If the compass were a market tool, this past week the needle would have leaned toward cautiously optimistic — with one clear exception: Tesla. Let’s unpack it.
Macro: Plenty of Noise, But No Panic
A lot happened this week. Ukraine launched one of its most coordinated drone attacks on Russian air bases to date, reportedly damaging up to 41 aircraft. In the U.S., the labor market showed fresh cracks — softer ADP numbers, a rise in jobless claims, and a services PMI at 49.9 that dipped into contraction territory. And in a more theatrical subplot, tensions between Trump and Musk escalated — a mix of threats, taunts, and EV politics dominated headlines, sending Tesla stock down more than 14% on the day.
Meanwhile, the ECB cut its deposit rate by 25 basis points to 2.00%, marking its eighth rate cut in a year. ECB President Christine Lagarde indicated that the bank is nearing the end of its rate-cutting cycle, suggesting a possible pause in the summer.
How did markets react? European equities rallied in anticipation and response to the ECB cut, with the DAX reaching a new all-time high of 24,479 on Thursday. To put it in perspective: since November 2024, the DAX has outperformed the S&P 500 by nearly 30%. U.S. equities posted more modest gains, with both the S&P 500 and Nasdaq 100 up around 1% on the week. Meanwhile, the VIX remained nearly unchanged at around 18.5, suggesting no major shift in equity market sentiment. The market seems cautiously optimistic — and when negative news do hit, reactions are brief and quickly fade. Barring any surprises, this current tone is likely to continue next week.
Crypto: Crypto Shrugs Off the Feud, But Skews Turn Cautious
Before the Musk–Trump feud escalated, crypto markets were largely range-bound. But the public clash between the two billionaires triggered a sharp reversal. Bitcoin dropped nearly -5% intraday, falling from highs of nearly USD 106,000 to as low as USD 100,500, before stabilizing around USD 101,500. The move wiped out over USD 308 million in BTC long positions. The sell-off was compounded by continued profit-taking from long-term BTC holders and a lack of fresh upside catalysts. ETH was hit even harder in the aftermath, shedding over 7% and now trading around USD 2,460, with broader altcoins also under pressure. However, the dip has faded for now, with crypto markets recovering as of writing.
BTC’s 7-day ATM IV slipped further to 37.6% (from 39.3% last week). Skews have also softened: the 10D risk reversal is now at -1.73 (vs. +2.32 last week), and the 25D RR stands at -0.99 (vs. +1.15), signaling a tilt toward neutral-to-slightly bearish sentiment. On the ETH side, IV remains elevated, with 7-day ATM IV at 68.6%, reflecting its higher-beta profile. But sentiment has clearly turned more defensive: the 10D risk reversal has dropped to -7.27 (vs. +8.82 last week), and the 25D RR has flipped to -2.95 (from +2.59), indicating strong front-end demand for downside protection.
Despite the Musk–Trump-induced sell-off, spot markets have held up relatively well — though the shift in the options market points to a more cautious undertone beneath the surface.
Looking Ahead: Markets Turn to NFP today and CPI next week
All eyes are on U.S. CPI (Wednesday) and PPI (Thursday) — key prints that could shape rate expectations ahead of the June FOMC. UK labor data (Tuesday) may stir GBP, while early G7 headlines could begin influencing sentiment during the next week.
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