U.S. and Global Markets Extended Gains Despite Tariff Headwinds

Alexander Garcia
10 Feb, 2025
Miami

Wall Street indexes overcame morning weakness and extended gains of previous weeks in a row as investors remained focused on corporate results. 

Investors turned cautious amid waning confidence in the White House and faltering enthusiasm surrounding artificial intelligence. 

The S&P 500 index increased 0.5%, and the Nasdaq Composite advanced 0.9% amid another round of threats issued by the White House targeting steel and aluminum products.

Tariffs are nothing but import taxes paid by the U.S. consumers, which ultimately drives inflation higher and forces the Federal Reserve to keep higher rates for longer. 

Global investors and Wall Street have started overlooking Trump's tariff threats, which are designed for domestic political consumption, as they do little to thwart imports and support domestic industries and businesses. 

Despite Trump's tariffs on imports from China during his first administration, shipments from the world's second largest economy increased by more than 50%. 

The current round of tariffs on Chinese goods is just as likely to fail in slowing down imports, and Chinese manufacturers are diversifying manufacturing bases. 

Moreover, U.S. consumers and businesses have few alternatives in many industries and for a range of products, as most of manufacturing has shifted to Asia following the free trade policy pursued by both political parties. 

This week investors will remain glued to the next batch of corporate results and two inflation reports in the U.S.

Coca-Cola, McDonald’s, Cisco Systems, Applied Materials, and Deere & Company are some of the leading companies scheduled to release their earnings. 

On the economic front, investors are awaiting updates on retail sales, industrial output, and inflation. 

 

Global Markets Previous Week 

Global financial markets retained an upward bias following strong corporate earnings, accommodative central banks, and upbeat market sentiment.

European markets advanced for the fifth consecutive week after the Bank of England lowered rates as expected, and German exports were ahead of market expectations.

Markets in China soared in the hopes of an earnings rebound driven by affordable access to artificial intelligence.

The S&P 500 index and the Nasdaq Composite extended the market rally to the fourth consecutive week as investors' confidence in the Trump administration ebbed amid flip-flops on tariffs on Mexico, Canada, and China. 

Last week, investors reviewed the latest updates on nonfarm payrolls, job openings, and record trade deficits in 2024.

The job market is expanding at a slower pace, but market conditions remain solid. 

The U.S. economy added 143,000 net new jobs in January, far less than the upwardly revised 307,000 in December.

The jobless rate edged down to 4.0%, and wages inched up to 0.5% from the previous month and increased the annual growth to 4.1%.

The U.S. economy added an average of 166,000 jobs a month, totaling 1.99 million in 2024, slower than the average monthly increase of 225,000, totaling 2.7 million in 2023.

Despite the slowdown in job growth, policymakers are likely to focus on the wage increase, which is far higher and inconsistent with the Fed's target rate of 2%.

 

U.S. Indexes and Yields

The S&P 500 index increased 0.5% to 6,054.06, the Nasdaq Composite edged up 0.93% to 19,718.97, and the Russell 2000 index advanced 0.4% to 2,287.77.

The yield on 2-year Treasury notes edged lower to 4.28%, 10-year Treasury notes decreased to 4.49%, and 30-year Treasury bonds advanced to 4.70%.

WTI crude oil increased $0.88 to $71.88 a barrel, and natural gas prices edged higher by $0.10 to $3.41 a thermal unit.

Gold increased by $38.82 to 2,989.18 an ounce, and silver edged up by $0.20 to $32.01.

The dollar index, which weighs the US currency against a basket of foreign currencies, increased 0.17 to 108.27 and traded at a two-year high.

 

European Markets Indexes Trade Higher Amid Rate Cut Optimism 

European markets edged higher and extended a five-week rally amid rate path optimism and a positive earnings outlook. 

Benchmark indexes in Frankfurt, Paris, Milan, and London advanced after the European Central Bank official supported the case for three additional rate cuts in 2025. 

The European Central Bank's Governing Council member Boris Vujcic said that expectations for three more rate reductions this year are "reasonable," supporting the market view of rate cuts totaling at least 125 basis points. 

Benchmark indexes in Germany and the UK are hovering near record highs despite the weakening macroeconomic backdrop and rising threats of trade barriers from the world's largest economy. 

Investors are overlooking the weakening of Germany's automotive exports to China and a sharp decline in industrial output, driven by falling demand for intermediate goods and industrial machinery.

In the week of few economic data releases, investors reviewed the latest inflation update from Norway. 

Consumer price inflation picked up to 2.3% in January from the four-year low of 2.2% in December, Statistics Norway reported Monday. 

Meanwhile, the so-called core inflation, which adjusts for tax changes and excludes volatile energy prices, accelerated to 2.8% from 2.7% in the previous month and stayed above the central bank's target rate of 2.0%.

Norway's consumer price inflation has been declining after peaking at 7.5% in October 2022 and dropping to a low of 2.2% in December 2024.

 

Europe Indexes and Yields

The DAX index increased by 0.05% to 21,797.35, the CAC-40 index advanced 0.06% to 7,977.86, and the FTSE 100 index rose by 0.48% to 8,742.03. 

The yield on 10-year German bonds inched lower to 2.38%, French bonds increased to 3.09%, the UK gilts moved down to 4.47%, and Italian bonds edged lower to 3.46%.

The euro increased to $1.03; the British pound was higher at $1.24; and the U.S. dollar was lower and traded at 90.99 Swiss cents.

Brent crude increased $0.86 to $75.51 a barrel, and the Dutch TTF natural gas advanced €0.17 to €49.91 per MWh.

 

Europe Stock Movers

Nokia Oyj jumped 2.2% to €4.76 after the company appointed a new chief executive officer. 

BP plc jumped 6.8% to 463.0 pence after the activist investor Elliot Investment took a stake in the company. 

GTT Group decreased 4.8% to €137.80 after the naval engineering company announced the resignation of its chief executive, Jean-Baptiste Choimet.

 

Tech Rally Powers Rise In China and Hong Kong Indexes

Stock market indexes in China and Hong Kong extended gains of the previous week, and investors reviewed the latest inflation reports. 

The Hang Seng index advanced 1.5%, and the CSI 300 index increased up to 0.3% following the continued surge in tech stocks in Hong Kong.

Market gains in China were muted after the U.S. threatened to impose an additional 25% tariff on steel and aluminum products, which could disrupt trade with Asian suppliers. 

 

Inflation Reports Support Need for Additional Stimulus 

On the economic front, investors reviewed the latest updates on inflation amid louder calls for clarity on the previously announced fiscal stimulus.

China's consumer price inflation accelerated to 0.5% in January from  0.1% in December. The National Bureau of Statistics reported on Sunday.

Consumer inflation rose to the highest level since August, driven by the seasonal effects of the Lunar New Year. 

Producer price inflation in January decreased for the 28th consecutive month, amid persistent demand weakness, according to a separate report by the statistical agency released on Sunday. 

Producer price inflation decreased 2.8%, matching the rate in the previous month, and remained at the softest pace since August, as policymakers announced a raft of stimulus measures. 

 

China Indexes and Stocks 

The Hang Seng index increased 1.6% to 21,468.93, and the mainland-focused CSI 300 index advanced 0.2% to 3,901.06. 

Technology stocks advanced in Monday's trading in the hopes that the affordable advances in artificial intelligence may provide a boost to earnings growth. 

Alibaba Group advanced 5.5% to HK $105.50, JD.com Inc increased 2.8% to HK $161.50, Meituan gained 5.6% to $162.70, and Kuaishou Technology advanced 2.9% to HK $47.65.