Investor sentiment took a hit last week as Wall Street grappled with volatility, driven by tariff threats from President Trump and struggles among major technology stocks. Confusing jobs data further muddied the waters, as a weaker-than-expected payroll report contrasted with upward revisions from previous months. Despite concerns, the three-month average remains robust, suggesting no immediate slowdown in job growth. Meanwhile, the unemployment rate dropped to 4%, and wage growth exceeded expectations, leaving analysts debating the implications for monetary policy.
The Federal Reserve is closely monitoring the labour market for any signs of cooling, which could prompt interest rate cuts. Adding to uncertainty, the latest University of Michigan survey suggested that Americans anticipate higher inflation under Trump’s economic policies, dampening consumer confidence. With the next Federal Committee Meeting scheduled for 18-19 March, investors must navigate further political rhetoric, including Trump’s unexpected remark about Canada potentially becoming the 51st state.
Trump continues to leverage US economic power on the global stage, particularly through his stance on reciprocal tariffs. His focus on European trade policies has led to a potential reduction in tariffs on US cars, with the European Trade Committee considering lowering the current 10% levy to match the US 2.5% rate on European vehicles.
Closer to home, the UK faces its own challenges as economic and political uncertainty weigh on growth. The Bank of England has revised its 2025 growth forecast down to just 0.75%, aligning more closely with stagnation seen in Continental Europe. The Monetary Policy Committee has responded with a third consecutive rate cut, lowering the base rate by 0.25% to 4.5%. While a positive move, Governor Andrew Bailey remains cautious about further cuts, given inflationary pressures that could push rates from 2.5% to 3.7% by autumn. Mortgage holders hoping for lower rates may find relief elusive unless banks reduce profit margins and bond yields decline, neither of which is currently playing out in their favour.
In corporate news, Diageo has abandoned its long-held sales growth targets, citing uncertainty over US tariffs and weakening demand in key markets. The spirits giant has faced growing investor pressure to improve performance, and its share price has tumbled more than 45% from its December 2021 peak. Meanwhile, activist investor Elliott has acquired a significant stake in BP, driving the share price up 7% on expectations that pressure from Elliott could unlock greater shareholder value and improve the company’s underperformance relative to its peers.
Key economic data releases this week include US Consumer Price Index figures today and European inflation reports on Friday. Recent US inflation data has surprised on the downside, providing reassurance for markets. Expectations for today’s release are a monthly core rate of 0.3% (3.1% annualised) and a headline rate of 2.9%. Investors are eager to see if this trend continues. In Europe, attention will focus on Producer Price inflation and preliminary GDP figures for Q4 2024, both set for release on Friday.
TEAM plc (LON:TEAM) is building a new wealth, asset management and complementary financial services group. With a focus on the UK, Crown Dependencies and International Finance Centres, the strategy is to build local businesses of scale around TEAM’s core skill of providing investment management services.
