The conventional view serves to protect us from the painful job of thinking—John Kenneth Galbraith
April 7: The Day Global Risk Assets Bottomed: A Synchronized Reversal Across Stocks, Crypto, and Commodities
Following the April 7-8 lows, a synchronized rally swept across US, Asian or global stocks, commodities, and Bitcoin. Forget domestic interventions—this was a liquidity-driven comeback, sparked by global catalysts and market dynamics.
I. Introduction
On April 7-8, 2025, global markets teetered on the edge: Hong Kong’s Hang Seng cratered 13%, U.S. stocks wobbled, copper plunged 8%, and Bitcoin hit a yearly low. Fear ruled, with the VIX spiking to 46.98.
Then, everything reversed course and headed higher through the next few weeks.
From Tokyo to New York, stocks soared. Gold, oil, copper, and even Bitcoin joined the party.
What sparked this global comeback?
It wasn’t Chinese state buying or local policies. It was a liquidity tsunami, fueled by a massive global short-covering and capital rushing back to oversold assets.
II. The Panic and the
Spark
Figure 1
Concerns over the festering trade war, all-time high uncertainties, mounting geopolitical tensions in the face of a weakening global economy, and high systemic leverage put pressure on risk assets.
In charts, US-China bilateral
tariffs soared in April. (Figure 1)
Figure 2
The world’s government debt-to-GDP ratio remains high and is expected to rise further. (Figure 2, upper diagram)
The IMF slashed its global GDP forecast from 3.3% to 2.8% in 2025 (Figure 2, lower image)
Deflating prices, deleveraging, and liquidity tightening led to a risk aversion in global stocks, which culminated in April 7’s brutal selloffs.
The Chinese yuan fell, or the US dollar-yuan USDCNY spiked, driven by China’s retaliatory tariffs.
But late on April 7, rumors of a 90-day U.S. tariff pause (excluding China) surfaced, sparking a wild U.S. market swing (S&P 500 from -4.7% to +3.4%).
Though denied, these rumors set the stage for April 8.
III. April 8 Onwards: A Liquidity-Fueled Macro Short-Covering Rally
On April 8, the selloff in some of the global markets had eased, and some had started a sharp recovery.
Liquidity—fueled by institutional buying, short covering,
and algorithmic trading—revived risk-ON sentiment.
Figure 3
From the April 7-8 lows, the S&P Global Equity Index rebounded 11.2%, the US S&P 11.02%, and the Euro Stoxx 600 10.8% as of April 25th. (Figure 3, topmost pane)
In Asia, China’s Shanghai Composite rallied 6.6%, while Hong Kong’s Hang Seng 50 surged 9.9%. (Figure 3, middle graph)
Meanwhile, Southeast Asian bourses staged a massive
recoil. Indonesia’s
JCI surged 12.7%, Thailand’s SET
9.33%, and the Philippine
PSEi 30 8.74%, over the same period. (Figure 3, lowest chart)
Figure 4
Strikingly, USD gold prices soared 12.1%, copper 20.2%, WTI crude 6.9%, and Brent crude 7.5% (Figure 4, upper window)
The CRB Commodity Index advanced by 7.2%, while Bitcoin roared 28%. (Figure 4, lower visual)
Risk-ON was suddenly back!
The USDCNY spike U-turned and plunged, with China’s central bank selling dollars to slow the yuan’s fall, but this was secondary. (Figure 4, lower graph)
I called this on my X.com post, "A macro short-covering rally."
IV. Extreme Oversold
Conditions
Figure 5
The VIX nearly hitting 50 was a sign of extreme oversold conditions. Historically, this has proved to be a turning point. (Figure 5, upper chart)
While past performance doesn’t guarantee future results, one thing is clear: liquidity re-emerged following oversold conditions, and the VIX metric may have been somehow validated.
V. Why Liquidity, Not Local Policies
Chinese state buying, PBOC intervention, and the BOJ’s yen-defense rhetoric were possibly too small to reinvigorate the world’s risk appetite.
Yet, the rally’s timing, scale, and breadth—spanning stocks, commodities, crypto, and the yuan—points to a global liquidity flood, driven by tariff relief hopes, the Fed’s dovish narrative, and oversold conditions.
VI. Takeaways: A Fragile Rally in a Fractured World
Trump’s arbitrary and capricious policies (Tariffs or not) should sustain an ambiance of "regime uncertainty," which clouds economic calculation for the global economy.
This is aside from geopolitical (e.g., latest India-Pakistan clash over Kashmir, the ongoing Israel-Palestine War, Russia-Ukraine War, US/Israel-Houthi War, frictions at South China Sea and Taiwan, et al.) and geoeconomic (US-China trade war) tensions.
Trump’s backsliding against China has prompted Chinese media to make a mockery of his policies, which in the coming days could test his mercurial temperament. Rising markets may reanimate his belligerent trade and foreign policy stance.
With Return on Investment (RoI) and "hurdle rates" indeterminate, investments will likely stall. The financial world will likely chase short-term gains via the financial markets, which likely implies heightened volatility in the days to come.
Easily, this ties to bear market rallies in stocks, which are often sharp and swift but fleeting.
Furthermore, for a financial world increasingly dependent on central bank easy-money bailouts, mounting de-globalization dynamics, rising geopolitical and geoeconomic uncertainties, increasing risks of economic discoordination and disruptions, increasing leverage, volatile liquidity conditions, and escalating risks of stagflation will likely inhibit central banks from their traditional approach—all of which may reduce the likelihood of fuel for a financial market "blowoff."
Lastly, aside from gold, central banks and governments have lately been amassing Treasury Bills—a sign of a stampede for liquidity. The last time they hit this high was during the Great Recession (2007-2009). They surpassed the highs during the 2020 pandemic recession. (Figure 5, lower chart)
All told, all-time high gold prices plus the
second-highest official inflows to Treasury bills are likely signs of a coming global
recession or a financial crisis.
