On his Truth Social platform on Thursday, President Trump reiterated that the 25% tariffs on imports from Canada and Mexico would come into effect on 04 March, having been postponed for 30 days, plus an additional 10% duty on Chinese imports. Earlier Trump had also threatened a 25% tariff on automobiles and other goods from the European Union, unnerving investors over the prospect of an escalating trade war. Another drag to performance on Thursday was Nvidia which slumped over 8%. Investors had been eagerly awaiting the earnings reports from the chipmaker, and while its fourth quarter sales beat analyst forecasts this was not enough to satisfy the market’s lofty expectations.
For the week the S&P 500 lost 1% and the tech-heavy Nasdaq Composite declined 3.5%, with growth stocks faring worse than value. The more narrowly focused Dow Jones Industrial Average rose 1%, although all three major indices logged losses for the month of February. Economic data showed signs of weakening, with initial jobless claims rising to their highest level since October and the consumer confidence index down to 98.3 in its biggest drop since August 2021. Friday saw the release of the core personal consumption expenditures price index, where year-on-year prices rose 2.6% in January, easing from December’s figure. Prices remaining sticky as well as a cooling economy may pose a challenge to the Federal Reserve. For the week Treasury yields experienced declines, with the 10-year yield ending at 4.2%.
Despite the tariff threats European markets managed to log a weekly gain, helped by gains in defence stocks as well as company earnings. The pan-European STOXX 600 added 0.6% to secure its tenth consecutive weekly advance, with the region continuing to outperform the US year-to-date. Germany’s DAX index was up 1.2%, after the centre-right CDU/CSU Union won the German election with 28.5% of the vote. Regional performance was mostly higher, with the Italian index seeing gains, and the UK FTSE 100 seeing a 1.7% increase although France’s CAC 40 declined 0.5%.
Japanese equities were lower over the week, with the Nikkei 225 dropping over 4%. Artificial intelligence names were some of the biggest laggards owing to the response from Nvidia’s result. The region was also pressured by the potential impact of Trump’s tariffs and the implications for the Bank of Japan. The yen was weaker however for February overall the currency strengthened against the US dollar. Chinese equities had seen early gains, with the Hang Seng index particularly strong mid-week, however Friday’s decline in response for the incoming tariffs pushed indices into negative territory for the week. The Hang Seng index fell 2.3% and on the mainland the Shanghai Composite dropped 1.7%.