Please see below article received from Brooks Macdonald this morning, which provides a global market update for your perusal.
What has happened
Markets had a better day yesterday despite ongoing trade tariff worries, helped by a lower US consumer inflation print. The US S&P500 equity index rose +0.49%, the ‘Magnificent 7’ megacap tech group bounced +2.27% to their best day in 6 weeks, and the pan-European STOXX600 equity index gained +0.81%, all in local currency price-return terms. The VIX ‘fear’ index (a US S&P500 equity-options-derived volatility gauge) registered its biggest one-day drop so far this year.
Weakest US core inflation in almost 4 years
The latest US Consumer Price Index (CPI) monthly report for February landed yesterday, buoying risk assets. Both headline (all-items) and core (excluding energy and food) numbers surprised on the downside. The annual headline CPI rate of +2.8% (below +2.9% expected, and versus +3.0% in January) was the weakest since November, while the core CPI annual rate of +3.1% (below +3.2% expected, and versus +3.3% in January) was the weakest print in almost 4 years – since April 2021.
Bank of Canada cuts interest rates
The Bank of Canada (BoC) cut interest rates by 25 basis points yesterday, taking rates down to 2.75%. The move was in line with market expectations and brings the tally of cumulative cuts to 225bps in less than a year since the first BoC cut back in June 2024, when rates were at 5%. Referencing the latest US-Canada trade tariff uncertainty, the BoC said that “heightened trade tensions and tariffs imposed by the United States will likely slow the pace of economic activity and increase inflationary pressures in Canada”.
What does Brooks Macdonald think
There is a tug-of-war around the outlook for the US going on in markets currently. On the one hand, the latest economic data all suggest a US economy which is still far from stagflation: S&P’s US Manufacturing PMI (Purchasing Managers’ Index) survey saw the strongest reading in almost 3 years, since June 2022; the JOLTS’ (Job Openings and Labour Turnover Survey) US worker voluntary ‘job-quits’ were the highest since July 2024; and US annual core CPI inflation was the weakest in almost 4 years, since April 2021. Against this, US president Trump’s continued trade tariff headlines are clearly sapping investor confidence and causing sizeable market jitters – the risk is that the longer this goes on, the greater the likelihood that it could start to show up in economic activity data. For now, predictions of an imminent US recession are, thankfully, still wide of the mark.
Please check in again with us soon for further relevant content and market news.
Chloe
13/03/2025