US equity markets were on edge during February amid mounting concerns over inflation, escalating geopolitical tensions, and questions over the impact of AI on the wider economy. The US Supreme Court struck down the tariffs imposed by President Donald Trump on Liberation Day, after which President Trump announced blanket worldwide tariffs of 10%, with plans for an increase to 15%.
- The Fed struck a cautious note over inflation
- The US Supreme Court struck down Trump’s Liberation Day tariffs
- Japan’s Sanae Takaichi won a landslide election victory
“As February ended, the US and Israel initiated air strikes on Iran“
Escalating tensions: US equity markets were on edge during February amid mounting concerns over inflation, escalating geopolitical tensions, and questions over the impact of AI on the wider economy. The US Supreme Court struck down the tariffs imposed by President Donald Trump on Liberation Day, after which President Trump announced blanket worldwide tariffs of 10%, with plans for an increase to 15%. While the Dow Jones Industrial Average Index edged up 0.2% over February, the tech-heavy Nasdaq Index fell by 3.4%. The price of gold proved volatile during the month and, as February ended, the US and Israel initiated air strikes on Iran.
Power politics: at the annual Munich Security Conference, German Chancellor Friedrich Merz warned that the rules-based world order “no longer exists”, arguing that “the international order based on rights and rules” had given way to one “openly defined by power and great power politics.”
“Doing dumb things”: questions were raised over the outlook for the financial sector amid the wider impact of the collapse of UK mortgage lender Market Financial Solutions. Jamie Dimon, CEO of JPMorgan Chase, drew comparisons to the years leading up to the Global Financial Crisis, warning that companies are “doing dumb things” by chasing risky loans.
Inflationary pressures: according to minutes from the Federal Open Market Committee’s January meeting, policymakers believe that progress towards the Federal Reserve’s 2% inflation target “might be slower and more uneven than generally expected.” Stronger-than-expected US producer price inflation dampened sentiment towards the end of February.
Japanese share prices surge: Japanese equity markets soared to fresh highs in February amid expectations of looser fiscal policy following a resounding victory for Prime Minister Sanae Takaichi’s Liberal Democratic Party (LDP). Prime Minister Takaichi said she intended to pursue a “responsible and proactive” approach to public finances. The Nikkei 225 Index climbed by 10.4% during the month.
Green shoots in Germany? Germany’s Dax Index rose by 3% during February, boosted in part by signs of an improving economic backdrop. In particular, activity in in the eurozone’s manufacturing sector hit a 44-month high, according to S&P Global’s Manufacturing PMI report; the acceleration was led by Germany, which posted its strongest performance since May 2023. Elsewhere, ifo’s German Business Climate survey rose to its highest level for six months.
To view the series of market updates through February, click here
