Weekly market recap

Your weekly global financial market newsletter

  • Donald Trump has finally delivered on what he promised before taking office, although for a while after the inauguration, it seemed unlikely to happen so soon. Late last week, he announced a 25% tariff on goods from Mexico and Canada, along with a 10% levy on imports from China. Canada has already responded by announcing countermeasures over the weekend, Mexico is considering a similar move, and China, at the very least, plans to file a complaint with the WTO. This has significantly shaken the markets, and we will have to wait and see what impact it ultimately has on the economy. However, sober-minded economists do not anticipate anything positive.

Indices

The U.S. markets ended the week mixed, with only the DJIA closing in positive territory, extending its streak to three consecutive profitable weeks. The biggest declines were seen in technology stocks, which lost ground, particularly on Monday, after news emerged of DeepSeek, a new, more affordable AI competitor from China. Stocks took another hit on Friday when President Donald Trump confirmed his intention to impose tariffs on Canada, Mexico, and China.

European stocks fared slightly better over the week, reinforcing their strong performance throughout January. This was driven by strong earnings reports from companies as well as expectations of a rate cut from the ECB. The pan-European STOXX Europe 600 gained 1.78%, reaching a record high, while Germany’s DAX rose 1.58%, France’s CAC 40 Index added 0.28%, and the UK’s FTSE 100 Index climbed 2.02%.

US30
+0.27%
US100
-1.36%
US500
-1.00%
GER30
+1.58%

Commodities

The price of U.S. natural gas fell by more than 11% during the week, reaching $3.0/MMBtu for the first time since last November. One of the main reasons for this decline is the forecast for warmer weather in February, which has naturally reduced heating demand.

Gold, on the other hand, strengthened over the week and once again surpassed its all-time high after three months, reaching over $2,810 per troy ounce. The main driver behind the metal’s price rise is the planned or ongoing monetary easing by major central banks worldwide. While the U.S. Federal Reserve has left interest rates unchanged, at least one rate cut is expected later this year. The Bank of Canada has already lowered rates, as have the ECB and Sweden’s Riksbank. Meanwhile, China’s PBoC and India’s RBI are also planning further monetary easing. As a result, gold was largely unaffected by the weekend announcement of tariffs on Canada, Mexico, and China.

Gold
+0.98%
Silver
+2.32%
BRENT
-3.61%
NATGAS
-11.77%

Forex

The Canadian dollar continues to weaken and fell to long-term lows late in the week after it was confirmed that Donald Trump would not delay the implementation of tariffs against Canada. Although the tariff on oil is expected to be only 10%, the introduction of tariffs comes as a significant setback for the Canadian economy, as demand for the currency is expected to decline. Additionally, the Bank of Canada cut interest rates during the week and announced plans to end its quantitative tightening program, with asset purchases set to resume in March.

The euro also weakened significantly against the U.S. dollar as markets priced in a further widening of the interest rate differential between Europe and the U.S. The ECB is expected to implement additional rate cuts following last week’s reduction, with three to four more moves anticipated. In contrast, the outlook for U.S. interest rates remains uncertain, with markets speculating that the Federal Reserve may delay further cuts for an extended period.

EUR/USD
-1.28%
USD/JPY
-0.54%
GBP/USD
-0.69%
USD/CAD
+1.37%

Macro

Investors closely followed central bank meetings in the U.S. and the euro area throughout the week. As expected, the U.S. Federal Reserve maintained its interest rate settings, keeping the main rate in the 4.25%–4.50% range. In a statement released at the end of the meeting, the Fed’s monetary committee reiterated that “inflation has made progress toward the 2% target, but the pace of price increases remains elevated.”

Meanwhile, the Governing Council of the European Central Bank cut interest rates again in an effort to support the European economy. As anticipated, it reduced the base rate by a quarter of a percentage point to 2.90% and lowered the deposit rate from 3.00% to 2.75%.

An unpleasant surprise came from the GDP figures for the EU, Germany, and the U.S. in the first quarter. Germany saw a sharper-than-expected economic contraction, the EU experienced stagnation, and U.S. growth came in lower than anticipated—all disappointing developments for markets.

Friday’s personal consumption expenditures (PCE) price index appeared to support the Fed’s comments regarding elevated inflation. Core PCE—which is the Fed’s preferred measure of inflation—rose 2.8% year over year in December for the third consecutive month since accelerating a tick from 2.7% in September.

 

What to watch out for this week

  • The key reports of the week will be the U.S. labor market data, with the most important releases—NFP and unemployment—coming out on Friday. The economy is expected to have created 170,000 jobs in January, marking a significant slowdown from the 256,000 added in December. However, the unemployment rate is projected to remain steady at 4.1%, while wage growth is likely to hold at 0.3%. Additional labor market data, including the JOLTs report, ADP employment figures, and Challenger job cuts, will be released later in the week.
  • Insights into the performance of the U.S., EU, and German economies will come from the final PMI data, both from S&P Global and ISM. Markets anticipate a slight expansion in the services sector and a slower decline in the manufacturing sector.
  • On Thursday, the Bank of England will decide on its monetary policy stance. The BoE is expected to cut the base rate by 25 basis points to 4.50%, driven by stagnation in the UK economy and falling inflation, although wage growth remains unexpectedly high.

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