Weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA.
U.S. stocks faced their steepest weekly decline since early September, as major indexes including the S&P 500, Nasdaq Composite, S&P MidCap 400, and Russell 2000 all dropped over 3%, while the Dow Jones Industrial Average shed 2.37%. Investor sentiment was rattled by uncertainty around tariffs, particularly following Tuesday’s implementation of 25% levies on certain Canadian, Mexican, and Chinese imports, though the Trump administration later announced temporary exemptions. Fears about inflation and economic growth contributed to market anxiety.
On the economic data front, the Institute for Supply Management’s manufacturing Purchasing Managers’ Index indicated expansion in February, though new orders contracted sharply, and prices jumped. In contrast, the ISM’s services index continued to expand, supported by business activity, new orders, and employment. The Federal Reserve’s Beige Book reported higher overall economic activity but noted weaker consumer spending and heightened price sensitivity across districts. Fed Chair Jerome Powell stressed that policymakers remain cautious amid trade and policy uncertainties, stating they do not feel compelled to raise rates imminently. The Labor Department’s monthly jobs report showed 151,000 new positions in February, modestly below forecasts, with the unemployment rate edging up to 4.1%. Despite these concerns, health care, finance, and transportation saw notable hiring gains.
European equities ended the week lower, snapping a 10-week winning streak in the pan-European STOXX Europe 600 Index, which declined 0.69%. Uncertainty about U.S. trade policy weighed on investor sentiment, but prospects of increased defense and infrastructure spending in Germany and the EU helped moderate losses. Major benchmarks were mixed: Germany’s DAX rose 2.03%, France’s CAC 40 edged up 0.11%, Italy’s FTSE MIB slipped 0.16%, and the UK’s FTSE 100 lost 1.47%.
The European Central Bank (ECB) cut its key deposit rate by 25 basis points to 2.5%, noting it is now “meaningfully less restrictive.” ECB President Christine Lagarde described “phenomenal” uncertainty, including possible U.S. trade conflicts. The bank lowered its 2025 growth forecast for the eurozone to 0.9% and revised its inflation estimate to 2.3%. Meanwhile, recent data showed January inflation slowed to 2.4% from 2.5% in December, while the core rate dipped to 2.6%.
In Germany, coalition talks produced a proposal for a EUR 500 billion infrastructure fund and relaxed borrowing rules, driving a jump in 10-year Bund yields. In the UK, net mortgage lending reached GBP 4.207 billion in January, reflecting strong demand ahead of a soon-to-expire stamp duty reduction. These developments underscore the region’s fragile recovery.
Japan’s stock market delivered mixed results, with the Nikkei 225 slipping 0.72% while the broader TOPIX Index gained 1.0%. Concerns over U.S. trade policy weighed on global risk sentiment, strengthening the yen to around JPY 147 against the U.S. dollar. Japan’s 10-year government bond yield rose to 1.53%, its highest level since 2008, reflecting expectations that the Bank of Japan (BoJ) might continue raising interest rates amid signs of economic improvement. Officials are preparing to declare an end to long-term deflation, and the country’s largest labor union group, RENGO, is pushing for a 6% average wage hike—potentially accelerating the BoJ’s timeline for additional rate increases.
In China, equities moved higher after Beijing announced growth and fiscal targets at the annual National People’s Congress. The onshore CSI 300 Index climbed 1.39%, while the Shanghai Composite rose 1.56%. Policymakers maintained a 5% GDP growth target for 2025, introduced a fiscal deficit goal of 4% of gross domestic product, and lowered the inflation target to roughly 2%. Despite headwinds from an extended housing downturn and continued uncertainty around U.S. tariffs, officials suggested further stimulus measures would be employed to support consumption, which Premier Li Qiang emphasized as the government’s top priority this year.
Overall, while markets face continued uncertainty around trade, inflation, and policy decisions, steady activity in select sectors and regions provides a measure of optimism for investors in the coming weeks.
