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Markets digest US tariff shock

Equity markets started the week on a positive note, even as investors weighed the US Supreme Court’s decision on Friday to strike down much of President Donald Trump’s tariff agenda and his swift move to re‑impose broad levies under a different legal framework. US stocks finished last week higher, led by technology shares, while Asian markets were mixed but resilient on Monday, with Hong Kong and South Korea advancing despite lingering uncertainty over the scope and duration of the new tariffs. Markets in mainland China remain closed for the New Year celebrations on Monday, while Japanese markets are also closed. Meanwhile, the US dollar started the week under pressure, gold was trading higher around USD 5160 per ounce, and bitcoin fell to about USD 65,400.

  • Date
  • Auteur Shane Strowmatt, Senior Investment Writer
  • Temps de lecture 5 minutes

The word tariffs with an American flag

The US Supreme Court ruled on Friday that a key law cited by Trump does not give him authority to impose wide-ranging tariffs, striking down much of his trade agenda by a six-to-three majority. The decision invalidates tariffs that had been introduced under the International Emergency Economic Powers Act, including Trump’s near-global “reciprocal” duties and measures tied to alleged fentanyl trafficking, which together generated most US tariff revenue last year. In response, Trump said at the weekend that he intends to raise proposed worldwide tariffs to 15% from 10%, now relying on Section 122 of the 1974 Trade Act, which permits temporary tariffs for 150 days unless extended by Congress. Meanwhile, investors are focused on potential tariff refunds for importers, which some estimates put at more than USD 175 billion, and on the implications for US inflation and trade relations. US stocks nevertheless had a strong final session last week, with the Dow Jones Industrial Average closing at 49,625.97 points, up 0.5%, while the S&P 500 rose 0.7% to finish at 6909.51 points. The tech-heavy Nasdaq-100 outperformed, adding 0.9% to close at 25,012.62 points.

US growth slows as inflation holds

US gross domestic product increased at an annualised pace of 1.4% in the fourth quarter, well below the 2.5% rate the market had anticipated and down from 4.4% in the previous quarter, according to data released on Friday. The Commerce Department estimated that the federal government shutdown from early October to mid-November shaved about 1 percentage point off growth, alongside a slowdown in consumer spending to 2.4% from 3.5% and a swing in exports from a 9.6% surge to a 0.9% decline. For 2025 as a whole, the US economy expanded by 2.2%, compared with 2.8% in 2024. Inflation pressures remained elevated as the core personal consumption expenditures index, the Federal Reserve’s preferred measure excluding food and energy, rose 3% year-on-year in December, up from 2.8% in November, while the headline PCE rate accelerated to 2.9%, keeping price growth above the central bank’s 2% target despite last year’s cumulative three-quarter-point rate cuts. Also released on Friday, US flash PMI data for February showed the composite output index easing to 52.3, a ten‑month low that points to cooling business activity in both manufacturing and services.

US tariffs, Iran negotiations, Nvidia earnings in focus

This week, geopolitical developments and the Trump administration's reaction to the US Supreme Court decision will be in focus. The week in Asian markets began slowly with both Chinese and Japanese markets closed on Monday for holidays. The Hang Seng index in Hong Kong rose 2.6%, led by technology and export-focused stocks such as Lenovo, BYD and Shenzhou International, as investors positioned for a potentially less aggressive tariff regime after the US Supreme Court decision. South Korea’s KOSPI climbed 0.7% to a record high, while Australia’s S&P/ASX 200 was trading 0.6% lower. On Tuesday, the People’s Bank of China announces loan prime rates, Australia releases quarterly inflation figures on Wednesday, and Japan publishes inflation data from Tokyo on Friday. Market participants will closely dissect any update on negotiations between the US and Iran about its nuclear programme for signs of escalation. Out of the US, the Conference Board Consumer Confidence Index and a regular update to the Atlanta Federal Reserve’s gross domestic product estimate are due on Tuesday, while weekly jobless claims are published on Thursday. In the euro area, investors will track sentiment and price dynamics with the German ifo Business Climate Index on Monday, followed by the euro-area consumer price index on Wednesday, alongside fourth-quarter gross domestic product data from Germany (Wednesday) and France (Friday). Switzerland rounds out the calendar with fourth-quarter gross domestic product data on Friday. On the corporate side, market participants will watch Nvidia earnings (Wednesday) for any signs of an artificial intelligence investment peak.

Euro-area business activity accelerates in February

Euro-area private sector activity expanded at a faster pace in February, with the flash Composite Purchasing Managers' Index rising to 51.9 from 51.3 in January, the strongest reading in three months, according to data released on Friday. Manufacturing drove the improvement as headline manufacturing PMI moved into growth territory at 50.8, its highest level in 44 months, while services activity increased more modestly to 51.8 from 51.6. European stock indices moved firmly higher on Friday. The Euro Stoxx 50 gained 1.2%, while Germany’s DAX and France’s CAC 40 climbed 0.9% and 1.4%, respectively. The Swiss Market Index increased by 0.4%.

UK retail sales post strong January rebound

British retail sales volumes increased by 1.8% in January from December, the largest monthly rise since May and well above the modest gain the market had anticipated, according to data released on Friday. The increase compares with a 0.4% rise in December and was accompanied by a 4.5% year-on-year expansion in sales, which also clearly exceeded market expectations. The stronger-than-expected retail figures, which helped lift sterling against the US dollar, suggest that the United Kingdom’s economy may be starting to improve after barely expanding at the end of last year. The data follow a recent downgrade by the Bank of England of its growth forecast for 2026 to 0.9% from 1.2%, even as some business surveys have indicated a pick-up in activity at the start of the year.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Swiss Producer Price Index (08:30), Germany’s ifo Business Climate Index (10:00), Italian Consumer Price Index (10:00), Dallas Fed Manufacturing Index (16:30) and European Central Bank President Christine Lagarde speaks (18:30).

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Editor: Alessandro Fezzi
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