Market updates

Monday was a somewhat eventful day for markets with several headlines in the US and Europe. Risk assets did not necessarily reflect the eventfulness of the day, finishing virtually unchanged, while rates had a volatile day that ultimately produced a sizeable rally.

Thus far in 2025, the prevailing and overriding topic of conversation amongst economists and market participants has been tariffs and what they might mean for the global macro outlook. Not surprisingly, as we wrap up first quarter earnings season, tariffs have also emerged as the primary focus of CEOs and management teams of US corporates at the micro level.

European banks are coming to the end of the Q1 2025 reporting season, and on the surface there are multiple headwinds to contend with. Interest rates – generally a significant factor in banks’ earning potential – have come down from peak levels, and economic uncertainty has been heightened by somewhat inconsistent trade rhetoric from the US administration.

With much fanfare, President Trump and Prime Minister Starmer announced a “historic” trade deal between the US and UK on Thursday. The main points for the UK are a reduction in auto tariffs from 27.5% to 10% for the first 100,000 cars that enter the US, and the removal of steel and aluminium tariffs.

April was one of the most volatile months across financial markets in recent memory, triggered by President Trump’s sweeping tariff announcement on April 2. While much has been written about the geopolitical and economic implications, here we will focus on how equity, credit and rates markets have adjusted following what was a sharp sell-off and subsequent recovery.

The Bureau of Economic Analysis (BEA) published its first estimate for Q1 US GDP growth, which at -0.3% was slightly worse than the Bloomberg consensus of -0.2% on a quarter-on-quarter (QoQ), seasonally adjusted, annualised basis. While the headline of the US experiencing negative growth looks quite bad, the detail of the report looks much better.

The high yield bond market reopened in Europe last week after a three-week hiatus triggered by the US tariffs fallout. Aside from a private placement by Very Group on April 10, the last public European high yield deal was from UK homebuilder Miller Homes on March 31, so we were interested to see how the first post-tariffs deal would be received.

With a week currently feeling like a long time in geopolitics, the European sovereign crisis at the beginning of the last decade feels even more like a distant memory. The road to recovery for Europe’s periphery economies has been long and windy, but post-Covid it has been surprisingly smooth.

Markets settled down last week thanks to the absence of headlines around tariffs. There is a universal acceptance that uncertainty and volatility will remain, though a series of constructive data prints relating to inflation and labour markets have now been navigated, and investors are shifting their focus to how central banks will weigh up the growth and inflationary impact of tariffs at the next round of meetings.

Last week was one of the most volatile on record. President Trump's announcement of a 90-day pause in reciprocal tariffs for every country bar China sparked one of the largest rallies in equity indices in recent history.

With the market focus over the last week or so being firmly on equities and credit spreads, it is worth zooming in on developments in the European bank credit default swap (CDS) market.

While much of the focus in private credit has been on direct lending, Significant Risk Transfer (SRT) is emerging as a compelling alternative. What began as a regulatory tool is now gaining traction with a growing investor base, as banks look to optimise capital and issuance reaches record highs.

“Liberation Day” has landed, and not with a whimper. In extraordinary scenes in the Rose Garden of the White House, President Trump held up a board outlining the level of tariffs the US will impose on countries around the world, and in most cases they were worse than worst-case expectations.

TwentyFour Asset Management’s Eoin Walsh breaks down a turbulent first quarter for investors, driven by newly imposed Trump tariffs and shifting economic forecasts.

TwentyFour Asset Management’s Chris Bowie reflects on a politically eventful first quarter, its impact on European and US markets and what it could mean for investors going forward.

As the first quarter of 2025 concludes, TwentyFour Asset Management’s Pauline Quirin shares her take on the strong performance of the securitisation market and insights for European ABS and Collateralised Loan Obligations (CLOs).

If we look at the main drivers of returns in Q1 2025, the first one that comes to mind is tariffs. But while this is true for equities and credit spreads, in the context of global fixed income the main driver of total returns in Q1 was the Bund sell-off triggered by a momentous shift in German fiscal policy.

With the recent economic spotlight dominated by President Trump’s rhetoric and Germany’s blockbuster fiscal expansion plans, Wednesday brought the UK back into focus with the latest round of inflation data and the Spring Statement from the Chancellor, Rachel Reeves.

Contentious call decisions from high profile issuers can provoke a fair bit of debate and emotion among participants in the Additional Tier 1 (AT1) market, and Deutsche Bank has put itself in the spotlight by announcing it will be calling only one of two AT1 bonds approaching their call dates.

Last week we wrote about a notable shift in market sentiment and how this had impacted our view of relative value within fixed income. So, where has the impact been felt, and has it changed our view on relative value?

Following the introduction of the European Union’s securitisation regulations in 2013, the Australian securitisation market initially lagged behind in aligning with European investors’ standards. Over the past decade, however, the market has undergone significant changes and recent record issuance shows investors are increasingly seeing the opportunity in Australian ABS.

Volatility in Bunds seems to have calmed down slightly in the last few days as markets continue to digest huge fiscal expansion plans from Germany and the European Union. At the same time, many forecasters have been downgrading their US growth projections after reassessing the level of pain President Trump seems willing to inflict on the US economy in order to implement his policy agenda.

With the UK’s Office for Budget Responsibility (OBR) set to publish its updated economic and fiscal outlook on March 26, we are starting to see headlines concerning potential changes the Labour government could make to its budgeting plans in response to shifting forecasts.

European government bonds have sold off sharply this week in the wake of Germany’s market-moving fiscal measures, while European equities, especially those of banks, have moved in the other direction.