Vol is Abating but Xi and Trump’s Tariff War is Not

Daily Updates:

• We’ve opened the past few iterations of our daily market updates with: 

“Over the weekend, there was a growing sentiment for a so-called 1987 Black Monday repeat when the US stock market opens later today.”

“Bill Clinton’s political advisor James Carville once said if he was reincarnated he “would like to come back as the bond market. You can intimidate everybody”.

“The President’s trade war intensified to a new level on Tuesday”

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• That’s because so far under the new Trump administration, macroeconomic headwinds have acted as the strongest driver of price behaviour by a long stretch in 2025 – particularly, the ignition of a global, tit-for-tat tariff war. 

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• Today, however, we start off on a more positive note: the US CPI report in March showed that inflation beat expectations on every front. 
• Headline CPI fell by 0.1% month-over-month, against an expected 0.1% increase – for perspective, no forecasters in the Bloomberg survey expected a drop and it was the first negative reading in MoM CPI in close to five years. That lowered the headline YoY CPI to 2.4% from 2.8% in February and lower than the expected 2.5%. 
• Core CPI over the past twelve months fell to 2.8% against an estimated 3.0% – that’s the lowest since 2021. 
• The MoM price declines were also across a broad range of goods and services: gasoline prices, hotels airfares, energy prices and car insurance, which has been a notable driver in previous readings. Shelter prices, another sticky basket component, rose 4% annually, “the smallest 12-month increase since November 2021”.
• March’s CPI reading was conducted prior to many of Trump’s tariffs escalations which markets expect to have some pass through into inflation in upcoming months, however, but for now will come as a relief for many US consumers. 
• If not for them, then for President Trump at least, who posted: “Just out: “INFLATION IS DOWN!!!””

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• The CPI report did very little to change market sentiment however. Wednesday’s best S&P 500 performance since 2008 (see below) was reversed yesterday, as an exodus of selling across all US assets occurred. The S&P 500 Index closed at -3.46%, the US Dollar Index (DXY) fell below 100, something it last did in 2023, and treasuries continued their selloff too after a momentary pause – with the 30Y yield rising 14 bps to 4.86%. 
• In a continued sign that investors are exploring alternative havens to US treasuries, USDCHF has sunk to its lowest levels since 2011 and gold reached another new high, upwards of $3,200/ oz. 
• BTC fell briefly to $78K, a level from which we have repeatedly seen it bounce, and ETH once again plunged below $1.5K before recovering slightly. 
• In derivatives markets, we see a continuation of the same sentiment which has gripped markets since Trump began to re-design global trade rules. While BTC’s inverted term structure has abated, escalation between China and the US has not: the Chinese Finance Ministry just now announced a further increase in levies against US goods from 84% to 125%, effective April 12.
• Volatility smiles at all tenors remain skewed towards puts, with short-dated optionality continuing to express a far stronger bearish sentiment. ETH Futures markets are not spared the bearishness either, as ETH futures trade at a discount to spot once more. However, this is a stark departure from BTC’s futures, which retain a (albeit smaller) premium to spot.

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• The IRS DeFi Broker rule has been officially overturned with Trump signing a joint congressional resolution marking the final step and completion of the process. 
• World Liberty Financial (WLFI) has moved $775,000 USDC from its primary wallet to a secondary wallet typically used for acquiring altcoins.

This Week’s Calendar:

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Charts of the Day: