opened positively but have since turned flat to slightly negative, indicating a cautious start today as the S&P 500 attempts to secure its first winning week after four consecutive weekly declines.
• Europe: European equities fell sharply Thursday, ending a four-day rally as investors processed monetary policy updates and ECB warnings on US tariffs. STOXX 50 dropped 1%, STOXX 600 down 0.4%. DAX (-1.2%) and CAC 40 (-0.95%) retreated, pressured by Christine Lagarde's caution that US tariffs could trim Eurozone growth by up to 0.5%. Banks led losses, notably Intesa Sanpaolo, BNP Paribas, and BBVA (-3%). Industrial heavyweights Schneider Electric, Airbus, and Stellantis declined between 1.7%-3%. Eurofins Scientific bucked the trend, up 6.7% after launching a share buyback.
• Asia: Asian markets weakened on Friday amid tariff concerns and profit-taking. Hong Kong's Hang Seng fell sharply by 2.2% Thursday and continued lower today, with tech giants Tencent, Xiaomi, and Alibaba declining heavily due to profit-taking. China’s CSI 300 dropped 1.6%. Japan's Nikkei (+0.1%) remained flat, buoyed by slightly stronger-than-expected inflation data. South Korea's KOSPI down slightly (-0.11%) as battery and steelmakers slumped, though semiconductor giants Samsung (+2%) and SK Hynix (+4%) rallied. Australian markets gained slightly by 0.4%.

Volatility

Volatility was relatively subdued Thursday with the VIX slightly down to 19.80, despite SPX declining modestly. Market focus remains on macro and geopolitical news, with today’s triple witching—when stock options, stock index options, and stock futures simultaneously expire—potentially causing elevated volatility, particularly towards market close. Meanwhile, 0DTE (zero day to expiration) options volume has surged significantly in March, reflecting increased trader hedging and speculative positioning amid tariff-driven volatility.

Digital Assets

Cryptocurrencies pulled back slightly Friday amid continuing economic and tariff uncertainties. Bitcoin hovered around $84,180, Ethereum below $2,000 (-0.5%), and XRP down 1.15%. Despite Trump's supportive stance at the Blockworks Digital Asset Summit, markets reacted negatively to the absence of anticipated significant pro-crypto announcements. Crypto-related equities mixed; Coinbase (+0.33%) rose slightly, while crypto miners Marathon, Riot, and CleanSpark posted minor losses.

Fixed Income

• US Treasury yields are heading for a small weekly drop, with one action being a continuation of the post-Fed steepening trend which has seen the 2s10s spread widening to 28 bps, with the front-end outperforming due to the Fed’s dovish shift. ed slightly. Overall, the 10-year yield has settled into a range around 4.25%

Commodities

• HG copper in NY trades lower, but still up more than 4% on the week, while prices in London slipped back below USD 10,000 a ton. Overall, the market remains in flux with the threat of tariffs being slapped on US imports leading traders to rush copper to the US, thereby tightening the rest of the world.
• A fresh silver slump following another failed attempt above USD 34 an ounce has dragged gold lower as well with trades taking a raincheck following a week that saw prices burst above USD 3,000 an ounce. While a correction is long overdue, traders and investors continue to seek havens amid worries about slowing growth and higher tariff-related inflation.
• Crude prices rose to near a three-week high after the US sanctioned a Chinese refinery for allegedly buying Iranian oil. Overall, the risk of an economic slowdown continues to be offset by risks to supply from US sanctioned countries.

Currencies

• USD is heading for a small weekly gain, recovering from a five-month low, trading firmer against most of its major peers, led by the MXN and JPY, with the notable exceptions showing some strengths are CAD and NOK.
• EURUSD traded below 1.0850 briefly, down from a near five-month high of $1.0955 on March 18th, after ECB President Lagarde warned of weaker growth but downplayed inflation risks from potential EU retaliation against US tariffs. She indicated a 25% US tariff could cut euro area growth by 0.3 pp, with counter-tariffs worsening it to 0.5 pp.
• GBPUSD traded below 1.30, down from a four-month high, after the Bank of England kept its rate at 4.5% and signalled a cautious easing of monetary policy. Despite disinflation progress, trade uncertainty has increased due to US tariffs, potentially raising price pressures.
• USDCAD edged lower to 1.4325 after briefly spiking to 1.44 on Thursday on reports PM Carney may announce a snap election.