Weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA.
The U.S. stock market experienced a volatile week, with major indices showing mixed results. The Dow Jones Industrial Average managed to post modest gains for the third consecutive week, while the Nasdaq Composite fell sharply due to heightened concerns over competition in the artificial intelligence (AI) sector.
A key factor driving market turbulence was the emergence of DeepSeek, a Chinese AI developer that introduced a new energy-efficient large language model. This development intensified competitive fears, leading to a 17% drop in NVIDIA’s stock on Monday. Despite these setbacks, strong earnings reports from major tech firms, including Meta Platforms and Apple, helped stabilize the market towards the end of the week.
On the policy front, President Donald Trump reiterated plans to impose tariffs of 25% on imports from Mexico and Canada, along with a potential 10% tariff on Chinese goods. These announcements created uncertainty among investors. Meanwhile, the Federal Reserve kept interest rates unchanged at 4.25%–4.50%, with Chair Jerome Powell signaling a cautious approach toward future policy adjustments. Economic growth remained steady, with the U.S. economy expanding at an annualized rate of 2.3% in the fourth quarter, driven by strong consumer and government spending.
European markets performed strongly, with the STOXX Europe 600 Index climbing 1.78% to reach an all-time high. Germany’s DAX also hit record levels, while Italy’s FTSE MIB, France’s CAC 40, and the UK’s FTSE 100 all posted gains.
Investor sentiment improved following the European Central Bank’s (ECB) decision to cut interest rates by 0.25 percentage points to 2.75%. ECB President Christine Lagarde emphasized that inflation was trending downward but refrained from committing to further rate cuts. The ECB’s stance reflects a delicate balance between stimulating economic growth and maintaining inflation control.
Economic performance across the Eurozone was mixed. The region’s GDP stagnated in the fourth quarter, falling short of expectations. While Germany and France saw economic contractions, Italy’s economy remained flat, and Spain posted a healthy 0.8% growth rate. Inflation trends also varied, with France’s inflation rate declining to 1.8% and Germany’s holding at 2.8%.
Meanwhile, Sweden’s central bank, the Riksbank, lowered its benchmark interest rate to 2.25%, marking its sixth rate cut as part of an effort to boost economic activity. Policymakers indicated that additional cuts might be limited in the near term. In the UK, mortgage approvals rose to their highest level since September 2022, signaling resilience in the housing market despite broader economic concerns.
Japan’s stock market delivered mixed results, with the Nikkei 225 falling 0.90% while the broader TOPIX Index gained 1.37%. The AI-driven tech sell-off early in the week weighed on Japanese semiconductor stocks. Additionally, the Bank of Japan (BoJ) maintained its hawkish stance, raising interest rates for the third time in a year. The yen appreciated against the U.S. dollar, reflecting expectations of continued monetary tightening.
In China, stock markets declined during a holiday-shortened trading week leading up to the Lunar New Year. Economic indicators signaled a weak start to 2025, with the official manufacturing Purchasing Managers’ Index (PMI) slipping to 49.1, indicating contraction. The non-manufacturing PMI also fell, highlighting broader economic struggles. Furthermore, industrial profits for 2024 dropped 3.3%, marking the third consecutive year of declines amid ongoing deflationary pressures and a prolonged real estate downturn.
Overall, global markets navigated a complex landscape of economic data, central bank decisions, and geopolitical developments. While the U.S. faced volatility from AI competition and tariff concerns, Europe benefited from monetary easing, and Asia contended with policy shifts and slowing economic momentum. As 2025 unfolds, market participants will closely watch inflation trends, interest rate movements, and global economic growth trajectories.
Ahead of the coming weeks, investors will continue to navigate evolving economic conditions, central bank policies, and geopolitical developments, all of which will play a crucial role in shaping global market trends in 2025.