European inventory market volatility index hits seven-month excessive
An index of concern in Europe’s monetary markets has hits its highest stage since final August.
The Euro Stoxx Volatility index, which makes use of choices pricing to measure market expectations of future volatility, has risen by nearly 5% this morning to 23.8 factors, a seven-month excessive.
The index has nearly doubled since mid-December, when it dipped under 14 factors, as buyers have grown extra nervous concerning the financial outlook.
China’s determination to impose retaliatory tariffs on US agricultural imports in the present day (see earlier publish) has highlighted the dangers of a world commerce conflict.
Analysts at Principal Asset Administration have warned that escalating commerce tensions are injecting recent volatility into markets, including:
The U.S. commerce deficit, which stays sizable with key companions like China, Mexico, and Europe, underscores the stakes in ongoing commerce disputes. Nevertheless, whereas tariffs may improve prices and disrupt provide chains, historical past means that markets adapt over time.
A well-diversified portfolio stays one of the best protection in opposition to short-term uncertainty. Traders ought to keep away from overreacting to short-term swings and as an alternative give attention to financial resilience, company earnings power, and broader market tendencies.
Final week the VIX index, which tracks concern ranges on Wall Road, hit its highest stage since final December, because the early market enthusiasm following Donald Trump’s election victory subsided.
Vishwanath Tirupattur, world head of quantitative analysis at Morgan Stanley, says the temper has modified quickly, telling purchasers:
Market sentiment has shifted rapidly from post-election euphoria and animal spirits to more and more critical concern about draw back dangers, pushed by ongoing coverage uncertainty and a spate of uninspiring ‘gentle’ knowledge. The macro markets now count on the Fed to pivot from fretting about inflation to worrying about progress. Market pricing of price cuts in 2025 has swung from about one minimize just a few weeks in the past to 3 cuts in the present day.
he pricing of the terminal price has additionally moved notably decrease, with its arrival a lot sooner. After reaching an all-time excessive just some weeks in the past, the S&P 500 has given up all its positive aspects because the election after which some, consistent with our US fairness technique staff’s outlook for a more durable first half and a 5,500-6,100 buying and selling vary attributable to slower progress.
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Up to date at 05.37 EDT
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Analysts at funding financial institution Jefferies stay optimistic concerning the prospects for the US financial system within the second half of 2025 – whereas additionally fearing that it could gradual greater than anticipated within the first half of the yr.
In an up to date US Financial Outlook, Jefferies inform purchasers:
Broadly, these adjustments are modest relative to what we had been in search of initially of the yr. We began out 2025 anticipating progress to gradual within the first half attributable to precisely the type of tensions and uncertainty about coverage that we’re presently seeing. It now seems that the slowdown will likely be a bit extra pronounced than we anticipated, however we stay optimistic concerning the second half of the yr and past.
We count on that the labor market will proceed to chill step by step within the months forward, with draw back dangers attributable to authorities spending uncertainty. We proceed to count on that the Fed minimize charges once more in June, adopted by 2 extra 25 bp cuts, however we’re now anticipating they are going to be back-to-back in July and September (relatively than every-other-meeting).
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Commerce tensions push down European markets
European inventory markets have dropped in the beginning of the brand new buying and selling week.
All the key indices are within the pink, as buyers proceed to fret concerning the affect of world commerce wars and a potential US recession.
In London, the FTSE 100 index has shed 36 factors, or 0.4%, to 8643 factors, with mining firms and banks among the many fallers.
Germany’s DAX has dropped by nearly 1%, and France’s CAC 40 has misplaced 0.4%.
Susannah Streeter, head of cash and markets at Hargreaves Lansdown, says:
‘’Unease concerning the impact of Trump’s tariffs hangs over monetary markets in the beginning of the week. The prospect of a recession within the US is lurking, with shopper confidence falling, firms going through rising commerce complexity and buyers turning extra nervous. China’s deflation downside can also be weighing on sentiment, and geopolitical considerations are staying in focus, with assaults on Ukraine intensifying.
The FTSE 100 is on the again foot in early commerce, unable to shake off the nervousness surrounding the considerations about slowing world progress.
