KBC Sunset Market Commentary 14/04/2025 via Trader Talent

KBC Sunset

Monday, April 14, 2025

Daily Market Overview

Click here to read the PDF-version of this report

Markets

• Last Friday’s tariff reprieve on some consumer electronics from China entering the US was enough for a sigh of relief in the “Sell America” trade. Even though president Trump later warned that some specific levy will be announced later, European stocks still add about 2.5% while Wall Street opens with gains of up to 1.5% (Nasdaq). It’s telling of how markets are craving for any positive news and that is exactly why we’re cautious on the depth and width of the current risk on move. Either way, the incredible US Treasury sell-off took a breather as well. US yields last week ripped more than 50 bps higher at the long end of the curve. The longest tenor, 30-year, neared the symbolical 5% barrier which, if surpassed, would likely have added even more fuel to the raging fire. Yields at the start of the new week ease between 5.8 and 9.8 bps, the belly outperforming the wings. German Bunds, which acted as the preferred safe haven last week, continue to rise with net daily changes ranging from -2.3 to -6 bps and underperforming vs swap. Intra-European yield spreads ease further from their recent highs, both against Bund and swap. Italian BTPs outperform regionally, profiting from a rating upgrade to BBB+ (stable outlook) by S&P late Friday. Looking at the other side of the globe, we noticed a sharp 12 bps (!) move higher in Japan’s long-dated bond yields (30-y) to a 21-year high. At least part of the move is said to be fiscally related with rumours of the Japanese government readying another stimulus package as soon as this week to offset the negative growth impact from US tariffs. These strained government finances are also a key reason for the curve’s long end heightened vulnerability in the likes of the UK and US.

• Dollar sales in fixed income markets also shifted in lower gear. The greenback still lost some ground in Asian dealings but was able to recoup most of that during the European session. DXY returned from intraday lows around 99.21 to close to but below 100. USD/JPY similarly recovered from Asian lows around 142.2 to 144. And EUR/USD’s second attempt to take out the 1.14 big figure failed with the couple currently changing hands around 1.13. Sterling catches a nice bid. EUR/GBP surged from the 0.83 area towards 0.87 in a matter of days and is currently hovering north of 0.86. The Swiss franc is the G10 underperformer, losing out both against EUR and USD. EUR/CHF rebounds to back above 0.93(3), USD/CHF above 0.82, the latter still among the lowest in 15 years.

News & Views

• OPEC cut its global oil demand forecasts slightly for this year and next. They target around 150k b/d less growth, projecting an expansion of 1.3mn b/d for 2025 and 1.28mn b/d for 2026 but also adding a growing level of uncertainty surrounding the projections which are still way more than the US government’s EIA for example which eyes 900 b/d growth this year. The International Energy Agency releases an update tomorrow (currently 1.03mn b/day for 2025). The downgrade comes as US tariffs negatively impact the global economy and crude consumption. Oil demand is still expected to be supported by strong air travel demand and healthy road mobility. The downgraded growth outlook comes weeks after OPEC+ raised production levels by more than expected. Brent crude prices currently trade around $65/b, up from last week’s <$60/b bottom but still significantly below “Liberation Day” levels (>$75/b).

• The European Union is set to unveil a roadmap in early May to phase out Russian fossil fuels. This plan aims to balance reducing dependency on Russian energy with lowering energy costs for industries. The roadmap, delayed due to the US's stance on Ukraine and the need for EU unity, will explore options like quotas or tariffs to cut Russian energy imports. A legal proposal will follow later. While sanctions on Russian gas are unlikely due to opposition from Hungary and Slovakia, trade measures could be adopted by a qualified majority. Despite reduced pipeline gas supplies, Russia remains a major LNG supplier to the EU, with record purchases last year by Spain, France, and Belgium.