US stocks declined during the week, with the Nasdaq Composite falling 2.34%, its steepest weekly loss since November. Early optimism about softer tariff policies under the incoming Trump administration faded after Trump dismissed these reports. Inflation concerns intensified, driven by rising prices in the ISM Services PMI and a strong jobs report showing 256,000 new jobs and 3.9% wage growth. This reinforced expectations that the Federal Reserve may keep interest rates higher for longer. Treasury yields surged, with the 10-year note reaching its highest level since November 2023. Corporate bond issuance was strong but saw wider spreads due to heavy supply. Markets remain volatile as investors weigh inflation, Fed policy, and corporate earnings.
European stocks posted gains, with the STOXX Europe 600 up 0.65%. Italy’s FTSE MIB led with a 2.82% rise, while the UK’s FTSE 100 added 0.30%. UK bond markets faced pressure as 10-year gilt yields hit 4.8%, the highest since 2008, driven by Trump policy concerns, the Fed’s hawkish stance, and doubts over UK fiscal health. Eurozone inflation rose to 2.4% in December, with core inflation steady at 2.7%. The ECB confirmed inflation is on track to meet its 2% target and supported further rate cuts, suggesting adjustments may continue through summer if inflation declines as expected.
