Global stock markets had yet another highly volatile – but ultimately positive – week as investors try to parse the latest policy statements and executive orders from US president Donald Trump
News that the US administration intended to impose swingeing tariffs on imports from Canada, China and Mexico sent markets into a tailspin at the start of the week, with the president’s threat to take similar action against the European Union in the near future adding to the turmoil. However, a relatively muted reaction from the Chinese authorities, as well as the news that levies on goods from both Mexico and Canada would be temporarily suspended, helped share prices recover on Tuesday and Wednesday. Elsewhere, positive corporate earnings statements supported markets in the US and Europe, while gold prices rose further due to expectations of significant geopolitical turmoil in 2025.
United States
On Wall Street, the Dow Jones Industrial Average ended trading on Thursday 0.4% up for the week so far, with the S&P 500 gaining 0.7%. Both indexes staged a significant recovery after Monday’s tariff-induced panic as Trump delayed his plans to place limits on trade with America’s nearest neighbours. However, his off-the-cuff approach to trade policy and international relations seems likely to create considerable market uncertainty over the next four years. Economic data from the US was mixed this week, with an unexpected fall in job vacancies and factory orders alongside signs of rising inflation among manufacturers.
UK
In the UK, the FTSE 100 closed on Thursday 0.6% up for the week so far at another record high. Investors welcomed the Bank of England’s decision to cut the base rate by 0.25%, but officials’ downward revision of their 2025 UK growth forecast highlighted the challenges facing the British economy. Latest data showed a significant deceleration in construction activity at the start of 2025, partly as a result of the spike in government bond yields in December and early January.
Europe
In Frankfurt, the DAX index ended Thursday’s session up 0.8% for the week, while France’s CAC 40 gained 0.7% as the index continued its progress back towards the highs of last spring. European stocks fell sharply on Monday following the Trump tariff news: even if the president decides not to directly target the EU, it seems likely that eurozone companies will to some extent be caught in the crossfire between America and China. Inflation in the bloc rose slightly and unexpectedly in January, but separate data indicated the eurozone had returned to growth last month. Signs of expansion in Germany’s services sector as well as in industrial orders were particularly welcome.
Asia
In Asia, the Hang Seng index in Hong Kong gained 3.3% as share prices bounced back from Monday’s losses on hopes that any trade war between China and the US will not be too pronounced or long lived. Technology stocks had an especially strong week as investors returned from the Lunar New Year holiday and belatedly reacted to last week’s news of a significant breakthrough in Chinese AI development. Japan’s Nikkei 225 index of leading shares, meanwhile, declined 1.3% with a rise in the value of the yen weighing on stocks after speculation about further Bank of Japan interest rate hikes intensified.
January 31 | February 6 | Change (%) | |
|---|---|---|---|
FTSE 100 | 8674.0 | 8727.3 | 0.6 |
FTSE 250 | 20950.5 | 20973.1 | 0.1 |
S&P 500 | 6040.5 | 6082.0 | 0.7 |
Dow Jones | 44544.7 | 44736.4 | 0.4 |
DAX | 21732.1 | 21913.0 | 0.8 |
CAC 40 | 7950.2 | 8007.6 | 0.7 |
ACWI | 869.0 | 874.4 | 0.6 |
Hong Kong Hang Seng | 20225.1 | 20891.6 | 3.3 |
Nikkei 225 | 39572.5 | 39066.5 | -1.3 |
Note: all market data contained within the article is sourced from Bloomberg unless stated otherwise, data as at 6 February 2025.
