Global News Summary (27 January – 1 February 2025)

United States (USD)

• Tariff Uncertainty & Market Reaction: Trump’s 25% tariffs on Mexico and Canada and 10% on China set to take effect this weekend, triggering market volatility. The dollar strengthened, with the Bloomberg Dollar Spot Index up 0.4%.

• Treasury Secretary Scott Bessent proposed gradual tariffs starting at 2.5% and rising to 20%, giving businesses time to adjust.

• GDP Growth: The US economy grew 2.3% in Q4 (vs. 2.6% expected, Q3: 3.1%), driven by consumer spending and government expenditures.

• Federal Reserve: Kept rates at 4.5%, with Powell saying there is “no hurry” to adjust policy, defying Trump’s calls for aggressive rate cuts.

• Stock Market Reaction:

• S&P 500 fell 0.5%, erasing early gains.

• Nasdaq 100 (-0.1%), Dow Jones (-0.8%).

• Russell 2000 lost 0.9%.

• Bond Market:

• 10-year Treasury yields rose 2bps to 4.54%.

• Germany’s 10-year yield fell to 2.46%.

• UK 10-year yield flat at 4.54%.

United Kingdom (GBP)

• Growth & Fiscal Policy:

• Reeves urged Labour MPs to back economic expansion and unveiled plans to build a UK tech hub around Oxford and Cambridge.

• UK government considered modifying non-domiciled resident tax reforms to ease concerns from investors.

• Housing Market: Rental prices outside London fell 0.2% QoQ in Q4, marking the first decline since before the pandemic.

• Water Bills Set to Soar: Household water bills in England and Wales to rise 26% to £603 this year.

• Debt Concerns: Budget deficit hit £17.8bn in December, overshooting OBR forecasts by £4.1bn.

European Union (EUR)

• Growth & Inflation:

• Eurozone GDP flat in Q4 (cons: +0.1%, Q3: +0.4%), pressuring ECB to accelerate rate cuts.

• ECB cut rates to 2.75%, citing weak growth and manufacturing contraction.

• ECB Chief Lagarde signaled further cuts, warning of economic “headwinds”.

• German Economy & Elections:

• Ifo Business Expectations Index fell to 84.2 in January, reflecting corporate pessimism ahead of the snap elections.

• German election frontrunner Friedrich Merz warned businesses of risks investing in China.

Japan (JPY)

• Central Bank Policy:

• Tokyo inflation rose 3.4% YoY in January, core inflation up 2.5%, supporting the Bank of Japan’s latest rate hike.

• Unemployment fell to 2.4%, while job-to-applicant ratio remained at 1.25.

• Exports rose 2.8% YoY (cons: +2.4%), driven by chip-making machinery and semiconductor parts.

• Imports increased 1.8% YoY (vs. expected 3.2%), reflecting trade uncertainty.

• BOJ Policy Outlook: Economists expect no further rate hikes until summer 2025.

China (CNY)

• Stock Market Intervention: Beijing ordered insurance firms and mutual funds to increase stock investments to restore market confidence.

• PBOC Liquidity Injection: Conducted 1.7 trillion yuan ($234bn) of reverse repo operations, the largest since October, to stabilise the yuan.

• Trade & Investment:

• China’s trade surplus hit a record ~$1tn in 2024, with over one-third from US trade.

• China Vanke received rare state support, signaling government intervention to prevent further property sector collapse.

• Tech Sector:

• Chinese AI startup DeepSeek shocked markets with a low-cost AI model, leading to Nvidia’s stock plummeting 17%, wiping $589bn from its market cap.

• ByteDance (TikTok owner) to invest $12bn in AI infrastructure amid rising US regulatory pressure.

Australia (AUD)

• Economic Resilience:

• Business conditions rose 3 points to +6 in December, driven by strong retail sector demand.

• Unemployment rose to 4% in December, with 56.3k jobs added (all part-time).

• Housing & Inflation:

• Consumer prices excluding volatile items rose 3% YoY, supporting expectations of an RBA rate cut later this year.

Artificial Intelligence (AI)

• DeepSeek Disrupts AI Market:

• DeepSeek’s AI advancements caused major losses for Nvidia, raising concerns about US AI valuation bubbles.

• AMD, Qualcomm, and Arm Holdings set to report AI-driven earnings next week.

• US AI Investments:

• SoftBank in talks for a $25bn OpenAI investment as part of a $100bn Stargate AI project.

• OpenAI seeking $40bn in new funding, which could raise its valuation to $300bn.

• Google & Microsoft AI Race:

• Google invested over $1bn in OpenAI rival Anthropic to counterbalance Microsoft’s AI expansion.

• Microsoft announced a partnership to restore Brazilian forests in exchange for carbon credits to offset AI-driven energy consumption.

Environmental, Social, & Governance (ESG)

• Trump’s Deregulation Drive: Big businesses pressured Brussels to scale back ESG requirements, fearing EU competitiveness vs. the US.

• Energy & Oil Prices:

• WTI crude rose 1% to $73.43/barrel amid supply concerns.

• Trump called on OPEC to lower oil prices, linking it to his push for lower global interest rates.

Inflation & Recession Concerns

• US Consumer Confidence fell 5 points to -22 in January, as higher government borrowing costs and job cut fears weighed on sentiment.

• UK Inflation Slows: Inflation fell to 2.5% in December (Nov: 2.6%), increasing pressure on the BOE to cut rates.

• Eurozone Economic Stagnation: GDP stagnated, with weak manufacturing and headwinds from Trump’s tariff threats.

Key Takeaways

• Markets highly volatile due to Trump’s trade policies, AI sector disruptions, and shifting global economic conditions.

• Major economies are bracing for growth slowdowns, with central banks expected to ease monetary policy in the coming months.

• AI remains a disruptive force, both in investment and valuation risks, while China’s economy faces further challenges from trade tensions and market instability.

• Investors eye monetary policy shifts, with Fed, ECB, BOE, and BOJ all under pressure to adjust rate strategies based on evolving macroeconomic conditions.

This period highlighted the fragile balance between trade policy, economic stability, and technology-driven disruptions, setting the stage for a critical Q1 2025.