Market Quick Take – 2 April 2025

Market drivers and catalysts

• Equities: Tech leads gains; Trump tariff speech looms; EU rebounds but opens lower
• Volatility: VIX dips ahead of Trump’s speech; traders cautious; gold, sector options in play
• Digital Assets: BTC -1.2%; crypto stocks up; Circle IPO filed; ETH fee revenue hits low
• Currencies: Pro-cyclical currencies bounce back with risk sentiment yesterday as USD sideways ahead of today’s US tariff announcement barrage
• Fixed Income: Credit spreads on high yield debt have widened dramatically over last week
• Commodities: Gold traders ponder how much has been priced in. Strong day for softs
• Macro events: US Mar. ADP Employment Change, US “Liberation Day” Trump tariff announcements

Saxo’s Quarterly Outlook has been published, and can be accessed on the SaxoTraderGO here or web here

Macro data and headlines

• Two US House of Representative seats remained in Republican hands after special elections to replace the two Republicans that were nominated for Trump administration positions, although the margin of victory fell by about half in both elections to 16-17 points from 33-34 points in the November elections, suggesting US President Trump is losing some of the middle ground.
• For today’s “Liberation Day” tariff announcements in a Rose Garden event scheduled for today at 2000 GMT, US President Trump is considering three tariff strategies: a blanket 20% on all trading partners, tiered rates, and country-specific rates, with a focus on the latter. Additional tariffs are likely on pharmaceuticals and semiconductors, a lifting of fentanyl-related tariffs for Canada and Mexico, and imposing secondary tariffs on Venezuela. Put together, the tariffs could exceed the scope of the infamous 1930 Smoot-Hawley tariffs.
• US February JOLTS Job openings dropped 194,000 to 7.568 million in February 2025, missing the 7.63 million forecast. Declines occurred in retail trade, finance and insurance, health care and social assistance, leisure and hospitality, and manufacturing.
• The March US ISM Manufacturing PMI came in lower than expected at 49 vs 49.5 expected while ISM manufacturing prices surged to 69.4, above expectations of 64.6. The report indicated that “price growth accelerated due to tariffs, causing new order placement backlogs, supplier delivery slowdowns and manufacturing inventory growth.”

Macro calendar highlights (times in GMT)

1215 – US Mar. ADP Employment Change 1400 – US Feb. Factory Orders 1430 – US Weekly DoE Crude Oil and Product Inventories 2000 (estimated) – US President Trump at Rose Garden press conference to announce tariffs 0145 – China Mar. Caixin Services PMI

Earnings events

• Thursday: Constellation Brands, Conagra Brands, Lamb Weston Holdings 

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

• US: Stocks edge higher ahead of Trump’s “Liberation Day” tariffs. The S&P 500 rose 0.38%, Nasdaq +0.82%, while the Dow slipped 0.03% as investors await details of sweeping import tariffs. Tech and discretionary sectors led, with Tesla +3.6%, Nvidia +1.6%, and MicroStrategy +6.2% among top performers. Economic data remained weak: factory activity contracted in March, and job openings fell to 7.57M, below expectations. Johnson & Johnson -7.6% weighed on the Dow after a failed talc-related bankruptcy attempt. Futures are flat this morning as investors brace for tariff announcements scheduled just after market close.
• Europe: Markets rebounded Tuesday but open lower today as tariffs loom. The Stoxx 50 +1.4%, DAX +1.7%, and CAC 40 +1.1% snapped a four-day slide, driven by upbeat German manufacturing data (PMI output index 52.1) and easing eurozone inflation (2.2% in March). Gains were led by Thyssenkrupp +7% and Airbus +3.2%. However, Wednesday’s open is weaker amid caution over Trump’s tariffs, which could include a universal 20% levy. The FTSE +0.6% gained despite soft UK factory data (PMI 44.9). Futures indicate a modest pullback today, with no key economic releases scheduled.
• Asia: Asia trades cautiously as Trump’s tariff clock ticks. Markets lacked clear direction with Japan flat, China +0.2%, and HK -0.2%. While optimism from strong Chinese manufacturing data helped early gains, nerves returned ahead of today's 3pm ET tariff speech. Xiaomi -2.9% hit a six-month low following an EV accident. South Korea’s KOSPI +1.7% outperformed after the court confirmed an April 4 ruling on President Yoon’s impeachment, bringing clarity to markets. Traders expect clarity on China stimulus and potential retaliation, adding to regional unease.

