Tariffs and tensions rise as global leaders meet

Global equities closed the week modestly lower amid heightened geopolitical tensions, worries that uncertain policy would slow economic growth, and a slowdown in AI infrastructure would reduce US mega-cap margins.

The US mega-cap stocks known as the Magnificent Seven, continued to underperform the broader market last week, as they have done year-to-date. Nvidia extended its run of estimate beating results during the week, though only modestly and shares fell on the announcement.

Geopolitical tensions rose with US President Donald Trump citing a lack of progress on halting the flow of fentanyl into the US, whilst announcing 25% tariffs on goods imported from Canada and Mexico, coming into effect on Tuesday 4th March, along with an additional 10% tariff on imports from China. The hike in levies against China will take the effective US tariff rate to 25%. Any last-minute negotiations to derail the duties, as we saw a month ago, appear unlikely this time. Canadian Prime Minister Justin Trudeau said Thursday afternoon that Canada would counter with a strong response. Numerous global leaders met late last week, with Ukrainian President Zelensky’s visit to the White House drawing significant global attention as tempers flared with US President Trump and Vice-President Vance. The meeting in the Oval Office was planned to discuss a minerals deal and negotiations over a ceasefire agreement with Russia. The yield on the US 10-year note tumbled 20 basis points to 4.25% while the price of a barrel of West Texas Intermediate crude oil declined $2 to $69.50.

Meanwhile, the minutes of the European Central Bank’s (ECB’s) January meeting indicated that policymakers were confident that inflation was heading back to the 2% target but also pointed to some evidence that suggests a shift in the balance of risks to the upside since December. The MSCI Europe ex UK index closed the week broadly flat.

In Asian markets, Japan’s stock markets retreated over the week, with the Nikkei 225 Index falling 4.18% and the broader TOPIX index down 1.99%. Domestic chip and AI related stocks led the declines, following the retreat in the US technology names. Mainland Chinese stock markets fell with most of the week’s declines occurring on Friday, a day after President Trump announced an additional 10% levy on Chinese imports effective March 4th. In Hong Kong, the Hang Seng index shed 2.28%.

Week Ahead

Monday	US	ISM Manufacturing PMI	February	50.60	50.90
Tuesday	Europe	Unemployment Rate	February	6.30%	6.30%
Wednesday	Europe	Final Services PMI	January	44.60	44.50
	UK	Final Services PMI	January	52.20	52.20
	US	ISM Services PMI	February	53.00	52.80
Thursday	Europe	Euro Summit	-	-	-
	Europe	Main Refinancing Rate	March	2.65%	2.90%
	US	Unemployment Claims	February	236k	242k
Friday	US	Average Hourly Earnings m/m	February	0.30%	0.50%
	US	Non-Farm Employment Change	February	156k	143k
	US	Unemployment Rate	February	4.00%	4.00%
	Europe	Revised GDP q/q	Q4'24	0.10%	0.10%

Source: Bloomberg, 03/03/25

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