Global economic shake-up: Bitcoin hits US$90K, German bonds slide

Same thing. I’ve been closely following the whirlwind of events that unfolded on Wednesday, March 6, 2025.

The global risk sentiment has undeniably taken a turn for the better, and the epicentre of this shift is Europe—specifically Germany—where an audacious fiscal proposal has sent shockwaves through the markets. German bunds, typically seen as the bedrock of stability in European fixed-income markets, are on track for their worst sell-off since 1990.

This isn’t just a blip; it’s a seismic event driven by Chancellor Friedrich Merz’s bold pledge to channel hundreds of billions of euros into defense and infrastructure, with a “whatever it takes” stance that echoes Mario Draghi’s famous 2012 vow to save the euro. The sheer scale of this proposal has caught market participants off guard, and the upside surprise has fueled a mix of optimism and unease.

Let’s unpack what’s happening in Europe first. The German bund sell-off reflects a dramatic repricing of risk. Yields on 10-year bunds spiked to 2.69 per cent, a level that signals investors are demanding higher returns to hold German debt amid this unprecedented fiscal expansion. The debt brake—Germany’s constitutional limit on borrowing—seems to have been tossed out the window, a move that’s both a departure from Berlin’s long-standing fiscal prudence and a gamble on future growth.

Posts on X suggest bond vigilantes, those hawkish investors who punish profligate governments with higher yields, are already circling, sensing fragility rather than strength in this shift. Yet, the equity markets are telling a different story. The MSCI Europe index climbed 0.8 per cent, buoyed by the prospect of massive government spending lifting economic activity.

The euro, too, has flexed its muscles, with EUR/USD soaring to a high of 1.0796 before settling at 1.0790—a robust 1.56 per cent gain. This currency surge reflects confidence in Europe’s economic prospects, at least for now, though the spectre of inflation and debt sustainability looms large.

Across the Atlantic, the US markets are enjoying a reprieve of their own, thanks to President Trump’s decision to delay automotive tariffs on Canada and Mexico by a month. This move, coupled with hints of exemptions for certain agricultural products, has dialed back fears of an all-out trade war that had been simmering since Trump’s re-election.

It’s a pragmatic step—autos and agriculture are deeply integrated across North America, and tariffs would’ve hit US consumers as much as they’d hurt exporters in Canada and Mexico. European carmakers, already reeling from earlier tariff threats, saw their shares stabilise, though the damage from Tuesday’s sell-off lingers. On the data front, the ISM Services Index came in stronger than expected, with a notable uptick in employment growth.

In my opinion, this is a reassuring signal that the US economy isn’t teetering on the edge of recession, though all eyes are now on Friday’s payrolls report for confirmation. The MSCI US index rose 1.1 per cent, with the Materials sector leading the charge at 2.8 per cent, likely reflecting optimism about infrastructure spending and industrial demand.

Also Read: Shifting sands: How trade fears and crypto hopes are redefining markets

Bond markets in the US are also stirring. The 10-year Treasury yield climbed 7 basis points to 4.28 per cent, while the 2-year yield ticked up nearly 5 basis points to 4.00 per cent. This steepening yield curve suggests investors are betting on stronger growth and, potentially, stickier inflation down the road.

Commodities, meanwhile, are a mixed bag. Gold eked out a 0.1 per cent gain, propped up by a softer dollar, but Brent crude slid 2.5 per cent for a third straight session. OPEC+’s plan to ramp up output in April is weighing on oil prices, despite the improving risk sentiment elsewhere. It’s a reminder that not every corner of the market is riding the same wave of optimism.

Turning to Asia, China’s National People’s Congress (NPC) has set an ambitious 5 per cent growth target for 2025, a number that’s raised eyebrows and sparked hopes of more stimulus. The Hang Seng Index in Hong Kong surged 2.8 per cent on Wednesday and looks poised for further gains today, Thursday, March 6.

Asian equity indices are mostly in the green, reflecting a broader appetite for risk. China’s policymakers seem determined to turn the tide after years of economic headwinds, and markets are lapping it up—for now. Whether Beijing can deliver remains an open question, but the mood is unmistakably upbeat. US equity index futures, however, are pointing to a softer open, suggesting some profit-taking or caution after Wednesday’s rally.

Then there’s the crypto saga, which is grabbing headlines of its own. Bitcoin staged a remarkable 8 per cent surge, reclaiming the US$90,000 level after dipping below US$80,000 just five days ago. This rollercoaster ride is fuelled by speculation around Trump’s rumoured US crypto reserve plan—a bold idea that’s got the market buzzing. Technical indicators like the Directional Movement Index (DMI) and Ichimoku Cloud are flashing bullish signals, hinting that buyers are firmly in the driver’s seat.

The US$100,000 mark is tantalisingly close, but volatility is Bitcoin’s middle name, and the upcoming White House Crypto Summit could either propel it higher or spark a pullback. Speaking of the summit, Cardano’s Charles Hoskinson found himself snubbed from the invite list, though he’s brushing it off, claiming he’s still a behind-the-scenes player in shaping US crypto policy.

Michael Saylor, meanwhile, is doubling down on Bitcoin as the “only neutral asset” for a US reserve, dismissing XRP as a mere digital token. Ethereum, too, is on the mend, climbing from its US$2,000 support zone and eyeing a break above US$2,350. A rising channel on the hourly chart suggests momentum is building, but resistance at US$2,275 and $2,350 will test its mettle.

Also Read: Global markets steady as PCE data softens, Trump names Bitcoin in strategic reserve

So, what’s my take on all this? I’m struck by the sheer pace of these developments. Europe’s fiscal gambit is a game-changer—Germany’s shift from fiscal hawk to big spender could jolt the continent out of its economic doldrums, but it’s a high-stakes bet. The bund sell-off is a warning shot; if yields keep climbing, borrowing costs could choke off the very growth Merz is chasing.

Yet, the equity rally and euro’s strength suggest markets are willing to give it a chance. In the US, Trump’s tariff delay is a savvy move—it buys time and cools trade tensions, though it’s hardly a resolution. The economy looks resilient, but the payrolls report will be the real tell. Asia’s optimism hinges on China’s ability to follow through, and crypto’s wild ride is a microcosm of the broader risk-on mood.

If I had to pick a standout, it’s Germany’s bold pivot. It’s shaking up Europe in a way we haven’t seen in decades, and the ripple effects—higher yields, a stronger euro, buoyant stocks—could redefine the region’s role in the global economy. But risks abound: inflation, debt overload, and geopolitical uncertainty could derail this fragile recovery. For now, though, the world’s investors are riding the wave, and it’s one heck of a story to watch unfold.

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