Technical analysis & fundamentals

Tariffs spark market turmoil as volatility rises

David Morrison

SENIOR MARKET ANALYST

04 Mar 2025

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The German DAX just kept on going yesterday, pushing relentlessly higher. Meanwhile, US stock index futures started the week in positive territory, but the modest rally lacked conviction. Markets opened in a choppy fashion, absorbed the ISM data with little reaction, and continued to chop around.

Then Trump hit the wires, confirming that tariffs of 25% on US imports from Canada and Mexico would be imposed on Tuesday.

The bulls were caught off guard, hoping for another delay or at least a lower tariff rate. The bears pounced and quickly seized control. A minor bloodbath followed as recent optimism rapidly unwound. By the close, it was a sea of red—the Dow was down 650 points, or 1.5%, the S&P 500 lost over 100 points (1.8%), and the Nasdaq slumped 2.6%.

All three major indices managed to rally off their session lows, but the damage was done.

Global markets

Overnight, Asian Pacific stock indices followed the US lower, though losses were contained. Mainland China managed a minor gain, but Tokyo was the clear underperformed.

In early Tuesday trade, European stock indices sold off sharply. The German DAX gave back a significant proportion of yesterday’s gains and was quickly down over 300 points or 1.4%. With the imposition of swinging tariffs on Mexico and Canada, investors are having to take President Trump’s threat of 25% tariffs across the European Union very seriously.

Currencies steady, metals climb, oil struggles

FX markets: The US dollar was lower again this morning, adding to Monday’s losses. The Dollar Index has fallen back below 106.00 and is retesting support. The USDJPY is also back to support around the 149.00 area.
Sterling and Euro: Cable continues to fight for a clear break of 1.27 in the face of persistent resistance. The EURUSD is also challenging resistance just north of 1.05. All eyes now are on the ECB, where a 25bps cut is expected this Thursday.
Gold and silver: Gold rallied in early trade and has broken back above $2,900. Last week’s all-time high of just above $2,950 is back in sight. If broken, expect calls for 3K to intensify. Silver edged higher but continues to lag gold as it trades well below its own all-time high near $50 per ounce from 2011.
Oil: WTI dipped below $68, facing pressure from multiple fronts, principally weak demand and ample supply. OPEC+ are considering yet another extension to the production cuts, which are due to expire in April. Front-month US Light is getting dangerously close to retesting significant support around $66.50.
Gas: Down around 1% at $4.10 per BTU in early trade, with $4.50 as the key upside target.

Crypto under pressure amid market sell-off

Crypto remains firmly tied to risk sentiment. Yesterday, Bitcoin managed a double-digit overnight rally on the back of Trump’s comments concerning the creation of a strategic crypto reserve. But it then gave back all these gains and more as investors rushed to cut their exposure to equities and other risk assets. Ethereum, up 15% at one point, finished in the red.

Bitcoin is now back at 83K. The big question is whether something more sinister is at play or if crypto is simply following the equity market sell-off.

Volatility on the rise

The VIX surged above 20, flashing an amber warning sign. Above this level, expect increased volatility as investors load up on downside protection.

Key events and earnings

Data: Light today, but the focus shifts to a wave of jobs data from tomorrow, culminating in Friday’s US Non-Farm Payrolls.
Earnings: Target, Best Buy, AutoZone, and CrowdStrike report—remember CrowdStrike from last summer?
Geopolitics: China retaliates, slapping 15% tariffs on US goods starting March 10. Trump halts all US military aid to Ukraine. TSMC announces a US investment of $100 billion. Still waiting on Canada/Mexico’s response to tariffs.

Market outlook

Tariffs are back in focus, and now it’s ‘tit-for-tat’ time. Nvidia’s additional 9% drop is fuelling further tech weakness— is it a buy?

With VIX north of 20, markets are bracing for further volatility. Stay nimble, watch the headlines, and be ready for a potentially wild session ahead.