Last week was marked by the escalation — and partial de-escalation — of geopolitical and trade tensions between the US and the EU, Macron's now-famous glasses that grabbed headlines at the World Economic Forum, and renewed stress around Japan's swelling public debt. The latter triggered a sharp sell-off in Japanese government bonds, pushing some long-dated JGB yields to multi-decade — and in some cases record — highs, while also weighing on the yen.

All's well that ends well — or almost. Last week ended on a better note than it began. US and European equities rebounded following the de-escalation, though the recovery remains limited and fragile: the next shock is a matter of when, not where.

The global order is shifting, and trust is gone. Restoring it will take time.

Against this backdrop, investors continue to flock to precious metals. Gold surged past the $5'000 mark early Monday — a clear signal that risk appetite has not returned. Silver, which had already broken through the $100 level on Friday, continues to push higher. US and European equity futures are lower this morning, while FTSE futures outperform — holding roughly flat — as sustained inflows into precious metals support mining stocks.

What's striking is that this renewed flight to safe havens is unfolding without any major geopolitical headline this morning. There has been no new escalation over the weekend — no fresh breach of international law, no invasion, no immediate military threat. The US did, however, threaten Canada with 100% tariffs, after Mark Carney approached China last week, defying the White House — a reminder that trade tensions remain alive and well. Beyond that, the news flow is thin. Yet the bid for precious metals suggests that market stress is far from over.

Even South Korea's Kospi — which had been rallying as if insulated from global turmoil — is lower this morning. Still, this week's packed economic and corporate calendar should redirect some attention toward more conventional market drivers: you know, economic data, central-bank decisions and corporate earnings.

On the policy front, both the Bank of Canada (BoC) and the Federal Reserve (Fed) are due to announce their latest decisions. Both are widely expected to keep rates unchanged, but the Fed's statement will be closely scrutinised amid growing pressure from the White House. While markets are hungry for drama, Chair Powell is likely to downplay political noise and reiterate the Fed's data-dependent stance. For now, strong economic growth, inflation still above target, and a cooling — but not collapsing — labour market argue for patience. Fed funds futures price the next rate cut no earlier than June, with a probability just above 40%.

Until then, investors can take comfort in the fact that the Fed's balance sheet is expanding again, helping to inject liquidity — potentially offsetting some of the drain created by rising Japanese yields and the risk of Japanese capital repatriation.

Speaking of Japan, while easing pressure on JGBs failed to halt yen selling when USDJPY traded above 159, intervention chatter did the trick. Since Friday, the yen has staged a sharp rebound on expectations that Japanese authorities — possibly with US coordination — would step in. The story is that reports that the New York Fed contacted financial institutions to gauge FX conditions added fuel to the move. The USDJPY has since retreated toward 154, alongside explicit warnings from Japanese officials that they stand ready to intervene.

Good news: once positioning is flushed out, yen shorts are likely to rebuild, potentially pushing the USDJPY back toward the 160 area — the line in the sand for policymakers.

Elsewhere, dollar weakness is the dominant theme. The EURUSD flirted with the 1.19 level this morning, while sterling traded above 1.36 — its highest levels since last September. Everything points to broad-based dollar selling.

A softer dollar should, in theory, support US equities: it makes US assets cheaper for foreign investors and boosts overseas earnings when translated back into dollars. Whether that will be enough to draw buyers back in remains to be seen.

This week marks a deeper dive into earnings season. In the US, Meta, Microsoft and Tesla report on Wednesday; Apple, Visa and Mastercard on Thursday; Exxon, Chevron and American Express on Friday. In Europe, ASML, SAP and LVMH will be in focus.

US big tech started the year on a cautious note, weighed down by persistent concerns:

The circularity of the AI deals, too much spending, too much debt, and not convincing return on investment so far. So, earnings will be important to reset sentiment among investors on whether the things are going toward the right direction, or will this earnings seasons be another disillusion and heightened scrutiny despite impressive headline numbers, partly boosted by circular deals. It's hard to tell, but what's sure is that the US companies must do the heavy lifting and make investors forget about the geopolitical and trade unease. If they can't do so, markets look vulnerable to a deeper pullback.

Historically, when we're at ATH levels, we tend to see price pullbacks of around 10–20%, with the severity depending on unpredictable factors. But the past years' clear pattern is rapid dip-buying and V-shaped corrections.

So, let it fall, let it fall, let it fall.

Source: Swissquote Bank SA