Commentary
US stocks rose during a holiday-shortened week, with the S&P 500 hitting a record high before slipping slightly on Friday. Growth stocks outpaced value shares, and large-cap stocks led gains. Optimism stemmed from President Trump’s decision to delay new tariffs and review US trade policies. Although Trump pledged 25% tariffs on Canada and Mexico by February, his comments about avoiding tariffs on China boosted hopes for a trade deal. Additionally, the announcement of a USD 500bn AI infrastructure project—led by SoftBank, OpenAI, Oracle, and MGX—sparked a rally in AI-related stocks. Manufacturing activity rebounded for the first time in six months, though overall growth slowed. December home sales rose 2.2% but yearly sales hit a 30- year low due to high mortgage rates. Municipal bonds outperformed Treasuries amid strong demand for new issues.
European stocks ended the week higher, with the STOXX Europe 600 Index up 1.23%, driven by optimism over US trade developments and expectations of further ECB rate cuts. France’s CAC 40 gained 2.83%, and Germany’s DAX rose 2.35%, while Italy’s FTSE MIB fell slightly, and the UK’s FTSE 100 was flat. Eurozone business activity showed slight improvement, with the composite index rising to 50.2, signaling modest growth in services while manufacturing remained weak. ECB officials hinted at further rate cuts to meet inflation targets, with President Lagarde signaling gradual easing. In the UK, wage growth hit a six-month high of 6.0%, but the labor market weakened as unemployment rose to 4.4%, payroll numbers dropped, and job vacancies continued to fall.
