Week ending 28th February 2025.

As you can see from the accompanying table financial markets were mixed this week amid company earnings reports, economic data and talk on tariffs.

U.S. stocks ended the week lower, weighed down by the “Magnificent Seven.” Nvidia’s Q4 earnings beat expectations but revealed a slowdown in data centre revenue growth. Still, the company posted $11 billion in Blackwell product revenue, exceeding forecasts and easing demand concerns.

On Thursday, President Trump announced new tariffs on Mexico and Canada effective March 4th, alongside an additional 10% tariff on Chinese goods. In response, Asian markets saw a sharp pullback on Friday, erasing much of their earlier weekly gains. He also proposed 25% tariffs on imports from the European Union, particularly for automotives. Despite this, European markets closed the week slightly higher, supported by strong corporate earnings and gains in defence stocks.

Markets have been relatively calm amidst Trump’s tariff proposals, but growing uncertainty around trade negotiations is now weighing on investor confidence. Trump’s unpredictable approach, balancing negotiation tactics and policy, has made it hard for the market to find clear direction. With Trump directing his team to explore “reciprocal” tariffs for each country, volatility is expected to continue as investors adopt a “wait and see” approach. Short-term fluctuations may persist, but pullbacks could present buying opportunities for long-term investors.

In the US, Friday’s release of January’s core PCE inflation report met expectations, providing reassurance about inflation’s trajectory. Annual personal consumption growth eased to 2.5%, down from 2.6% in December, while core inflation slowed to 2.6%, from 2.9%. Personal income saw a significant 0.9% month-over-month increase, its largest rise in a year. However, personal spending dropped by 0.2%, marking the first decline in nearly two years. The softer consumer spending and slower income growth are likely to capture the Fed’s attention. While inflation is decelerating, the monthly rate remains higher than the Fed would prefer, keeping future rate hikes in focus.

The UK’s FTSE 100 outperformed other major indices, with UK Prime Minister Keir Starmer’s White House visit keeping sentiment positive. While discussions on a trade deal with the US were cordial, there were no firm commitments made on trade terms but no mention of tariffs which was seen as a positive. Starmer also came away without any U.S. security guarantees for Ukraine.

On Friday, tensions flared in the Oval Office during a meeting between President Trump, U.S. Vice President JD Vance, and Ukrainian President Zelensky. The discussion focused on a potential deal where the U.S. would receive mineral resources from Ukraine in exchange for supporting ceasefire negotiations with Russia. What began as a cordial talk quickly escalated into a heated argument, with Trump and Vance accusing Zelensky of not showing enough gratitude for U.S. support and “gambling with World War Three.”

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As no agreement was reached on either issue, this added to the uncertainty surrounding the prospects of a peace deal with Russia. Despite the drama, U.S. markets, which had already closed after European markets, responded with caution. The S&P 500 initially dipped following the confrontation but regained ground to finish the day higher. Many investors are speculating that President Trump may still pursue the deal in the future.

Over the weekend, British Prime Minister Keir Starmer welcomed Zelensky as well as other European leaders for discussions. During the meeting, he emphasized the importance of Ukraine’s allies maintaining and strengthening their support.

As always, investors should keep an eye on geopolitical developments, but there is reassurance in the fact that markets have remained resilient despite the headlines.

Coming up next week, Eurozone inflation data, unemployment rate and the ECBs interest rate decision. Chinese PMI, US Services PMI and US labour market data.  We also have The Chinese People’s Political Consultative Conference on March 4th, followed by the National People’s Congress on March 5th.

Kate Mimnagh, Portfolio Economist