After reaching fresh highs, stock markets are treading cautiously as concerns over global trade tensions and geopolitical uncertainty take centre stage. Under President Trump, fears of a full-blown trade war are impacting investor sentiment, while the ongoing instability in Ukraine continues to reverberate through financial markets. US consumer confidence has slumped by 15% in the past month, and the services sector—crucial to economic growth—has shown signs of contraction. With inflation climbing and a weaker-than-expected reading of Leading Economic Indicators, market volatility is on the rise, increasing the risk of a broader correction.
Over the weekend, investors focused on Germany’s election, where the centre-right parties secured a comfortable victory over the far-right Alternative for Deutschland (AfD), which gained a significant 21% of the vote. Friedrich Merz, a likely candidate for Chancellor, now faces the challenge of forming a stable grand coalition, a process that could extend well into Easter, adding another layer of political uncertainty to European markets.
In the UK, inflation delivered an unpleasant surprise, rising to 3% in January from 2.5% in December. This unwelcome development is a setback for both the government and the Bank of England, with services inflation climbing even higher to 5%. Hopes for a March interest rate cut are quickly fading as consumers and mortgage holders brace for prolonged financial strain.
A bright spot emerged from China, where local financial markets have suffered from prolonged stagnation. Renewed optimism in the artificial intelligence (AI) sector has sparked investor interest, propelling equities higher. The technology sector has rallied 30% since the start of the year, with Alibaba leading the charge, surging by 50% in the same period. Encouragingly, there are signs that Beijing is loosening its grip on China’s tech giants, allowing them to flourish with less interference. Alibaba’s announcement of a $52 billion investment in AI and cloud computing over the next three years underscores the government’s shifting stance towards supporting technological innovation.
In the retail sector, Walmart, often viewed as an economic bellwether, saw its shares tumble by 10% despite delivering resilient quarterly results. The company’s cautious outlook for the year ahead prompted investors to lock in gains following a strong twelve-month performance.
Vaccine producers are back in the spotlight as renewed concerns over emerging viruses drive investor interest. Shares in GSK and Moderna saw gains after a Chinese research team identified a new bat coronavirus with potential animal-to-human transmission, reminiscent of Covid-19. The study, led by virologist Shi Zhengli, highlights the ongoing risks in global health that could spur fresh demand for vaccines and antiviral treatments.
In the UK banking sector, Standard Chartered reported an 18% rise in annual profits, buoyed by strong performances in its wealth management and markets divisions. In a sign of confidence, the bank announced a $1.5 billion share buyback programme to enhance shareholder returns. HSBC followed suit with an even larger $2 billion buyback, signalling that major banks remain well-capitalised and on a steady recovery path despite global economic headwinds.
Looking ahead, investors will be closely monitoring Friday’s US inflation data, particularly the Federal Reserve’s preferred measure of inflation. Stuck at 2.8% for the past three months—well above the central bank’s 2% target—this data will provide critical insight into whether the Fed has room to cut interest rates later this year. With inflation trends shaping monetary policy decisions, market participants are bracing for further developments that could dictate the next moves in global financial markets.
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.
