Global equities continued to fall last week as US tariffs on steel and aluminium came into effect, adding to an intensifying trade war and stoking fears of higher inflation. The S&P 500 index saw a -2.3% fall in local currency whilst UK and European indices were more resilient.
On Wednesday, US tariffs of 25% on all steel and aluminium imports came into effect after previous exemptions expired. In retaliation, Canada quickly imposed 25% tariffs on US goods including beef, motorcycles and whiskey alongside American-made steel and aluminium, coming into effect last Thursday. Similarly, the European Union announced plans to implement counter tariffs on $28 billion worth of US products such as boats, motorbikes and alcohol, beginning next month although the bloc remains open to negotiations. European equity markets closed the week lower; the French CAC 40 index fell to close the week down -1.1%, whilst Germany’s DAX 30 recovered ground on Friday to leave it just -0.1% lower for the week.
US consumer prices increased by 2.8% year over year in February, down from the 3% rise recorded in January. A decline in airline fares contributed to the lower rate, whilst shelter inflation also experienced the smallest increase since late 2021. Core inflation, which excludes food and energy, also saw its lowest reading since 2021, rising by 3.1% but remains above target and sticky. Coupled with concerns that increased tariffs will keep inflation high, bird flu has also caused shortages in eggs and poultry, driving up food prices. Meanwhile, the US Producer Price Index (PPI) inflation was unchanged in February and came in at 3.2% year-on-year, also marking a slowdown from the prior month. PPI measures wholesale prices. The yield on the US 10-year Treasury note fell below 4.2% mid-week before rebounding to 4.3% at Friday’s close.
Elsewhere, the UK’s FTSE 100 lost -0.55% on the week, whilst Asian markets posted positive gains. The Shanghai Composite made a 1.39% local currency gain, whilst Japan’s Nikkei 225 index returned 0.45%. Japan’s economic growth for the fourth quarter of 2024 was revised lower during the week to an annualized rate of 2.2%.
In commodities, the price of a barrel of West Texas Intermediate crude oil ended roughly unchanged at $67 per barrel. Meanwhile, Gold continues to set new highs, breaking through $3000 an ounce during intra-day trading on Friday amid global trade wars, fraught tensions in the middle east and on the Russia-Ukraine border.
Week Ahead
| Day | Country | Measure | Period | Forecast | Previous |
| Monday | China | Industrial Production YoY | February | 5.30% | 6.20% |
| China | Retail Sales YoY | February | 3.80% | 3.70% | |
| US | Retail Sales MoM | February | 0.60% | -0.90% | |
| Tuesday | N/A | - | - | - | - |
| Wednesday | Japan | Bank of Japan policy rate | March | 0.50% | 0.50% |
| Europe | Final CPI YoY | February | 2.40% | 2.50% | |
| US | Federal funds rate | March | 4.50% | 4.50% | |
| Thursday | UK | Avergae Earnings Index 3m/y | February | 5.80% | 6.00% |
| UK | Unemployment Rate | February | 4.40% | 4.40% | |
| UK | Bank of England MPC rate | March | 4.50% | 4.50% | |
| Japan | National core CPI y/y | February | 2.90% | 3.20% | |
| Friday | Europe | Consumer Confidence | February | -13.00 | -14.00 |
Source: Bloomberg, 17/03/25
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