Trump's Tariff Gamble Rocks February's Financial Landscape

Matin Weekly Markets Update (January 24th - January 31st , 2025) - Week 5

Market Overview

Global markets ended the week on a mixed note. The global stock markets saw a turbulent start to the week, influenced by the emergence of “DeepSeek”, a Chinese AI startup challenging American tech giants.?The middle of the week saw some upside movement with positive economic data and earnings reports but it’s reviving concerns about potential impacts on growth and doubts on further Fed rate cuts.

U.S. indices retreating after the White House announced new tariffs against major trading partners. The S&P 500 and Nasdaq posted weekly losses of 1% and 1.6% respectively, while the Dow managed a 0.3% gain. Trade tensions will set the tone as trading partners will undoubtedly retaliate.

Equities

U.S. stocks stumbled Friday as the White House confirmed 25% tariffs on goods from Mexico and Canada, as well as 10% tariffs on Chinese imports, would take effect Saturday. The S&P 500 fell 0.5% on Friday to close at 6,041, while the Dow Jones Industrial Average shed 0.8% to 44,545. The tech-heavy Nasdaq gave up 0.3%. Earlier optimism from solid Apple earnings and in-line inflation data was erased by the tariff news.

Despite the late-week pullback, the Dow posted a 0.3% weekly gain. However, the S&P 500 and Nasdaq declined 1% and 1.6% respectively for the week. Market breadth has been expanding beyond mega-cap tech stocks in recent months, with financials and industrials outperforming technology over the past six months.

Fixed Income

Treasury yields retreated from recent highs as tariff concerns spurred some safe-haven buying. The 10-year Treasury yield fell about 25 basis points from its January peak, ending the week at 4.54%. The yield curve flattened as traders pushed back expectations for Fed rate cuts. Markets are now pricing in the first cut to come no earlier than June.

The Fed held rates steady at its January meeting as expected, maintaining a patient approach amid solid economic growth and slowing but above-target inflation. Core PCE inflation rose 2.8% year-over-year in December, meeting estimates but remaining above the Fed's 2% goal.

Commodities

Oil prices declined for the week, with WTI crude falling 1.6% to $73.44 per barrel. Uncertainty around U.S. tariff policies and their potential impact on global growth weighed on sentiment. Gold benefited from safe-haven flows, rising 1.2% to $2,800 per ounce.

European natural gas prices surged to their highest level since October on supply disruptions and colder weather forecasts. Agricultural commodities like coffee and grains saw volatility tied to weather concerns and trade policy uncertainty.

GCC Markets

Gulf markets ended mixed as investors focused on corporate earnings. Dubai's main index gained 0.5%, snapping a four-session losing streak but the Abu Dhabi index drove the UAE index down for the week. The positive momentum was driven by blue-chip stocks like Dubai Islamic Bank and Emaar Properties. Other regional markets were unremarkable, with the exception of ?Saudi Arabia's Tadawul index ending up 0.5% higher for the week.

Investors are closely watching earnings reports for signs of how GCC companies are navigating economic headwinds like lower oil prices. The real estate and banking sectors remain in focus, particularly in the UAE.

Islamic Markets

No specific information was provided on Islamic markets. However, given the overall mixed performance across Gulf markets, it's likely that Sharia-compliant indices and stocks followed similar trends. Islamic banks and sukuk issuers would be of particular interest to investors in this space as earnings season progresses.

Fun Facts

Open Interest on Brent-Dubai Contract Hits Record High:?The open interest on the Brent-Dubai contract, which allows traders to bet on the price difference between Middle Eastern crude and the global benchmark Brent, reached an all-time high of 448,000 contracts.?This surge is attributed to U.S. sanctions on Russian oil, forcing buyers to seek alternative sources, particularly from the Middle East.?The trade sanctions with Canada on oil will further increase the spread between WTI and Brent.

The Week Ahead

Key events to watch in the coming week include:

• Further fallout and market reaction to new U.S. tariffs
• Continued Q4 earnings releases, including reports from Alphabet, Amazon, and other major companies
• U.S. jobs report for January on Friday
• Bank of England interest rate decision on Thursday
• Eurozone inflation data for January

Investors will be closely monitoring how markets and economies absorb the impact of new trade barriers, while also parsing corporate earnings for signs of resilience. The U.S. jobs report will be crucial for Fed policy expectations. Overall, trade tensions and monetary policy outlook are likely to remain key drivers of sentiment.

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