Global Risk Monitor: Recap of the Week of February 7

The U.S. job market experienced moderate growth, although payrolls did not meet expectations. Despite this, the unemployment rate continued to decline. Stock markets faced volatility due to uncertainty surrounding tariffs. President Trump announced tariffs on imports from Mexico, Canada, and China, causing an initial drop in U.S. equities. However, the markets rebounded after Trump postponed tariffs on North American trade partners, alleviating concerns of a potential trade war.
Corporate earnings played a crucial role in supporting stocks, with the S&P 500 showing a growth of 16.4%, surpassing the expected 11.9%. The Treasury yields in the U.S. dropped, reflecting concerns of slower economic growth and the possibility of future Federal Reserve rate cuts. In the Eurozone, inflation rates remained high, leading to a delay in rate cuts by the European Central Bank. Japan adopted a hawkish policy stance, resulting in a strengthened yen that impacted exporters. China exhibited strong retail and travel data during the Lunar New Year period, but manufacturing PMI suggested a slowdown in growth.
Investors reacted to various factors including trade policy developments, economic data, and earnings reports. U.S. equities saw losses initially but recovered after Trump’s tariff postponement announcement. Strong corporate earnings helped mitigate losses, as many S&P 500 companies exceeded expectations. In Europe, stocks in Italy and Germany posted gains, while Japan’s markets were pressured by a stronger yen. China’s market saw growth as Lunar New Year spending remained robust.
The U.S. labor market witnessed slower growth in January, with fewer jobs added compared to the previous month. Despite this, the unemployment rate improved, indicating stability. Wage growth increased, which could potentially impact inflation control. In Europe, economic indicators showed mixed results, with Eurozone inflation remaining high and Germany experiencing fluctuations in factory orders and industrial production. Central banks around the world made policy adjustments to address economic challenges and inflation risks.
Looking ahead, market focus will remain on tariff negotiations between key players like the U.S., China, Mexico, and Canada. Inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), will also be closely monitored. The Federal Reserve’s policy stance and corporate earnings reports will continue to shape market sentiment. Emerging markets such as Turkey, Poland, and the Czech Republic will be watched for central bank decisions, while Ecuador’s elections could bring about policy changes. As markets grapple with geopolitical risks, economic data, and corporate earnings, volatility is expected to persist in the short term.