As we start a new week, let's take a look at the significant events in the global economy over the past week with our weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA.

U.S. stocks retreated over the week, with the S&P 500 holding up relatively well by slipping just 0.24%. Market sentiment initially took a hit on news that President Donald Trump planned to impose 25% tariffs on imports from Mexico and Canada and 10% on Chinese imports starting February 1. However, the decision to postpone tariffs on Mexico and Canada for 30 days helped ease concerns and allowed equities to recover some early losses. Earnings announcements also played a role in shaping investor sentiment: According to FactSet, 77% of S&P 500 companies that have reported fourth-quarter results beat consensus estimates, with an average year-over-year earnings growth of 16.4%, surpassing the 11.9% forecast.

Economic data offered mixed signals. The Institute for Supply Management (ISM) reported that U.S. manufacturing returned to expansion territory for the first time since 2022, though services activity, while still growing, slowed from the prior month. January’s nonfarm payrolls rose by 143,000—below expectations—and the unemployment rate dipped to 4.0%. Job openings also declined to 7.6 million in December, suggesting a stable but gradually cooling labor market. In the bond market, soft employment figures and tariff concerns supported U.S. Treasuries, sending yields slightly lower.

European equity markets ended the week in positive territory, with the pan-European STOXX Europe 600 Index up 0.60%. Investors shrugged off concerns about U.S. trade policy, focusing on domestic developments. Italy’s FTSE MIB was the top performer among major bourses.

The Bank of England (BoE) lowered its benchmark interest rate by 0.25% to 4.5%, citing progress in taming inflation and wage growth. The vote was 7–2, with two policymakers favoring a half-point cut amid weaker-than-anticipated data. The BoE revised its UK growth projection for 2025 down to 0.75%, half the previous estimate. It warned that inflation could stay above target until 2027—six months later than expected. Governor Andrew Bailey suggested further rate cuts could follow, emphasizing a meeting-by-meeting approach.

Eurozone inflation remained above the European Central Bank’s (ECB) 2% target for the third straight month, as consumer prices rose 2.5% year over year in January. Services inflation, a key focus for policymakers, stood at 3.9%, while core inflation held at 2.7%, according to the latest data from Eurostat. Despite these pressures, the ECB maintained that current inflation trends stemmed from energy-related base effects. Germany’s factory orders rebounded 6.9% in December, but industrial production fell 2.4%, highlighting the region’s uneven recovery.

Japanese equities retreated over the week, with the Nikkei 225 falling 2.0% and the TOPIX Index down 1.8%. A more hawkish stance from the Bank of Japan (BoJ) contributed to a stronger yen. The yield on the 10-year Japanese government bond rose to 1.28% from 1.23%, reflecting expectations of additional BoJ rate hikes later this year. Recent data showed a sharp increase in nominal wages in December, with real wages also climbing for a second straight month, due to higher winter bonuses. Household spending posted a solid rebound, supporting the BoJ’s view that inflation and growth could remain enough to justify further policy normalization.

In China, stock markets climbed in an abbreviated week following the Lunar New Year holiday. The CSI 300 rose 1.98%, and the Shanghai Composite added 1.63%, driven by strong holiday consumer spending. Box office revenues grew 18% from last year, and domestic tourism spending rose 7%, both suggesting improved demand. However, private surveys signaled a slower pace of manufacturing and services expansion in January, consistent with broader signs of an uneven recovery. Meanwhile, President Trump’s announcement of a 10% tariff on Chinese imports dampened sentiment, though investors seemed more focused on the country’s post-holiday consumption trends.

Looking ahead, investors will remain focused on evolving trade policies, monetary decisions, and economic indicators for further direction in what promises to be another pivotal phase for global markets.