Gold's Time to Shine with Trade Wars and Tech Troubles

Matin Weekly Markets Update (January 31st - February 7th , 2025) - Week 6

Market Overview

Global markets experienced a mixed performance this week, with US indices slightly declining amid a backdrop of trade tensions, earnings reports, and economic data.?The S&P 500 slipped -0.2%, the Nasdaq Composite shed -0.5%, and the Dow Jones Industrial Average fell -0.5%.?European markets fared slightly better with the Stoxx 600 going up by 0.59%

Gold prices surged to new record highs due to trade uncertainty and geopolitical tensions, while oil prices declined on concerns about global economic growth and rising US crude oil inventories.???This slight decline in US indices this week can be partially attributed to the ongoing chaos in Washington. Political uncertainty and gridlock have contributed to trade tensions and concerns about economic policy, weighing on investor sentiment.

The mixed signals from the US jobs report, with moderating job growth but unexpectedly falling unemployment, reflect the complex economic landscape shaped by Washington's inconsistent policy approach. This uncertainty has likely contributed to the decline in the University of Michigan consumer sentiment index, as Americans grapple with the potential economic impacts of political instability.

The surge in gold prices to new record highs can be seen as a direct response to the geopolitical tensions and trade uncertainty emanating from Washington. Investors are seeking safe-haven assets amid concerns about the US government's ability to navigate complex international relationships and economic challenges.

Equities

US tech giants Amazon, Alphabet, and Microsoft faced setbacks, while European counterparts reported better-than-expected results.?The US jobs report delivered mixed signals, with job growth moderating but unemployment unexpectedly falling.?The University of Michigan consumer sentiment index also declined, raising concerns about potential inflationary pressures.???

Also, a concern for the US is its soft power as seen for Tesla in Europe. Tesla saw car sales drop by 59% year-on-year in Germany last month, according to the country’s Federal Motor Transport Authority. Tesla registered only 1,277 new cars in Germany in January, and this even though Germany’s wider EV market was up 54% in January, reducing Tesla’s market share from 14 to 4%. The trade war, beyond tariff threats or actual tariffs are leaving a bitter taste for EU, Mexico and Canada.

If this trend continues, it could lead to long-lasting damage to the reputation and market position of US companies in key international markets, extending beyond the duration of any specific trade dispute.?

Fixed Income

Treasury yields rose as the U.S. jobs market looks tighter than expected following the release of the US jobs report and consumer sentiment data.?The 10-year yield rebounded to 4.496%.???

Commodities

Oil prices experienced a new round of declines, driven by concerns about the potential impact of US-China trade tensions on global economic growth.?Additionally, a significant increase in US crude oil inventories further weighed on prices.?Gold prices, on the other hand, continued to rally, reaching new record highs as investors sought safe-haven assets amid trade uncertainty and geopolitical tensions.???

GCC

The GCC region saw a mixed performance in its equity markets.?The Abu Dhabi Securities Exchange (ADX) continued to solidify its position as a leading financial market, maintaining its ranking among the world's top 20 stock exchanges.?The UAE's debt capital market is expected to grow to $400 billion in the coming years, fueled by funding diversification, upcoming debt maturities, infrastructure financing, regulatory reforms, and the Dirham Monetary Framework.???Most GCC markets rose this week with the exception of Qatar.

Islamic Markets

Islamic markets are expected to continue benefiting from the growth of the Sukuk market and increasing demand for Sharia-compliant investments.

Fun Facts

Jerry Seinfeld on AI: “We’re smart enough to invent AI, dumb enough to need it, and so stupid we can’t figure out if we did the right thing.”

The Week Ahead

The week ahead will be filled with key economic data releases and corporate earnings reports.?Investors will be closely watching US inflation data, retail sales figures, and earnings reports from major companies such as McDonald's, Coca-Cola, Cisco, Essilor Luxottica, Nestlé, Siemens, and Hermès.?

?