Volatility

Volatility pulled back slightly but remains elevated. The VIX closed at 21.77 (-2.3%), with VIX futures at 21.00 (+0.58%). Short-term vol (VIX1D -8%) fell sharply after Monday’s spike but still reflects tariff event anxiety. SKEW -3.75% and VVIX -1.6% show a slight reduction in tail risk hedging. JPMorgan expects a ~1.6% move in SPX on today’s tariff news and sees opportunities in gold straddles and sector rotation via options. Despite the easing, a lack of VIX put buying suggests traders aren't ready to fade the risk spike yet.

Digital Assets

Bitcoin steadies as tariff risk tempers sentiment. BTC dipped -1.2% to $84,141, while ETH fell -2.5% to $1,856, and SOL -1.8%. XRP -2.6% also underperformed. Caution dominated ahead of Trump’s tariff announcement. Crypto stocks surged, with MSTR +6.2%, RIOT +5%, CLSK +12.5%, and IBIT +3.2% leading gains. Meanwhile, Circle filed for a $5B IPO, hoping to join Coinbase and MicroStrategy among listed crypto plays. Ethereum’s revenue from L2 “blob fees” hit 2025 lows, showing fragility in the network’s new fee structure. Binance delisted USDT pairs in the EU, complying with MiCA.

Fixed Income

• Credit spreads for high-yield bonds have spiked over the last week, with one Bloomberg measure of the spread on high-yield bonds to US Treasuries stretching to 347 basis points on Monday before tightening two basis points yesterday. This is the widest the spread has been since a a few days in early August of last year, when a dramatic spike in the Japanese yen unsettled global markets. This episode of widening spreads indicate rising default concerns and comes after a period from November to February in which credit spreads were near their tightest ever.
• US treasury yields remained within the range after the 10-year benchmark treasury yield prbed new multi-week lows near 4.13% before rebounding to 4.19% by this morning. The cycle low in that benchmark since last October is 4.10%.
• European short yields were rangebound after yesterday’s flash Eurozone CPI estimate came in lower than expected at 2.4% (versus 2.5% expected and 2.6% in Feb.) This was a new three-year low in that reading. At the longer end of the yield curve, the 10-year German Bund yield fell five basis points to close at 2.69 , it’s lowest close since Germany’s coming chancellor Friedrich Merz promised a massive German fiscal boost

Commodities

• Gold prices briefly slumped USD 50 on Monday after reaching a fresh record, before finding support and bouncing from USD 3,100, with traders now looking ahead to today’s tariff announcement while pondering how much of the economic fallout has already been priced in.
• Spot silver trades back below USD 34 while the discount to the COMEX future widens on tariff jitters. New York HG copper trades softer as well, while maintaining a 14% premium over London.
• Crude prices paused last month’s rally, with Brent finding some resistance above USD 75, with the focus—for now—turning from a sanctions-led reduction in supply to Trump’s tariff announcement and its potential negative impact on growth and demand.
• The softs sector saw broad gains on Tuesday, with coffee and cocoa rising on mounting supply fears in top growers West Africa and Brazil. The strength spread to sugar and not least orange juice, which surged 6%, with buyers emerging following a halving of the price during the past three months.

Currencies

Yesterday’s rebound in risk sentiment favoured pro-cyclical currencies like the commodity dollars AUD, CAD and NZD and the Scandies NOK and SEK, as EURSEK and EURNOK pushed back to the cycle lows.

USDJPY remains stuck near 150.00 and EURUSD near 1.0800 ahead of Trump’s tariff announcements later today. Yesterday was the eighth consecutive day that EURUSD crisscrossed that 1.0800 level as investors remain indecisive on the impact of incoming European fiscal stimulus and US tariffs as well as global portfolio reallocations sparked by Trump administration policies.

Metals: The standout performers

On a sector level, precious and industrial metals stand out, having delivered returns this quarter of 15.2% and 12.5%, respectively, while the 12-month performance is even more impressive at 37.6% and 18.1%. This has been driven by continued haven demand for gold (+14.7%) and silver (+16.7%) amid ongoing demand from investors seeking protection in tangible assets against geopolitical and economic uncertainties, as well as central bank purchases of gold to reduce their dependency on fiat currencies, especially the USD.

The industrial metals sector shows a clear distinction between New York-traded HG copper and those traded and tracked by futures contracts on the London Metal Exchange. The HG copper contract has surged to a record high on speculation that Trump may implement tariffs on imports within weeks. The premium HG copper trades over London has reached 17%, helping to explain the major contribution of industrial metals to the BCOMTR—a sector that otherwise would struggle amid global growth concerns.

Energy: Natural gas takes the lead

The energy sector has mostly been a story about natural gas strength, with a total return so far this year of around 25.5%, while crude and fuel products have struggled amid a tug-of-war between economic growth concerns impacting demand and the increased threat of sanctions potentially reducing supply from Iran and Venezuela. This has, in turn, offset a planned OPEC+ production increase from next month.

