Stocks saw the biggest gains on Thursday as President Trump announced that reciprocal tariffs would not be imposed immediately, sparking hopes that negotiations could happen. Over the previous weekend Trump had also announced that he would introduce 25% tariffs on all steel and aluminium exports, benefiting US metal producer stocks. For the week the S&P 500 added 1.5%, ending near an all-time high, while the tech-heavy Nasdaq Composite climbed 2.6%. The Dow Jones Industrial Average saw a more modest rise of 0.6%, and small caps also lagged.
Stocks still faced pressure during the week, in particular on Wednesday after the release of the consumer price index (CPI) for January came in hotter-than-expected. The following session, the producer price index also rose more than anticipated, raising doubts about interest rates staying higher for longer. Indeed, comments made earlier in the week from Federal Reserve chairman Jerome Powell suggested that the central bank was in no hurry to cut rates given a strong labour market and ongoing economic growth. The yield on the 10-year Treasury note had jumped above 4.6% after the CPI report, however it ended the week down at 4.48%, in its third consecutive weekly drop.
European markets continued their ascent last week, extending their year-to-date gains. The pan-European STOXX 600 was up 1.8% in its eighth consecutive weekly gain. It logged fresh closing highs in every session apart from Friday where investors took a slight breather. Investors welcomed the better-than-expected European earnings that have been released so far. In addition, there were also hopes that Russia and Ukraine could be moving closer to peace talks, influenced by Trump. The UK market lagged other European peers, with the FTSE 100 up just 0.4%, even with the UK economy unexpectedly returning to growth in the fourth quarter.
Japan’s Nikkei 225 added 0.9% in a holiday shortened week, boosted by a weaker yen. Japanese government bond (JGB) yields also climbed, with the 10-year JGB nearing a 15-year high. This came on growing expectations that the Bank of Japan will hike rates again later this year. The positive mood also carried across to China, with the Shanghai Composite up 1.2%. Consumer inflation showed signs of picking up, while factory gate prices once again remained in deflationary territory for January. It also reported that Chinese authorities were working on a plan to help Vanke repay $6.8bn of debt. The Hong Kong Hang Seng outperformed, rising over 7% on optimism around artificial intelligence (AI) names. Furthermore, Alibaba is partnering with Apple to integrate AI into its smartphones in China.