Weekly house view | Tariffs delayed, not denied
The week in review
While they had to untangle a welter of pronouncements and executive orders from Donald Trump, freshly installed as US president, overall the mood remained positive on US equity markets last week. Helped by earnings news and relatively quiet bond markets, the S&P 500[i] rose 1.8% (in USD), with sectors like industrials and financials taking heart from Trump’s policy agenda. A heavy earnings week and a 1 February deadline for the introduction of 25% on Canadian and Mexican imports will determine whether these dynamics will continue in the days ahead. European equity indexes, helped by signs of stabilisation in business activity and a probable rate cut from the ECB this week also rose last week. Widely expected, the Bank of Japan’s rate rise was brushed off by the TOPIX[ii], which rose 2.7% on the week (in yen). While moves by the Chinese authorities to stimulate equity investments seemed to have a mild impact, a lack of specifics on US tariffs pushed the CSI 300[iii] to a 1.9% gain last week (in USD). At the same time, Trump’s mixed messaging on tariffs and trade policy meant the dollar slid against other major currencies.
Geopolitics
Trump said Egypt and Jordan should take in Palestinians from Gaza; Russian President Vladimir Putin said he was ready to meet Trump.
Key data
S&P Global’s flash estimate of the composite purchasing managers’ index (PMI) for the euro area rose to 50.2 in January from 49.6 in December and just above the mark that separates growth from contraction. The flash composite PMI for the US fell to 52.4 in January from 55.4 in December, with a rebound in the manufacturing PMI (to 50.2) failing to offset a drop in the services PMI (to 52.8). The International Monetary Fund raised its US GDP growth forecast to 2.7% in 2025 from 2.2% previously. The official manufacturing PMI in China came in at 49.1 in January, down from 50.1. The official non-manufacturing PMI fell to 50.2 from 52.2.
[ii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, TOPIX (net 12-month return in JPY): 2020, 4.8%; 2021, 10.4%; 2022, -5.1%; 2023, 25.1%; 2024, 17.7%.
[iii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, China CSI 300 (net 12-month return in USD): 2020, 38.4%; 2021, -1.0%; 2022, -26.5%; 2023, -10.9%; 2024, 14.9%.