Agriculture: Modest gains with mixed results

Finally, the agriculture sector has delivered a small return of 2.2%, with broad losses across an amply supplied grain and soybean complex partly offsetting gains in softs and livestock. Standout performances have come from Arabica coffee and sugar and, to a certain extent, live cattle.

Key takeaways: The power of broad exposure

Looking at the performances and individual weights, we find that gold, copper, and natural gas have delivered close to 75% of the total return, despite the three contracts only carrying a total index weight of 27.5%. This highlights the advantage of holding broad exposure to commodities instead of trying to pick individual winners.

Mega-trends to drive long-term gains

In our opinion, the long-term trend for key commodities remains upward, driven by several major themes or mega-trends, and they highlight why we believe a broad approach is the best option for long-term gains:

• Deglobalisation: The US-China rivalry is reshaping supply chains, prioritising security over cost, and increasing demand for critical resources.
• Defence: Rising geopolitical tensions are fuelling record military spending and stockpiling of key materials.
• Decarbonisation and power demand: Investments in renewables, EVs, AI, and data centers are driving demand for metals and energy.
• De-dollarisation: A shift from US dollar reliance is boosting gold purchases as a financial hedge.
• Debt and fiscal risks: High global debt and deficits are increasing demand for hard assets like gold and silver.
• Demographics & urbanisation: Ageing Western populations and growing emerging economies are driving resource demand.
• Climate change: Higher power needs for cooling, food security concerns, and protectionism

So far this millennium, we have witnessed three major commodities bull cycles, the biggest being the China-led rally from 2002 to 2008, followed by the pandemic- and Ukraine war-led spike between 2020 and 2022. In the past three years, the index has traded mostly sideways before making a renewed upside attempt within the past couple of months.

Recent commodity articles:

25 Mch 2025: Crude oil Sanctions threat counters tariff-driven demand worries 24 Mch 2025: COT on Forex and Commodities - 24 March 2025 21 Mch 2025: Commodities weekly: High-flying precious metal sees profit taking 19 Mch 2025: Has the gold express already left the station? 17 Mch 2025: COT Report: Silver and copper stands out in week of energy weakness 14 Mch 2025: Gold surges past USD 3,000 as haven demand grows 12 Mch 2025: Tariffs and the energy transition: Key drivers of copper demand 11 Mch 2025: Gold holds steady despite deleveraging risks in volatile markets 10 Mch 2025: COT Report: Wholesale reductions in speculators' USD and commodity longs 7 Mch 2025: Commodities Weekly: Tariffs, trade tensions, fiscal bazooka, and Ukraine 5 Mch 2025: Tariff threat disconnects HG copper from global market 4 Mch 2025: Stagflation and geopolitical tensions fuel renewed demand for gold 3 Mch 2025: COT Report: Broad retreat sees WTI longs slump to 15-year low 28 Feb 2025: Commodities weekly: Broad weakness as tariff fatigue sets in 24 Feb 2025: COT Report: traders turn selective despite ongoing broad rally 21 Feb 2025: Commodities weekly: energy market strength and Trump rethoric fuel surge 18 Feb 2025: COT report: crude, gold and grains see mild profit taking 5 Feb 2025: Broad Strength Drives Commodities sector to 26-month High 4 Feb 2025: Crude Oil Wipes Out 2025 Gains as Tariffs and Demand Weighs 3 Feb 2025: COT Report: Mixed Week Seen Ahead of Trump's Tariff Offensive 1 Feb 2025: YouTube: Joining Kevin Muir on The Market Huddle podcast Podcasts that include commodities focus: 25 Mch 2025: Did Trump just blink? 18 Mch 2025: US market found support, but how durable will it be? 14 Mch 2025: Is silver set to shoot the lights out? 10 Mch 2025: US un-exceptionalism is the theme 7 Mch 2025: US bear market risks ratchet higher. EUR train has left the station 4 March 2025: Are we on the verge of a big whoosh? 25 Feb 2025: Meltdown risks are rising. What to watch next 18 Feb 2025: Europe is on fire 5 Feb 2025: Mag 7 risks underappreciated?  3 Feb 2025: If new Trump tariffs stick, markets have only just begun to react 31 Jan 2025: Does the market think Trump is bluffing? 29 Jan 2025: The DeepSeek winners emerge 27 Jan 2025: DeepSeeking missile strikes global markets 24 Jan 2025: Four days in, Trump continues to dominate headlines, but ... 20 Jan 2025: Trump 2.0 swings into action 17 Jan 2025: Brace for Monday, as a new era begins