February 5, 2025

The PULSE: February 5, 2025, global economic and market dynamics

On February 5, 2025, global economic and market dynamics were shaped by escalating trade tensions, significant corporate earnings reports, and notable geopolitical developments.

Escalation of Trade Tensions

The trade conflict between the United States and China intensified as both nations imposed new tariffs. On February 1, President Donald Trump announced a 10% tariff on Chinese imports. In retaliation, China imposed tariffs on U.S. products, including a 15% tariff on coal and liquefied natural gas and a 10% tariff on crude oil, agricultural machinery, and certain automobiles, effective February 10. Additionally, China initiated an antitrust investigation into Alphabet Inc., Google's parent company. thetimes.co.uk

These actions have raised concerns about a potential trade war between the world's two largest economies, with markets reacting negatively. The FTSE 100 declined by 0.5%, and Brent crude oil prices fell below $75 per barrel. thetimes.co.uk

Corporate Earnings Impact Markets

In the corporate sector, Alphabet Inc. reported fourth-quarter earnings that fell short of Wall Street expectations by $1 billion, leading to a 7.3% drop in its share price. The disappointing performance was attributed to weaker-than-expected cloud computing revenue and increased investments in artificial intelligence.

Advanced Micro Devices (AMD) also experienced a significant decline, with shares falling by 6.3% after missing revenue targets for its AI chip segment.

Geopolitical Developments Influence Markets

Geopolitical events further influenced market dynamics. President Trump's proposal to take control of the Gaza Strip and redevelop it into a "Riviera" has introduced additional uncertainty. This unexpected announcement has left markets confounded, with little immediate impact on oil prices but contributing to overall market volatility. reuters.com

Currency and Bond Markets React

The U.S. dollar weakened in currency markets following a decline in Treasury yields. The Japanese yen strengthened after reports of promising wage growth and an inflation-adjusted wage increase, suggesting a potential interest rate hike by the Bank of Japan. reuters.com

U.S. Treasury yields fell, benefiting from adjustments in labor market expectations and indications of continued Federal Reserve policy easing. reuters.com

Global Economic Outlook

The International Monetary Fund's latest World Economic Outlook projects global growth to continue at 3.2% during 2024 and 2025, consistent with the pace in 2023. Advanced economies are expected to accelerate slightly, while emerging markets and developing economies may experience a modest slowdown. Global inflation is forecasted to decline steadily, with advanced economies returning to their targets sooner than emerging and developing economies.

Conclusion

Today's economic and market developments underscore the complex interplay between trade policies, corporate performance, and geopolitical events. Investors are advised to monitor these factors closely, as they will likely influence market sentiment and economic conditions in the near term.This blog is for informational purposes only and does not constitute financial or investment advice. Readers should consult with a financial advisor before making any investment decisions.

Disclosure

This article is for informational purposes only and should not be considered investment advice, a recommendation, or an offer to buy or sell any securities or financial instruments. The information contained herein is derived from publicly available sources that are believed to be reliable; however, no representation or warranty, express or implied, is made as to its accuracy, completeness, or timeliness. Market conditions and economic data may change, and past performance is not indicative of future results.

Duncan Williams Asset Management (DWAM) does not provide tax, legal, or accounting advice. Before making any investment decisions, readers should consult their own financial advisor, tax professional, or legal counsel. Investing involves risk, including the potential loss of principal. Securities mentioned in this article may be subject to additional risks not described herein.

Forward-looking statements in this article, including projections and economic outlooks, are based on current expectations and are subject to uncertainties, risks, and changes in market conditions. DWAM does not undertake any obligation to update these statements in response to new information or future events.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of DWAM or its affiliates. References to specific companies or securities are for illustrative purposes only and should not be construed as investment recommendations. Readers should conduct their own due diligence before making any investment decisions.

Sources

China's Retaliatory Tariffs and Antitrust Investigation into Google:

"China hits back at Donald Trump with tariffs on US products" – The Times

URL: https://www.thetimes.co.uk/article/china-tariffs-news-us-trump-5fpththds

Alphabet Inc.'s Fourth Quarter Earnings Report:

"Morning Bid: Alphabet flubs, Yen surges, China returns" – Reuters

URL: https://www.reuters.com/markets/us/global-markets-view-usa-2025-02-05/

Advanced Micro Devices (AMD) Earnings Report:

"Morning Bid: Alphabet flubs, Yen surges, China returns" – Reuters

URL: https://www.reuters.com/markets/us/global-markets-view-usa-2025-02-05/

President Trump's Proposal on the Gaza Strip:

"Morning Bid: Markets confounded by Trump's Gaza proposal" – Reuters