USA
The U.S. stock market faced significant volatility during the week, with all three major indices—S&P 500, Nasdaq Composite, and Dow Jones Industrial Average (DJIA)—experiencing sharp swings. The S&P 500 declined by 1.7%, while the DJIA plunged over 700 points on Friday, marking its worst day of the year. Meanwhile, the Nasdaq Composite suffered a 1.5% weekly decline as tech stocks came under pressure.
Economic data released during the week signaled weakening momentum in the economy. Consumer sentiment fell for the second consecutive month, as per the University of Michigan's Consumer Sentiment Index, reflecting concerns about slowing wage growth and higher borrowing costs. The U.S. services sector contracted for the first time in over two years, with the ISM Services PMI falling to 48.7, below the 50-point threshold indicating contraction.
Labor market data was mixed. Initial jobless claims came in at 212,000, slightly below expectations, signaling continued resilience in employment. However, businesses are showing early signs of slower hiring, as suggested by February’s ADP private payrolls report, which showed job gains of 110,000, below the expected 150,000. Meanwhile, inflationary pressures remained persistent, with the CPI rising 0.4% in January and 3.1% year-over-year, keeping the Federal Reserve cautious on rate cuts.
Corporate earnings also impacted markets. Walmart’s disappointing full-year guidance led to a 6.5% decline in its stock, weighing on the retail sector. Tech stocks, particularly semiconductors, faced headwinds amid concerns over weaker demand. However, AI-related stocks, such as Nvidia and AMD, continued to outperform, limiting losses in the Nasdaq. Treasury yields remained elevated, with the 10-year yield at 4.23%, reflecting expectations that the Fed will delay interest rate cuts until at least June.
Europe
European equity markets posted mixed performances during the week, with the STOXX Europe 600 Index managing a modest 0.3% gain, while Germany’s DAX 40 and the UK’s FTSE 100 struggled. The FTSE 100 fell by 0.9%, weighed down by renewed concerns about inflation, while DAX 40 gained 0.5% on improved private sector activity. France’s CAC 40 ended flat, while Spain’s IBEX 35 posted a 0.4% weekly gain.
On the economic front, UK inflation unexpectedly accelerated, rising to 3.0% in January, primarily due to higher transport and food costs. This dampened expectations of an imminent Bank of England (BoE) rate cut, pushing UK bond yields higher. Similarly, Eurozone inflation came in at 2.9%, only slightly easing from the previous month, reinforcing expectations that the European Central Bank (ECB) will wait until the second half of 2025 before considering rate cuts.
The Eurozone Composite PMI improved to 52.3, signaling continued expansion in business activity, led by services growth in Germany and moderate manufacturing recovery in France. Investors also monitored geopolitical risks, particularly Russia-Ukraine tensions and potential energy supply disruptions. Natural gas prices surged by 6% during the week as concerns over supply constraints persisted. The Euro weakened slightly against the U.S. dollar, trading around $1.07, reflecting uncertainty over the ECB’s monetary policy stance.
Japan
The Japanese stock market had a volatile week, with the Nikkei 225 Index initially hitting a fresh 34-year high before paring gains. The Nikkei closed the week down 0.3%, while the TOPIX Index posted a 0.2% gain. Investor sentiment was affected by both strong domestic economic data and external trade concerns.
Japan’s GDP expanded by an annualized 2.8% in Q4 2024, exceeding expectations of 2.1% growth. This was driven by a surprise increase in consumer spending and a rebound in capital expenditures, suggesting that corporate Japan remains resilient despite global economic headwinds. The Japan PMI data also showed continued expansion, with the Manufacturing PMI at 51.2 and the Services PMI at 52.5, indicating strong private sector activity.
The Bank of Japan (BoJ) maintained its ultra-loose monetary policy, keeping the benchmark rate at -0.1%, despite rising inflationary pressures. However, expectations of a possible rate hike in mid-2025 strengthened the Japanese yen, pushing it closer to 145 per U.S. dollar. The stronger yen weighed on export-heavy sectors, particularly automakers, with Toyota and Honda shares slipping by 1.5% and 2.0%, respectively.
China
Chinese equity markets rebounded sharply during the week, driven by government stimulus expectations and strong tech sector performance. The Shanghai Composite Index gained 2.5%, while the Hong Kong Hang Seng Index surged by 4.0%, led by a rally in technology and real estate stocks.
Economic data showed mixed signals. China’s GDP growth for Q4 2024 came in at 4.9% year-over-year, in line with expectations. However, industrial production growth slowed to 3.8%, reflecting weak global demand. The Manufacturing PMI remained in contraction territory at 49.2, signaling continued stress in the industrial sector. Retail sales, however, surprised on the upside, rising 5.2% year-over-year, driven by Chinese New Year spending and strong e-commerce growth.
Market sentiment was boosted by speculation that Beijing will announce new fiscal stimulus measures to support the struggling property sector. This fueled a sharp rally in real estate developers, with Country Garden and Evergrande surging 8% and 6%, respectively. The Chinese yuan weakened slightly to 7.12 per U.S. dollar, reflecting ongoing capital outflows amid uncertainty about economic recovery.