ONCE MORE WITH FEELING
Last week, US equities were weighed down by growth concerns related to Trump's tariff threats, with those on Canada, Mexico and China due to be imposed from tomorrow. Friday’s heated meeting between US President Trump, Vice President Vance and Ukraine President Zelensky was illustrative of the continued ‘America First’ agenda.
Bond yields also fell as slower growth due to tariff talk, (which has negatively impacted American consumer sentiment), may prompt more Fed rate cuts.
This week, attention will be on the ECB meeting and press conference (Thursday), with a 25bps cut in the deposit rate to 2.50% expected, as well as the US employment report (Friday) to help assess how many Fed rate cuts might be feasible.
Tariff threats from US President Trump have continued to dominate headlines. Last week, he suggested that from tomorrow most imports from Canada and Mexico will be subject to a 25% tariff, which had been delayed by a month. He also said an additional 10% tariff, on top of the 10% implemented in February, will be applied to Chinese imports.
The US Conference Board Consumer Confidence Index fell by more than expected in February to the lowest level since June 2024, driven by weaker expectations around future conditions. Sentiment was dampened by concerns related to tariff and trade rhetoric from the Trump administration.
AI bellwether Nvidia reported Q4 earnings that beat market expectations, with revenue up by 78% y/y and profits up by 80% amid continued strong demand for its latest Blackwell chips.
US equities declined as growth prospects were dimmed by weaker consumer sentiment and continued policy uncertainty, with the S&P 500 down by 1.0%.
The EuroStoxx 600 was up by 0.6%. Positive sentiment from the German election early in the week helped, with a clear path to government formation via a Christian Democrat (CDU/CSU) and SPD "grand coalition" reducing uncertainty and prospects for higher government spending set to support growth. The DAX rose by 1.2% last week.
Global bond yields fell (bond prices rise as yields fall), with that for the 10-year Treasury down by 23bps to 4.19% and that for the equivalent German bund down by 6bps to 2.41%.
The fall in US yields was sharper as the potential for tariffs to slow growth increased expectations for Fed rate cuts in 2025. By contrast, the likely increase in German government spending under the next administration could improve activity and result in less rate reductions than previously expected from the ECB.
- Mon 3rd US - ISM manufacturing • Eurozone - Consumer price inflation
- Tue 4th US - Consumer confidence • Eurozone - Unemployment rate
- Wed 5th US - ISM services, factory orders
- Thu 6th US - Initial jobless claims • Eurozone - ECB meeting, retail sales
- Fri 7th US - Employment report • Germany - Manufacturing orders
This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.