Global equity markets significantly diverged this week. U.S. equity markets and the dollar were weighed lower by concerns for economic growth due to the trade tariffs imposed on China, Canada and Mexico. European and Chinese markets were bolstered by investor optimism generated by their policy makers. European policymakers discussed fiscal reforms and a $1.2 trillion mega spending plan. China policymakers pledged support to businesses amid a higher tariff regime. The minerals deal between the U.S. and Ukraine collapsed due to public disagreements between their political leaders. The subsequent freeze in military aid to Ukraine prompted President Zelenskyy to seek renewed talks between the leadership in Europe.

Global Updates
  • The MSCI All Country World Index trended lower this week weighed down by trade and economic growth fears in the U.S. In a major divergence from the decline in U.S. equity markets, European and China equities rose. European equities benefitted from investor optimism due to the proposed fiscal bazooka spending of $1.2 trillion. China also introduced stimulus measures to cushion their businesses from the escalating trade confrontations with the U.S. 
  • China and Canada have announced retaliatory tariffs on the U.S. following recent U.S. trade tariffs, jeopardizing $2.2 trillion in annual trade between the nations.
  • The Stoxx Europe aerospace and defense index rose this week following the decision by European Union leaders to increase their defense spending. Germany’s new government is reformulating the country’s borrowing rules to support economic growth and defense spending. Germany will also be setting up a 500-billion-euro fund to shore up infrastructure and defense spending. EU leaders will also be mobilizing 150 billion euros for defense spending, extendable to 800 billion euros. 
  • Germany’s fiscal stance triggered a selloff in German bonds and raised the euro to a four-month high. Goldman Sachs and Nomura expect these changes to raise the German and European economic growth by 0.2% to 0.8%.
  • Oil futures fell after OPEC+ announced plans to increase output starting in April. The group has been cutting production by 5.7% since 2022 to stabilize the market. The markets are also anticipating global headwinds from tariffs to impact oil demand.
  • Iron ore futures have lagged and price premiums on aluminum imports have surged by 60% to record highs of $900 per metric ton, due to possible tariffs. S&P global suggests that the downstream users of metal products would face larger cost escalations from the tariffs. 
  • Bayer reported a Q4 EBITDA of $2.5 billion, surpassing expectations despite a 22% decline in earnings. The company forecasts an adjusted EBITDA of €9.5-10 billion for 2025.
  • AIB of Ireland announced a 14% increase in full-year after-tax profit to €2.35 billion, attributed to a 7% rise in net interest income from renewable energy, mortgages, and corporate activities. 
  • Moderna stock gained over the expected release of a personalized cancer vaccine in collaboration with Merck and Co. by 2027 and the purchase of $5 million in stock by its CEO.

 

U.S. Equity
  • The S&P 500, Nasdaq and Dow Jones indices ended the week lower due to a broad selloff triggered by concerns for the long-term economic impact of the trade war incited by the tariffs imposed by the Trump administration. The decline in equity markets this week has erased all the post-election gains in the S&P 500, Nasdaq and Russell 2000. Trade barriers, sticky inflation, concerns for health of the economy, AI trade and skepticism on feasibility of interest rate cuts this year.
  • The Trump administration implemented the pending 25% tariffs on imports from Mexico and Canada and increased tariffs on China to 20%, citing inadequate control of fentanyl trafficking across borders. Markets expect inflation to accelerate due to the tariffs. Automakers were later exempted from the tariffs. 
  • Investor sentiment on federal rate cuts improved as Personal Consumption Expenditure decelerated to 2.5% in January, contrasting with the earlier acceleration in inflation indicated by the Consumer Price Index.
  • Industrial manufacturing expanded in February with a PMI of 50.3%, though growth slowed from January, due to tariff concerns.
  • AI-related companies declined this week after Marvell Technology’s disappointing outlook. Despite Marvell’s higher-than-expected Q4 earnings of $531.4 million and $1.37 billion revenue, its projected Q1 revenue of $1.875 billion were merely in line with expectations. Bank of America analysts noted the outlook lacked significant AI-driven growth.
  • The American asset management firm BlackRock is acquiring two ports on the Panama Canal from Hong Kong based CK Hutchison Holding.
  • President Trump has proposed the formation of a strategic reserve for cryptocurrencies. 
  • HP Inc. reported a 2.4% revenue growth to $13.5 billion in its first fiscal quarter, driven by increased demand for AI-capable systems. Adjusted EPS fell to 74 cents, in line with expectations. The company projects a soft EPS range of 75 to 85 cents for the second quarter due to tariff costs.
  • Dell reported higher-than-expected adjusted earnings of $2.68 per share for Q4 2024, despite lower-than-expected revenue of $23.93 billion. The company projects fiscal 2026 revenue between $101 billion and $105 billion due to market conditions. UBS analysts recommend buying Dell shares, anticipating strong demand for its AI servers.
  • The private equity firm Baine Capital is close to a deal with Seven & i Holdings for the acquisition of their supermarket business for $4.7 billion.
  • Cybersecurity company CrowdStrike reported larger-than-expected adjusted earnings of $260.9 million, and a 25% growth in fourth quarter revenue to $1.06 billion revenue. The company projected a lesser than expected net income of $851.2 million to $883 million for fiscal 2026.
  • ByteDance is launching a $315 billion share buyback program for its U.S. employees at an increased valuation of $189.9 per share.
  • The Wall Street Journal reported that the pharmacy giant Walgreens Boots Alliance is being bought out by equity firm Sycamore Partners in a $10 billion deal.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index edged higher this week.
  • The U.S. 10-year Treasury yield was slightly higher at 4.253% and the yield on the 2-year note dipped slightly to 3.94% over the week. 
  • The U.S. Dollar Index fell to a four-month low of 104.04 this week, due to tariffs concerns, growth speculation and defense spending plans of the E.U.

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