Weekly Commentary

Over the past week, U.S. stock indices showed neutral dynamics: the S&P 500 declined by 0.2%, while the Nasdaq edged up by 0.1%. In Europe, the EUR STOXX 50 index gained 0.7%. Brent crude oil prices fell by $2.1, closing at $74.7 per barrel.

The Bank of England lowered its key rate by 25 basis points to 4.5%, in line with expectations. Two members of the Monetary Policy Committee voted for a larger 50 basis point cut, highlighting the growing influence of policymakers favoring a more accommodative stance. The central bank’s report noted that domestic inflationary pressures continue to ease, though they remain somewhat elevated. Economic growth has been weaker than projected, and risks of inflation acceleration due to rising energy prices and tariffs add to economic uncertainty. The regulator signaled a "gradual and cautious approach" to further monetary easing, suggesting the possibility of additional rate cuts but at a measured pace to balance inflation risks and weak demand.

China’s consumer inflation in January reached a five-month high of 0.5% YoY (forecast: 0.4%, previous: 0.1%). Prices rose by 0.2% MoM due to seasonal factors linked to the Lunar New Year. Food prices increased by 0.1% YoY, non-food goods by 0.5% YoY, and services by 1.1% YoY. Core inflation edged up to 0.6% YoY. Producer price deflation persisted, with factory-gate prices falling by 2.3% YoY, reflecting overcapacity issues. Durable goods prices dropped by 2.6% YoY, while short-term consumer goods prices rose by 0.5% YoY. The inflation uptick in January was largely driven by holiday effects rather than a sustained rebound in consumer demand. Structural economic challenges, such as industrial overcapacity, continue to exert downward pressure on prices.

The U.S. postponed its planned 25% tariffs on Canadian and Mexican goods and a 10% tariff on oil imports for one month after Ottawa and Mexico City threatened retaliatory measures. Meanwhile, Washington imposed a 10% tariff on Chinese imports, prompting Beijing to respond with 15% tariffs on coal and LNG, as well as 10% tariffs on oil, agricultural equipment, large-engine vehicles, and pickup trucks. These measures will take effect on February 10. Additionally, the U.S. confirmed plans to introduce further tariffs on imports from the EU, escalating transatlantic tensions and increasing global trade risks. Analysts note that these measures aim to reduce the trade deficit and support domestic industries, but they also pose short-term inflationary and economic risks for the U.S. economy.

January’s U.S. labor market data presented a mixed picture. The number of job openings (JOLTS) declined to 7.6 million (forecast: 8.01 million). Non-Farm Payrolls rose by 143,000 (forecast: 169,000), a sharp slowdown from December’s 307,000 increase. The unemployment rate fell to 4.0% (forecast: 4.1%), while labor force participation edged up to 62.6%. Average hourly earnings growth accelerated to 0.5% MoM and 4.1% YoY. However, a decline in hours worked led to an overall reduction in total payroll earnings. Despite fewer job openings and slower employment growth, the labor market remains relatively strong. Nevertheless, signs of cooling reinforce the Federal Reserve’s cautious stance, supporting its decision to pause monetary policy changes.

Key events for this week:

• 11.02.2025: Jerome Powell’s testimony before Congress
• 12.02.2025: U.S. Consumer Price Index (CPI) data
• 13.02.2025: U.S. Producer Price Index (PPI) data and U.K. GDP report
• 14.02.2025: EU GDP data and U.S. retail sales report

Companies reporting this week:

• 10.02.2025: McDonald's, ON Semiconductor, Vertex, Rockwell Automation, Incyte;
• 11.02.2025: Shopify, Coca-Cola, DoorDash, Zillow, BP, SMCI, Humana, Lyft, AutoNation, Leidos, Energy Transfer, S&P Global, Gilead, Marriot, Welltower;
• 12.02.2025: CVS Health, Dominion Energy, Biogen, Reddit, AppLovin, Cisco Systems, Robinhood, Vertiv, Barrick Gold, Kraft Heinz, Albemarle, The Trade Desk;
• 13.02.2025: Barclays, Brookfield, Duke Energy, Sony, Zoetis, John Deer, Coinbase, Roku, Twilio, Applied Materials, Airbnb, Palo Alto Networks, Datadog, DraftKings, Howmet Aerospace;
• 14.02.2025: Moderna, Enbridge.