Highlights
U.S. equity markets ended the shortened trading week on a positive note. After modest gains through Thursday, stocks rallied Friday following the U.S. Supreme Court’s decision to strike down the Trump administration’s broad global tariffs. Rising tensions between the U.S. and Iran, which pushed oil prices higher, also remained on investors’ radar. Markets were closed Monday in observance of Presidents’ Day. Among major indexes, the Nasdaq Composite led performance with a 1.13% gain, marking its first weekly advance since late January. The S&P 500 rose more than 1%, while the Dow Jones Industrial Average posted a smaller 0.29% increase. Minutes from the Federal Reserve’s January meeting showed policymakers divided over the next steps for interest rates. Some officials indicated further rate cuts could be warranted if inflation cools as projected, while others acknowledged that additional rate hikes might be necessary if inflation remains stubborn. Most participants agreed that risks to employment have lessened but that persistent inflation remains a concern. Inflation data reflected renewed price pressures. The Bureau of Economic Analysis reported that core personal consumption expenditures (PCE)—the Fed’s preferred inflation measure—rose 0.4% month over month and 3.0% year over year in December, both higher than November readings. Headline PCE inflation reached 2.9% annually, its highest level since March 2024. Separately, BEA data showed that U.S. GDP growth decelerated significantly in the fourth quarter, expanding at a 1.4% annual rate compared with 4.4% in the third quarter. The slowdown was largely due to reduced government spending, weaker exports, and softer consumer spending. Moving across the Atlantic, European equities continued their upward momentum, with the pan-European STOXX Europe 600 Index reaching another record high and gaining 2.46%. Stronger earnings expectations, supportive macroeconomic data, and investor diversification away from the tech-heavy U.S. market contributed to gains. Speculation emerged that European Central Bank President Christine Lagarde might leave her position before her term ends in 2027, prompting discussion about potential successors. Lagarde stated that completing her term remains her baseline plan but did not firmly dismiss the report. In the UK, inflation slowed to 3.0% year over year in January, aided by lower fuel prices. The unemployment rate rose to 5.2%, and wage growth moderated, strengthening expectations that the Bank of England may cut interest rates in March despite inflation remaining above its 2% target. Meanwhile in Asia, Japanese equities declined modestly during the week. Geopolitical tensions weighed on sentiment, while domestic data showed weaker-than-expected economic growth and slowing inflation. The yen weakened against the U.S. dollar. Mainland Chinese markets were closed for Lunar New Year holidays, while Hong Kong’s Hang Seng Index fell slightly after trading resumed.
Data Highlights
Canada’s Inflation Rate YoY (Jan) fell 10bps, from 2.4% to 2.3%, expectations wrongly held the figure at 2.4%. The Core Inflation Rate YoY (Jan) fell 20bps, from 2.8% to 2.6%, expectations had the figure at 2.8%. U.S. PCE Price Index YoY (Dec) pleasantly rose 10bps more than the previous and stagnant consensus, from 2.8% to 2.9%. U.S. Core PCE Price Index YoY (Dec) also rose 20bps more than the previous, from 2.8% to 3%; and 10bps above the consensus of 2.9%. Germany Inflation Rate YoY (Jan) rose 30bps from 1.8% to 2.1%, in line with consensus. Germany PPI YoY (Jan) fell 50bps, from -2.5% to -3%, when an improvement to -2.1% was estimated. U.K.’s Unemployment Rate (Dec) rose 10bps, from 5.1% to 5.2%, expectations wrongly held the figure at 5.1%. The Inflation Rate YoY (Jan) fell 40bps, from 3.4% to 3%, in line with expectations. Japan’s Inflation Rate YoY (Jan) fell 60bps, from 2.1% to 1.5%, when consensus only priced a 20bps move down. Meanwhile, the Core Inflation Rate YoY (Jan) also fell, by 40bps, from 2.4% to 2.0%, in line with consensus. The Reserve Bank of New Zealand held its policy rate at 2.25% in line with expectations. Australia’s Unemployment Rate (Jan) stayed still at 4.1%, against the consensus of a 10bps increase.
Week Ahead
AUD Inflation Rate YoY (Jan), AUD CPI (Jan), Germany GDP Growth Rate YoY (Q4), EUR Core Inflation Rate YoY (Jan), EUR Inflation Rate YoY (Jan) – Wednesday | ZAR PPI YoY (Jan) – Thursday | USD PPI YoY (Jan), USD Core PPI YoY (Jan), Germany Inflation Rate YoY (Feb), Germany Unemployment Rate (Feb) – Friday
