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. equities ended the week mostly higher, with the Nasdaq Composite gaining 2.58% and leading the major indexes. Growth stocks outperformed value shares for the second time this year, based on Russell indexes. Meanwhile, small-caps struggled, with the Russell 2000 Index underperforming the S&P 500 by 146 basis points.

Investors welcomed President Donald Trump’s announcement that the administration would not immediately introduce new global tariffs but instead consider reciprocal tariffs on a country-by-country basis by April 1. Although uncertainty remains, markets appeared relieved by the prospect of continued negotiation rather than blanket tariffs.

Attention turned midweek to inflation data. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) rose 0.5% in January, up from 0.4% in December, while the core CPI advanced 0.4%. Producer price data also came in higher than expected, although components showed signs of cooling. Federal Reserve Chair Jerome Powell cautioned that inflation remains above target, underscoring the need for continued restrictive policy. Notably, futures markets shifted their expectations for the next rate cut from September to December following these reports. Treasury yields rose in response before easing later, reflecting persistent inflation concerns. The S&P 500 advanced 3.96% year-to-date, while the Dow rose 4.71%.

In Europe, the STOXX Europe 600 Index rose 1.78% in local currency terms, reaching a fresh record. Optimism over a potential resolution to the Ukraine-Russia conflict and robust earnings supported sentiment. Germany’s DAX climbed 3.33%, France’s CAC 40 rose 2.58%, and Italy’s FTSE MIB advanced 2.49%. The UK’s FTSE 100 added 0.37%.

In the UK, the Office for National Statistics reported that the economy unexpectedly grew 0.1% in the final quarter, defying forecasts for a contraction. December’s 0.4% expansion drove the quarterly result, as services and construction gains offset weaker production. The ONS said GDP rose 0.9% in 2024, improving from 0.3% in 2023.

On monetary policy, Bank of England Chief Economist Huw Pill cautioned against cutting interest rates too soon, citing strong pay growth. He noted that further efforts are needed to bring inflation down. Monetary Policy Committee member Catherine Mann also warned that more decisive action might have been warranted previously. Elsewhere, eurozone industrial production fell 1.1% in December, pulled down mainly by capital and intermediate goods. Revised data showed the eurozone economy grew 0.1% in the last quarter, putting annual growth at 0.7%. Overall, European markets maintained momentum despite geopolitical and economic uncertainties, helping reassure some investors.

Asian markets posted gains, with Japan’s Nikkei 225 rising 0.93% and the broader TOPIX up 0.80%. A weaker yen boosted exporters, while Japanese government bond yields moved higher on speculation that the Bank of Japan (BoJ) may tighten policy sooner than expected. The 10-year JGB yield reached 1.35%, its highest in almost 15 years. Adding to rate-hike expectations, the corporate goods price index rose 4.2% year over year in January, exceeding forecasts.

In a first, Japan’s government announced it would release rice from reserves to curb soaring food prices. BoJ Governor Kazuo Ueda warned that elevated food costs could shape inflation expectations, reflecting the central bank’s resolve to remain vigilant.

China’s markets also rallied, supported by hopes for milder U.S. trade measures. The CSI 300 added 1.19%, while the Shanghai Composite gained 1.30%. Hong Kong’s Hang Seng surged 7.04%, fueled by tech optimism around artificial intelligence. Meanwhile, China’s consumer price index rose 0.5% in January from a year earlier, but producer prices fell for the 28th straight month, signaling deflationary pressure.

Moody’s downgraded real estate China Vanke into junk, citing financial troubles. The government is drafting measures to address Vanke’s funding gap, reflecting efforts to shore up the property sector.

As the global economy navigates these shifting dynamics, investors will remain vigilant, focusing on policy decisions, inflation pressures, and corporate fundamentals to guide their strategies in the weeks ahead.