KBC Sunset Market Commentary 24/04/2025 via Trader Talent

KBC Sunset

Thursday, April 24, 2025

Daily Market Overview

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Markets

• Yesterday’s US risk rebound shifted in lower gear. It adds to our cautious view on the durability of such moves in these headline-based trading circumstances where the outlook remains clouded as ever. The “meaning” of Wednesday’s upside rip headlines – “I have no intention to fire him [Fed chair Powell]” & “We’re going to be very nice [to the Chinese]” – was watered down mere hours later. First by US Treasury Secretary Bessent, then WH press secretary Leavitt and finally to a certain extent by president Trump himself. Adding to the whipsawing trade narrative was China maintaining a tough stance. It implored the US to revoke all tariffs it imposed. The Wall Street Journal yesterday reported the US was mulling to cut (not fully remove) them with Bessent later adding that it would not do so unilaterally. Stocks already finished well of the intraday highs on Wednesday and continue to thread water today. Core bonds gain with Treasuries slightly outperforming Bunds. US rates drop between 4.6 and 7.5 bps with declines growing on arrival of the first US investors. German yields drop up to 6.6 bps at the front, helped by comments from Finish ECB governing council member Rehn. He doesn’t want to rule out larger rate cuts in a monetary policy which he said needs to be agile and active. While saying the great uncertainty requires the ECB to keep an open mind on next steps, Rehn saw few good arguments to pause the cutting cycle, referring to growth risks identified in March that are materializing and financial conditions having tightened. Chief economist Lane later offered a more balanced view. On the 50 bps cut matter he stressed the theoretic nature of the debate. He said the euro area growth forecasts will see a moderate markdown in June but remains optimistic over the longer term. Either way, the comments don’t impact the euro, which is gaining against the biggest G10 peers including the US dollar. EUR/USD recovers some of the recent declines to trade around 1.138. The USD in general is pressured with the trade-weighted index sliding towards 99.34 again. Both JPY and CHF trade higher, revealing a cautious stance in (FX) markets.

News & Views

• Czech economic sentiment in April dropped from 99.5 (best since mid-2022) to 96.7 (lowest since October last year). The decline was both due to a weaker business confidence (96.5 from 99.6) and a more modest decline in consumer confidence (97.7 from 98.8). Confidence only increased in construction (+ 0.6 points), but decreased the most in industry (-4.5 points), followed by trade and selected services. The share of consumers expecting the overall economic situation and their own financial situation to deteriorate over the next twelve months increased. The proportion of consumers who believe that the current period is not conducive to making large purchases decreased for the second time in a row. In Hungary, the GKI economic sentiment indicator showed a slightly different dynamic, improving from -16.8 to -15.7. The industrial sector showed signs of recovery while the service sector declined. Confidence in the trade and construction sectors remained virtually stagnant. Still construction continues to be the least optimistic sector, while business services remain the most upbeat. The price indicator, decreased substantially for the fourth consecutive month, reaching a six-month low. Price increase intentions declined across all sectors, consumer confidence after reaching a low point in November 2024 has improved somewhat. Most sub indicators in the survey improved while at the same time inflation expectations decreased.
• Belgian business confidence stabilized in April, improving slightly from -15.1 to -14.7 and ducking the feared deterioration to -16. Today’s outcome is still the second weakest one since January 2024. The confidence of business leaders rose in the manufacturing industry but fell further in the building industry and in business-related services. The uptick in manufacturing (-16.1 from -18) was mainly due to a significantly more favourable assessment of total order books combined with a sharp upward revision of the outlook for overall market demand. In the business-related services sector (-9.3 from -7.6), the NBB noticed worse assessments of current and future activity levels even though expectations for overall market demand improved as well. Aside from demand expectations, all components contributed to the drop in subindicator for the building industry (-13.1 from -10.1). The business climate also worsened in the trade sector (-17 from -14.3) after two consecutive months of recovery.