Peace talks

César Pérez Ruiz, Chief Investment Officer, Pictet Wealth Management.

The S&P 500 rose 1.5% last week, coming back to life once inflation and other data had been absorbed. Despite the drumbeat of Trump tariff threats, equity volatility, as measured by the Vix index, went down. But broad indexes outside the US performed better. The Euro Stoxx 600 rose 1.8% last week (in euros), extending its outperformance since late last year, helped in part by speculation about a ceasefire in Ukraine and better-than-expected corporate earnings for Q4. While (some) US tech-related stocks have lost momentum, especially since the DeepSeek announcement, China’s tech sector has helped a rebound in Chinese indexes (the MSCI China rose 7.1% last week in USD). Government bond yields rose slightly in Europe but declined in the US (on weak retail sales) while Japanese 10-year bond yields rose to 14-year highs. The US dollar retreated against European currencies, signalling new-found optimism about Europe. The weakening dollar and concerns about a global trade war gave gold a further leg up.

Quote of the week

“On trade, I have decided, for purposes of fairness, that I will charge a reciprocal tariff, meaning whatever countries charge the United States of America, we will charge them—no more, no less.” – Donald Trump

Key data

The US consumer price index (CPI) ticked up to an annual rate of 3.0% in January from 2.9% the month before while core CPI rose to 3.3% from 3.2%. US retail sales fell 0.9% in January from the previous month, more than expected, while industrial production increased 0.5%. Industrial production in the euro area declined by 1.1% in December over the previous month and was 1.7% lower than a year before. Japanese GDP rose at an annual rate of 2.8% in Q4, well ahead of expectations and up from 1.7% in Q3. Japan’s producer price index rose at an annual 4.2% in January to reach a 20-year month high.