KBC Sunset Market Commentary 28/04/2025 via Trader Talent

KBC Sunset

Monday, April 28, 2025

Daily Market Overview

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Markets

• We saw the first signs of market calm returning to a certain extent in the wake of Liberation Day by end last week. The new one kicks off in a similarly good spirit. Markets are slowly coming to terms with a world where uncertainty will remain huge and are figuring their way through by trial and error. It’s a delicate balance that could be overthrown quickly by new shocking announcements. But barring these, we could see markets moving into some sideways consolidation ahead of important eco data later this week, high-profile earnings from the likes of Caterpillar, Meta Platforms, Microsoft, Apple and Amazon and potentially the first US trade deal (India?). For today though, the empty eco calendar and relative silence on the trade front offered core bond yields a chance to recoup some of the losses. Reports of a 30-day ceasefire on Ukraine’s initiative briefly added to the recovery. The German bottoming out process already began on Friday and gains traction today with yields adding between 1.7 and 5.4 bps in a bear steepener move. Swap yields rise 1.2-5.2 bps, easing the immediate downside threat for the likes of the 10-yr tenor to lose support around 2.43% (50% pullback on the Dec-March rise). ECB speech was limited to France’s Villeroy who saw no extra inflation coming from tariffs in either 2025 or 2026. He doesn’t expect a recession in France or Europe but believes there’s still margin for gradual rate cuts. US rates rise up to 4.5 bps at the long end of the curve in a similar shift of the curve. European stock markets eke out another 1% gain (give or take). Wall Street opens a tad higher. The S&P 500 is eager to confirm last week’s topside break above 5500.

• Moves in foreign exchange markets stay limited. The US dollar trades mixed, keeping the trade-weighted index at unchanged levels south of 100. EUR/USD eases slightly towards the 1.135 area. Sterling is among the better performers today, gaining against virtually every G10 peer. EUR/GBP is testing the 0.85 zone, down from an open around 0.855. The UK’s open economy makes it particularly vulnerable for a global trade shock, explaining some of the relief rally now the trade tariff dust has settled a bit.

News & Views

• The Belgian debt agency conducted its regular monthly OLO auction today. It wasn’t influenced by Friday’s decision by rating agency S&P to change the outlook on the AA rating from stable to negative because of implementation risks regarding reducing the budget deficit to below 3% of GDP by 2030 and downside growth risks, both direct and second-round of the global trade war. The BDA raised €3.22bn, the upper end of the targeted €2.8-3.2bn range by tapping OLO 100 (€0.97bn 2.85% Oct2034), OLO 103 (€1.14bn 3.1% Jun2035) and OLO 96 (€1.11bn 2.75% Apr2039). The auction bid cover was solid at 1.91. After today’s debt sale, the Belgian debt agency raised slightly over €20bn or 48% of this year’s €42bn OLO funding need.

• The Confederation of British Industry’s Distributive Trades Survey showed retail sales falling for the seventh month in a row (on an annual basis) with a faster decline expected in May. Sales for the time of year were already judged to be “poor”. Especially wholesale annual sales volumes declined in April at one of the quickest rates since September 2020. Online retail sales volumes were broadly flat. Firms remain pessimistic about the outlook due to the impact of Autumn Budget measures, persistently weak consumer sentiment, and global economic uncertainty.