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Airport strike hits German air journey
There’s journey disruption at German airports in the present day, the place a 24-hour strike has led to hundreds of flight cancellations in a dispute about employees’ pay.
The strike, referred to as by the Verdi union on Friday, impacts 13 airports throughout the nation, together with Munich, Berlin and Dusseldorf.
The operator of Frankfurt airport, Germany‘s busiest, mentioned no passenger flights would depart from there on Monday, with delays and cancellations additionally potential on Tuesday.
Verdi is demanding an 8% wage improve, or not less than a rise of 350 euros ($380) extra per 30 days, in addition to larger bonuses and extra break day.
Employers have rejected the calls for as unaffordable, with negotiations attributable to proceed later this month, Reuters studies.
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German exports have tumbled, an indication of the troubles gripping Europe’s largest financial system.
Exports from Germany fell by 2.5% in January, new knowledge exhibits, weaker than the 0.5% rise which economists anticipated.
This pulled Germany’s commerce steadiness all the way down to 16bn for January, down from 20.7bn in December.
In cheerier information for Berlin, although, industrial manufacturing rose by 2.0% month-on-month in January.
This may increasingly present that Germany’s industrial downturn is bottoming out, suggests Carsten Brzeski, world head of macro at ING, telling purchasers:
As we speak’s knowledge confirms the bottoming out of Germany’s industrial hunch. Nevertheless, it’s too early to name any substantial turnaround. Manufacturing capability utilisation is at lows comparable solely to these seen throughout the monetary disaster and the preliminary lockdowns, order books shrank once more in January with significantly weak international demand, and stock ranges stay at elevated ranges. This nonetheless paints a relatively unflattering image of a nation referred to as an industrial powerhouse.
With looming US tariffs on the EU and the anticipated fashionable model of ‘beggar-thy-neighbour’ insurance policies by the brand new US administration, the short-term outlook for German business stays something however rosy. This isn’t simply due to the potential affect on German exports, however extra so the impact on German investments if firms had been to maneuver manufacturing to the US.
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Transport agency Clarksons warns of rising uncertainties
Clarksons, the world’s greatest transport providers supplier, has warned this morning that commerce tensions and geopolitical battle is hitting its sector.
Andi Case, chief govt officer of Clarksons, informed shareholders that each freight charges and asset values have fallen this yr, hitting its monetary leads to 2025.
Case explains:
For some years now now we have began every new monetary interval with an unsure geo-political outlook; 2025 has began with extra uncertainty than most attributable to political change, ongoing regional conflicts, elevated commerce tensions, tariffs and sanctions, inflation and altering financial coverage throughout world economies.
As I write this report, the affect of those uncertainties is that freight charges and asset values have broadly fallen, which has meant that the worth of spot enterprise finished up to now is lower than the identical interval final yr.
Shares in Clarksons have tumbled by over 17% in early buying and selling.
The corporate additionally reported document underlying pre-tax earnings for 2024, and a 4% rise in earnings per share.
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China’s inventory markets have dropped in the present day, because the double-whammy of commerce conflict fears and deflation weighed on buyers.
The CSI 300 index dropped by 0.4%, whereas in Hong Kong the Hold Seng index slid by 1.8%.
Ipek Ozkardeskaya, senior analyst at Swissquote Financial institution, calls it an “ugly early week selloff in China”, including:
The week begins on a pointy destructive notice for the Chinese language shares, as the newest inflation replace confirmed that shopper costs in China fell essentially the most in additional than a yr….
Total, the week is anticipated to carry extra tariffs the Chinese language tariffs on US agricultural and a few Canadian merchandise will begin in the present day, whereas the US metal and aluminium tariffs will likely be reside from Wednesday.
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The US-China commerce conflict comes at a time when the Chinese language financial system is already battling weak inflation.
Client costs fell in February, pulling the CPI inflation price all the way down to -0.7% in February, the primary destructive studying since January 2024.
