Muted week for stocks, bonds amid data, trade, conflicts

by John Viljoen and Julien Ponthus

Equities and bonds posted mostly small moves at the end of a week dominated by headlines on trade tariffs and Ukraine peace efforts, a slew of earnings and more evidence of stubborn US inflation.

Luxury stocks helped push Europe’s Stoxx 600 index slightly higher, with Hermès rallying to a record in Paris after its holiday-season sales surged. S&P 500 futures were steady after Thursday’s near-record close on Wall Street.

Investors are taking heart from speculation that negotiations over US President Donald Trump’s proposed trade measures may blunt their eventual impact. Meanwhile, strategists at Bank of America Corp. said faster inflation in the US could actually prove positive for markets because it will force Trump to adopt less severe tariffs. 

Wednesday’s hotter-than-forecast consumer price index reading prompted a brief pullback in stocks and bonds, but the price pressures are a “blessing in disguise,” BofA’s Michael Hartnett said in a note. They mean “Trump must go small not big on tariffs and immigration in coming months to avoid fanning a second wave of inflation.”

The Bloomberg Dollar Spot Index has dropped about 2.5% from February’s high as investors wind back bets that Trump is determined to ramp up global tariffs as part of his “America First” policy. The dollar fell further Friday, adding to its biggest drop in three weeks on Thursday. 

“The volume of news stories on tariffs has risen as you would expect, but the impact of those stories on the dollar is declining,” said Michael Metcalfe, head of macro strategy at State Street Global Markets. “In part, this likely reflects the fact that asset managers already have a significant overweight in the dollar and if anything in 2025 have been trimming positions.”

Elsewhere in currencies, the yen rose, while the pound hit its highest level against the greenback this year. The euro was 0.1% higher as data showed unexpected growth in the euro area economy in the final quarter of last year.

Treasuries steadied after rallying Thursday. BofA’s Hartnett recommended buying bonds, saying that the 30-year Treasury yield likely reached a multi-year high of about 5% in January. It was near 4.7% on Friday.

The work required to propose reciprocal levies will occur on a country-by-country basis and could take until April to complete, said Howard Lutnick, Trump’s nominee to lead the Commerce Department. The comments followed news that Trump had ordered his administration to consider reciprocal tariffs on numerous trading partners. 

“The fact that Trump didn’t explicitly target Europe yesterday and left an April deadline to negotiate with him brings some relief,” said Karen Georges, a fund manager at Ecofi in Paris.

Moves in Asian equities were stronger Friday, with Chinese stocks in Hong Kong soaring more than 4% to the highest in three years on optimism around the nation’s growing capabilities in artificial intelligence. 

Gold traded near a record high. The precious metal has gained this year, powered by haven demand, setting successive records with potential to line up a test of $3,000 an ounce.

Key events this week:

• US retail sales, industrial production, business inventories, Friday
• Fed’s Lorie Logan speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 was little changed as of 10:05 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures were little changed
• Futures on the Dow Jones Industrial Average fell 0.2%
• The MSCI Asia Pacific Index rose 0.8%
• The MSCI Emerging Markets Index rose 1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%

• The euro rose 0.1% to $1.0478
• The Japanese yen rose 0.2% to 152.51 per dollar
• The offshore yuan was little changed at 7.2635 per dollar
• The British pound rose 0.2% to $1.2586

Cryptocurrencies

• Bitcoin rose 0.7% to $97,157.04
• Ether rose 1.7% to $2,713.52

Bonds

• The yield on 10-year Treasuries was little changed at 4.52%
• Germany’s 10-year yield was little changed at 2.43%
• Britain’s 10-year yield advanced one basis point to 4.50%

Commodities

• Brent crude rose 0.5% to $75.37 a barrel
• Spot gold rose 0.2% to $2,934.73 an ounce

This story was produced with the assistance of Bloomberg Automation.

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