James Brodie
Head of Learning & Development, Flux
Trump Approves 15% Tariff, US Data Disappoints, Eurozone PMI
Trump approves new 15% tariffs, US GDP and core PCE inflation disappoints, BofA Bull & Bear index up to 9.3 points; Eurozone PMI; data
After the US Supreme court struck down President Trumps tariffs, Trump approved a new 15% ‘temporary’ tariff.
Following a string of positive releases from Europe and Japan, the latest U.S. data disappointed in two main ways:
(i) Q4 GDP grew by a 1.4% (annualized), missing the consensus forecast of 2.8% by a wide margin and well below Q3’s 4.4%. This deceleration brings the full-year 2025 growth rate to 2.2%, down from 2.8% in 2024.
The analytical focus will be on the sluggish figures for personal consumption and the government impulse. The political one will center on the fallout from the recent government shutdown.
(ii) Core PCE inflation - known as the Fed’s preferred metric - printed at 0.4% for the month. This pushed the annual rate to 3.0%, coming in hotter than the 2.9% consensus forecast.
The AI disruption trade moved to cybersecurity software companies on Friday, after Anthropic introduced a new security feature into its Claude AI model. CrowdStrike Holdings was among the biggest decliners, falling 8%, while Cloudflare slumped 8.1%. Meanwhile, Zscaler dropped 5.5%, SailPoint shed 9.4% and Okta declined 9.2%. The Global X Cybersecurity exchange-traded fund fell 4.9% and closed at its lowest since November
Institutional investors sold $8+ billion in stocks last week - second largest sale ever. Meanwhile European stocks are heading for their highest-ever monthly inflows in February, following two consecutive record weekly flows of about $10
The Tech Sector 5-year Credit Default Swaps are up to ~330 basis points, the highest since the Great Financial Crisis. This metric has TRIPLED over the last few months. In other words, credit traders are buying protection against tech sector defaults at the fastest pace in over a decade. This creates a historic divergence between equity prices and credit risk. (Chart 1, TopDown Charts)
The BofA Bull & Bear Index hit 9.3 points and is now at one of the highest readings on record. (Chart 2, BofA Global Research). Historically, with the indicator this high, the median “max drawdown” over the following 3 months was -4.3% for the MSCI All-Country Index (ACWI), -5.5% for the S&P 500, and -8.6% for the Nasdaq.
China destroys the German car industry (Chart 3, Economist)
The Eurozone PMI beat consensus forecasts, fueled by a milestone in Germany, where manufacturing expanded for the first time in almost four years. Also in the UK, January’s PMI climbed to 53.9, its strongest showing in nearly two years and above the consensus forecast of 53.2. Rounding out the UK's strong morning, retail sales jumped by 1.8% in January. This blew past the 0.2% forecast and represents the fastest growth rate in almost two years.
This week’s data:
Monday – Germ IFO Tuesday – US Consumer confidence
Wednesday – Nvidia earnings, EZ & Australian inflation, US mortgage applications
Thursday – jobless claims
Friday – US PPI, Japan IP & retail sales, Canadian GDP
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