European stocks opened strongly, benefiting from a notable rebound in Wall Street performance. The Eurostoxx index rose by 7.0%, with the Germany DAX increasing by 8.2% and France’s CAC 40 up by 6.3%.
The UK FTSE gained 6.1%, while Spain’s IBEX surged by 8.0%, and Italy’s FTSE MIB soared by 9.2%. The announcement of a 90-day pause on country-specific reciprocal tariffs by Trump has eased market risk, although US futures are slightly down, with S&P 500 futures falling by 0.4%.
European and US Market Surge
The previous day saw the S&P 500 rise nearly 10%, while the Nasdaq achieved gains exceeding 12%, resulting in a record $2 trillion increase in market capitalisation, largely attributed to the Magnificent Seven.
The article so far shows a sharp jump in European equities, largely pushed along by an equally strong move higher in US tech-heavy indices the day before. Germany, France, and several southern European markets all posted robust gains, boosted by confidence that tariff tensions may ease. Back in the States, a 10% spike in the S&P 500—its best move in months—was enough to inject renewed energy into global markets. That surge brought about a massive recovery in stock valuations, especially among the largest firms sitting atop the market in terms of influence and size.
Trump’s decision to hit pause on some of the bilateral duties has clearly taken some pressure off risk assets. While that doesn’t mean downside is off the table, it does mean that selling pressure around that one driver has, at least for now, ebbed away.
Market Volatility and Strategies
For those of us pricing near-term direction through options or spread instruments, what matters most isn’t where the benchmark ended yesterday. It’s how the shift in momentum plays into volatility premiums, gamma exposure, and liquidity in the next 3 to 5 sessions. When spot prices move rapidly and market makers scramble to hedge exposure, that activity reshapes implied volatilities—not just for the major indices, but across sector ETFs and single-name derivatives. That push can make the difference between decaying value and profit, depending heavily on how exposures are structured and trimmed intra-day.
Yields haven’t pivoted much, which keeps some pressure on rate-sensitive stocks. That creates dislocations and short-term inefficiencies—points where mean reversion or skew bleed may offer tradable entries. Those using calendar spreads or iron butterflies might want to watch for compression in the weekly IV crush.
Yellen’s silence this week removes one variable, but Powell’s unavoidable appearance next Thursday makes it clear that rates remain the market’s unresolved pivot. The recent moves make gamma scalping more effective in the interim, but we are not expecting volatility to fade on its own unless macro data underwhelms.
Notably, commodity volatility—especially in crude-linked options—has not dropped off alongside equities. That’s unusual. Historically, such a divergence didn’t last more than a week or two. It often acts as a tell when equities are reacting more to positioning than macro fundamentals.
The reality is that this isn’t an earnings rally. It’s a relief move, possibly over-extended, carried by a short-covering chain reaction. Still, we don’t want to be on the wrong side of skew shifts when liquidity is thinner heading into month-end.
Keep a close eye on two-day implied moves around the Wednesday open and Friday close. Those have tended to misprice in recent weeks, often leading to intraday premium expansion that benefits intraworking structures.
And don’t ignore Asian equity options flow overnight—particularly from Tokyo—since that’s where positioning has begun to lean more directionally. Short calls on Nikkei-linked names are being unwound in size, which often feeds through to EUREX by the following afternoon.
Lastly, now that the top of book in tech has reclaimed previous breakdown zones, those positioning with defined risk via debit spreads may find more consistent payoff probabilities versus naked short calls or long straddles.
