USA
The U.S. market faced heightened volatility during the week of January 27 – February 2, 2025, as investors reacted to key economic data and policy developments. Inflationary pressures showed signs of easing, with the Institute for Supply Management's (ISM) prices-paid index declining to 60.4%, suggesting a moderation in price increases. However, GDP growth slowed to an annualized rate of 2.3% in Q4 2024, reflecting cautious consumer spending amid trade policy concerns. The labor market remained resilient, while the ISM Services PMI declined to 52.8%, signaling a slower expansion in services. Market sentiment was rattled by the White House’s confirmation of new tariffs on imports, leading to sharp sell-offs in equities. The S&P 500 declined by 0.8% on January 31, while the Dow Jones lost 122 points (0.3%) and the NASDAQ tumbled over 3% as technology stocks faced a major rout.
Europe
European markets outperformed their U.S. counterparts, benefiting from investor rotation out of American tech stocks and reduced concerns over U.S. trade tariffs. The European Central Bank (ECB) responded to sluggish economic growth by cutting interest rates by 25 basis points to 2.75%, supporting risk assets. The eurozone's economic data pointed to stagnation, with GDP growth struggling to gain momentum. Despite this, European equities surged, with the STOXX Europe 600 gaining 6.3% and the FTSE 100 rising 6.1% in January, both reaching record highs. Germany’s DAX, however, faced headwinds, slipping 0.22% as telecom and energy stocks weighed on performance. Strong luxury sector earnings and hopes of further monetary easing provided support for European stocks overall.
Japan
Japanese markets faced downward pressure as concerns over a global technology sell-off and trade uncertainty weighed on investor sentiment. The yen appreciated sharply following stronger-than-expected wage growth, fueling speculation that the Bank of Japan might raise interest rates. Meanwhile, Japan’s factory activity contracted at its fastest pace in ten months, with PMI figures reflecting a slowdown in manufacturing. The Nikkei 225 and TOPIX indices both suffered losses, mirroring the decline in global equities. Investor caution prevailed as fears of reduced global demand for semiconductors and other technology exports led to risk-off sentiment in Japan’s stock market.
China
China’s economic data for Q4 2024 showed strong GDP growth at 5.4% year-over-year, marking an acceleration from the previous quarter’s 4.6%. However, manufacturing activity struggled, with the PMI falling to 49.1 in January, indicating a contraction for the first time in four months. The Shanghai Composite Index declined as investors reacted to weaker-than-expected economic data and concerns over new U.S. trade tariffs. However, the Hang Seng Index in Hong Kong saw gains, driven by strong demand for artificial intelligence and technology stocks. Geopolitical tensions escalated as China announced countermeasures against U.S. defense firms following arms sales to Taiwan, contributing to investor caution in mainland markets.