Over the previous weekend, President Trump did not rule out a recession, stating that there will be a “period of transition” for the economy. This pushed the S&P 500 to its biggest daily drop of the year on Monday, falling 2.7%, while the Nasdaq Composite plunged 4% in its biggest drop since September 2022. In Trump’s latest back-and-forth on tariffs, he had threatened to double the planned 25% duties on Canadian steel and aluminium, in response to Ontario imposing a 25% surcharge on exports of electricity to some US states, which was later dropped.
The above mostly overshadowed the latest inflation data. The consumer price index advanced 2.8% year-on-year in February, slowing from the previous month’s reading, although it won’t yet reflect the full impact of tariffs. US stocks found some support on Friday as a vote to fund the government through September was able to pass through the Senate, averting a shutdown. In addition, investors also bought back in following the recent steep losses, pushing the S&P 500 and Nasdaq to their best session since the day after the US election. Despite Friday’s advance this was not enough to avoid weekly losses. US Treasury yields climbed higher over the week, with the 10-year note ending at 4.32%.
European markets logged another weekly loss, following their strong start to the year, with the pan-European STOXX 600 falling 1.2%, weighed down by US tariff concerns. Regional performance was mixed, with French and Spanish indices losing over 1%, Germany’s DAX lost 0.1% while Italian equities saw slight gains. The German index rallied on Friday on news that incoming chancellor Friedrich Merz had reached a deal to increase state borrowing. The 10-year Bund yield also jumped on the announcement, continuing its quarterly gains. Trade tensions between the European and US bubbled up, with the EU announcing retaliatory duties, including goods like whiskey and motorcycles and then Trump later threatening a 200% tariff on wine and other alcohol imports.
The mood in the Asia Pacific region was a bit brighter, with Japan’s Nikkei 225 adding 0.5% for the week, despite still being pressured by proposed US duties. The index benefited from the yen weakening against the US dollar, while 10-year Japanese government bond yields continued to hover near their 2008 highs. China’s Shanghai Composite gained 1.4%, supported by hopes that authorities would step up stimulus measures to support consumption. The weak consumption was evident in the latest inflation figures with the consumer price index coming in lower-than-expected in February, rising 0.7%, while the producer price index spent its 29th consecutive month in contraction territory. The Hang Seng pulled back 1.1% with the recent rally around artificial intelligence related names pausing.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.