Market Update

Global Markets Weekly Recap: Mixed Signals and Cautious Sentiment
This week, financial markets navigated mixed economic data and central bank updates, leading to a cautious global outlook.
U.S. Markets: Early Gains Fade Amid Inflation and Trade Uncertainty
U.S. stocks ended the holiday-shortened week lower after an early rally lost steam. Following Monday’s Presidents’ Day closure, equities surged on Tuesday and Wednesday, briefly pushing the S&P 500 to record highs. However, late-week losses erased those gains, dragging major indexes into negative territory.
The Federal Reserve’s January meeting minutes contained no major surprises but reaffirmed policymakers’ cautious stance. Officials acknowledged the economy’s resilience but stressed that inflation progress remains a priority before considering rate cuts. While the labor market remains strong, the Fed highlighted risks from potential cost increases tied to Trump-era tariffs and immigration restrictions, reinforcing its focus on controlling inflation.
Trade policy and geopolitics were key themes throughout the week. President Trump’s efforts to resolve the Russia-Ukraine conflict grabbed headlines, while his proposal for potential tariffs on automobiles, pharmaceuticals, and lumber added to market uncertainty. While details were scarce, the prospect of new trade barriers weighed on investor sentiment. However, as seen with previous tariff threats, negotiations or exemptions remain possible.
Later in the week, concerns over consumer spending pressured markets, with major indices pulling back from near-record highs. Walmart’s quarterly earnings exceeded expectations, but its cautious outlook for the year ahead dampened investor sentiment. Meanwhile, U.S. business activity showed signs of slowing, with the Composite PMI falling to 50.4—its lowest level in 17 months—indicating near-stagnation. While manufacturing remained strong, the services sector slipped into contraction, with rising input costs and policy uncertainties contributing to late-week market jitters.
UK: Retail Sales Rebound, But Manufacturing Struggles
UK retail sales bounced back in January, rising 1.7% and beating expectations. Food stores led the gains with a 5.6% surge, while household goods, clothing, and automotive fuel saw declines, highlighting uneven growth.
Manufacturing remained weak, with the sector’s PMI slipping further into contraction due to sluggish domestic and overseas demand. In contrast, the services sector showed modest expansion, rising to 51.5. However, new business declined as firms faced budget constraints and inflationary pressures, exacerbated by payroll tax hikes and rising labor costs. The Bank of England’s recent 0.25% rate cut—the third since August—reflects concerns over weak growth, though the central bank remains cautious about further reductions, preferring to monitor inflation trends.
Asia: Strong Tech Earnings Boost Chinese Markets
Asian markets saw positive momentum, with Hong Kong’s Hang Seng Index surging 2.98% to its highest level since February 2022. Investor sentiment improved following stronger-than-expected earnings from major tech firms, particularly Alibaba, which reported a significant profit increase, driving its shares up 12.9%. Confidence was further bolstered by a high-profile meeting between President Xi and top tech entrepreneurs, signaling a more supportive government stance toward the private sector.
Europe: Markets Steady Amid Trade and Political Developments
European markets had a relatively strong week, driven by cautious optimism surrounding U.S. trade policy developments and efforts to resolve the Russia-Ukraine conflict. However, Germany’s DAX fell 1.00% ahead of Sunday’s federal election.
In Germany’s elections, the conservative Christian Democrats (CDU) and Christian Social Union (CSU) secured victory, while the far-right Alternative for Germany (AfD) achieved its best-ever result. Meanwhile, Chancellor Olaf Scholz’s party suffered significant losses, reshaping Germany’s political landscape.