China’s deflationary pressures are “deepening”, says Stephen Innes, managing accomplice at SPI Asset Administration, including:
Monday kicks off with the identical outdated deflationary drumbeat as China’s shopper inflation took a deeper dive than anticipated, slipping under zero for the primary time in over a yr. The info solely reinforces what’s been clear for months—deflationary pressures stay firmly entrenched on this planet’s second-largest financial system.
The property sector stays caught within the mud, home demand is weak, and regardless of a bounce in tech shares, the broader wealth impact simply isn’t filtering by way of to shoppers.
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China additionally introduced new tariffs in opposition to Canada final weekend, creating an early headache for its subsequent prime minister, Mark Carney.
Beijing is bringing in tariffs on over $2.6bn value of Canadian agricultural and meals merchandise, in a retaliation in opposition to levies on China-made electrical autos and metal and aluminium merchandise which Ottawa launched final October.
The commerce ministry mentioned in a press release.
“Canada’s measures severely violate World Commerce Group guidelines, represent a typical act of protectionism and are discriminatory measures that severely hurt China’s reliable rights and pursuits.”
China will apply a 100% tariff to simply over $1bn of Canadian rapeseed oil, oil desserts and pea imports, and a 25% obligation on $1.6bn value of Canadian aquatic merchandise and pork.
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Up to date at 04.06 EDT
China’s retaliatory tariffs on US farm items kick in as commerce conflict escalates
One other entrance in Donald Trump’s commerce wars opened up this morning, as China’s retaliatory tariffs on US imports kicked in.
The tariffs, introduced final week, goal about $21bn of agricultural imports from the US, in response to the additional 10% tariff imposed on China’s exports to the US by Trump.
Beijing’s transfer covers a variety of commodities. Imports of US-grown rooster, wheat, corn and cotton will face an additional 15% tariff, the Chinese language ministry mentioned final week. Tariffs on sorghum, soybeans, pork, beef, seafood, fruit, greens and dairy merchandise will likely be elevated by 10%.
The transfer will make US merchandise costlier, and thus much less aggressive, within the Chinese language market, which is prone to result in extra imports from different international locations as an alternative.
That’s unhealthy information for US farmers, and will increase the dangers that the US financial system slows… and even drops into the dreaded recession.
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Up to date at 04.14 EDT
Introduction: Trump doesn’t rule out recession
Good morning, and welcome to our rolling protection of enterprise, the monetary markets and the world financial system.
“If it isn’t hurting, it isn’t working,” was the cry of then-UK-chancellor John Main in 1989, because the British authorities tightened coverage to struggle inflation and drove the nation right into a recession.
However it is also the catchphrase of the brand new American president, who seems relaxed about considerations he may set off a US downturn.
Donald Trump has refused to say whether or not his commerce insurance policies means the US financial system is going through a recession or larger inflation, arguing {that a} “interval of transition” is going down.
As a substitute, he informed Fox Information present Sunday Morning Futures:
“I hate to foretell issues like that. There’s a interval of transition, as a result of what we’re doing could be very large. We’re bringing wealth again to America. That’s an enormous factor.
And there are all the time intervals of, it takes somewhat time. It takes somewhat time, however I believe it ought to be nice for us.”
The feedback echo Trump’s line about how tariffs will trigger ‘somewhat disturbance’, in his State of the Union speech final week.
Trump was chatting with Fox shortly after the newest US jobs report confirmed a pick-up within the unemployment price in February, but additionally an increase in hiring – with payrolls up 151,000 in February.
That jobs knowledge calmed some nerves a few looming “Trumpcession”, however economists stay involved that slapping tariffs on main buying and selling companions and slashing the Federal authorities will harm progress.
Kyle Rodda, senior monetary market analyst at Capital.com, says:
US President Trump implied he’s keen to tolerate weaker progress because the financial system “transitions”, one thing that will bitter investor sentiment additional – with non-public sector job creation far outstripping modest public sector job creation.
The info added to the notion the US financial system is moderating and its efficiency is converging with the remainder of the world. The charges market, responding to more and more disappointing knowledge and draw back surprises in exercise, point out that the Fed should re-starting chopping rates of interest in July, if not probably June.
The agenda
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Up to date at 03.50 EDT
