European equities opened lower, with the Eurostoxx down 1.1%, the Germany DAX down 1.0%, and the France CAC 40 dropping 1.1%. The UK FTSE declined by 1.0%, while the Spain IBEX fell 0.8% and the Italy FTSE MIB dropped 1.4%.
US futures also faced pressure, with S&P 500 futures declining 0.8%. Concerns regarding potential Trump tariffs ahead of Liberation Day on 2 April are affecting market sentiment, leading to anticipated volatility in the coming days.
Broad Based Market Weakness
That opening summary sets the tone plainly – equities across Europe are slipping, nearly in unison, and the declines are relatively uniform across the board, save for Italy’s steeper move. This kind of bulk sell-off isn’t random. When multiple regional indexes slice off around 1%, at the same time, it’s usually not tied to local stories. Instead, it points to a broader source of tension, something that’s weighing across sectors and borders. In this case, the anxiety appears to be driven by apprehensions about upcoming trade developments in the US, particularly around tariffs.
Futures in the United States are indicating a softer open as well – S&P 500 futures dipped nearly 0.8%, mirroring the European drop. The repricing likely stems from renewed speculation that Washington may lean toward protectionist measures. With 2 April approaching – the date of Liberation Day, which historically has been linked with policy gestures – the unease is showing up clearly in equity prices.
From our perspective, what tends to happen when tariff concerns re-emerge – especially with the shadow of previous policy cycles in the background – is that volatility expectations pick up quickly. That means options markets often start to show higher implied volatility levels, even before any firm move is announced. As participants price in potential stress ahead, we often see new hedging activity, some of which is proactive, others more reactive.
Looking at the broader positioning right now, the equation for short-dated derivatives is becoming less one of direction and more one of timing. Spot volatility may be subdued intraday, but forward-looking contracts are drifting higher, particularly those aligned with early April expiries. We’ve noted an uptick in volume skew this week – that typically signals increased demand for downside protection.
Following Powell’s recent comments, which largely echoed the committee’s previous language around patience and reliance on incoming data, front-end vols held steady yesterday. There wasn’t anything new injected into the market from the Federal Reserve that would have altered the implied curve dramatically. As such, traders are adjusting not because of central bank noise – but because geopolitical actions may once again interfere with global trade expectations.
Focus On Gamma Positioning
Near-term, we’re watching the 4000-4035 level on the S&P futures as a soft support if the current unwind extends further. Should that zone break convincingly, momentum could build quickly into options expiration. There’s a heavy open interest build there, particularly in put strikes dated 5 April. If breach levels are triggered, a reflex test of the mid-March lows can’t be ruled out.
What we’ve seen over the last few sessions is a pattern: the equity weakness isn’t being bought aggressively. Dips, thus far, are not drawing in the usual surge of call flow that might signal immediate buyer presence. Instead, flow is neutral to slightly bearish. That implies cards are still being held close, with more participants choosing to express caution via hedges and straddles rather than directional bets.
In terms of skew, one-week tenors are showing a modest steepening on the downside. That reflects positioning rather than panic – there’s no premium blowing out, just a rebalancing as traders move to cover near-term risk without overpaying on longer-duration tail structures.
Further along the curve, mid-April contracts have not yet responded in full. We expect that to shift if rhetoric around tariffs escalates meaningfully in coming sessions. Until then, relative calm further out suggests the market is dealing with this largely as an April event, not a lasting shift in risk sentiment.
From a trading standpoint, we’re focused now on gamma exposure around 4000, watching for any manufactured momentum that might come from dealer hedging flows. In our experience, those setups can lead to short-lived bursts of price movement outside standard ranges, particularly into lower liquidity sessions or headlines that hit out-of-hours.
Volume Monday was lower-than-average across major index options, but spread structures opened slightly wider in the morning session before narrowing into the close. That pattern tends to appear when there’s trepidation but no catastrophe, and often hints that the next large directional move – if any – is being timed.
Volatility spreads around tech held steadier than peers, which may indicate that traders aren’t expecting this drawdown to be led by high beta names. Instead, responses are more index-focused, built on macro risk rather than sector or earnings-related shock.
In the coming days, especially as April rolls in, we should expect cerebral trade setups: reduced exposure into binary headlines, shorter gamma profiles, and a rise in intraday reversals as positioning adjusts in discrete steps. Not chaotic trading – but deliberate trimming, pausing, and watching levels rather than chasing breaks.
