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Last week was packed with tariff uncertainty and weak economic data. Friday’s jobs figures - the first set of jobs data of the new Trump era so far marked by mass firings at federal agencies - resulted in a weaker-than-expected NFP print, a higher-than-expected unemployment rate and a lower-than-expected participation rate.

This week, the US CPI update will be closely watched. The rising inflation expectations keep the Federal Reserve (Fed) doves on the sidelines but the recession bets are rising and the latest forecasts point at a sharp drop in economic growth in Q1. Soft inflation is needed for the Fed to support the economy.

The US dollar and US indices are under pressure, the euro and European assets are in demand. Mark Carney will replace Trudeau in Canada and defend Canadian interests while Chinese inflation disappointment push the Chinese stocks down this morning, opening an opportunity window to strengthen long positions in relatively low-valuation Chinese stocks.

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Donald Trump paused tariffs imposed on Canadian and Mexican imports two days after imposing 25% levies on its biggest trade partners’ products amid sanguine market reaction and resistance from trade partners. Beyond the politicians who refused to surrender, Walmart’s Chinese suppliers reportedly refused to take on a 10% price cut on their products while Europe is looking to replace Elon Musk’s Starlink in Ukraine by a European alternative, the French satellite operator Eutelsat, to make sure not to give the communication capabilities into the hands of a no-ally-anymore. Eutelsat’s stock price gained more than 500% in just a week. The European defense stocks consolidate gains near ATH levels as the European countries agreed to spend EUR 800bn for strengthening their defense and security. On top, the European Central Bank (ECB) delivered another 25bp cut at yesterday’s meeting, as expected, but hinted that the rate cutting cycle could gently be coming to an end after six rate cuts as inflation is approaching their 2% policy target. The EURUSD is on a bullish trend while selloff in the US barely affects appetite in Europe.

Anyway, this morning, the market mood is a little bit better for the US equity futures. Broadcom jumped nearly 13% in the afterhours trading after announcing better-than-expected quarterly results and after giving a strong forecast. All eyes are on the US jobs data due later today.

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US President Donald Trump said that the tariffs that concern the North American car industry will be delayed by a month... a day after he imposed 25% levies on all Mexican and Canadian imports. Global markets welcomed Trump’s move to turn a threat into reality and then roll it back—arguably a better outcome than imposing and sticking to 25% tariffs. However, the uncertainty and lack of seriousness in these decisions will undoubtedly have a sizeable impact on US growth.

The market conditions are getting appetizing for traders that are looking for interesting short-term opportunities, but it’s important to have a clear playbook and determine what factors influence the market moves? Is it the data, is the central bank expectations, is it politics, geopolitics?

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Trump’s tariffs went live yesterday, sending global markets—including the US indices—tumbling, until rumours of a potential rollback started circulating. High volatility is driving investors toward safe havens like bonds and gold, while the Trump-fueled rally in the US dollar index has already reversed.

The DAX got hit by a hefty 3.50% selloff, the CAC 40 fell 1.85% while the Stoxx 600 tumbled more than 2%, the Japanese Nikkei eased to the lowest levels since September and the major US indices – from big cap, tech-heavy to medium and small cap benchmarks – fell below the levels they were trading at when Donald Trump was elected president last November.

The aggressive reaction was curious, though, as investors knew that the tariffs would go live yesterday, suggesting that a clear majority was expecting Trump to make a last-minute U-turn – a thing that he did! There are now rumours circulating that he may roll back some of the tariffs. The DAX futures are up by almost 2% at the time of filming.

Today, investors will watch the US ADP report, and PMI, ISM numbers from both sides of the Atlantic Ocean. While the European investors could brush off bad news on expectation that the US tensions will boost activity sooner rater than later, weakness in the US data will probably be perceived as bad news and should further weaken appetite.

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Today marks a turning point in Donald Trump’s tariff policy. It is the day the tariff threat will materialize – unless there is a surprise U-turn – and hammer hopes that the aggressive tariff threats were not just a negotiation tactic.

US stocks are sold on expectation that higher tariffs will boost inflation, prevent the Federal Reserve (Fed) from giving the necessary support and slow growth. The European stocks on the other hand are in demand – appetite for defense stocks increasing by the day.

It’s crucial to note that market sentiment is now influenced less by the central bank policies and the level of yields, and more by growth expectations. And the latter supports the European equities vs US peers, and the euro vs the US dollar.

In energy, crude oil fell 2% below the $70pb psychological mark – not necessarily on trade fears – but on news that OPEC+ will start restoring output production from April because Trump wants cheaper oil.

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A clash between Trump and Zelensky and UK’s Starmer’s call for a ‘coalition of the willing’ is marking investor sentiment this Monday morning. Oil prices initially rose in early Asian trading amid concerns that the Trump-Zelensky conflict could delay any path to lasting peace. However, selling pressure outweighed geopolitical risk perception, as last Friday’s US economic data fueled concerns about slowing growth—Atlanta Fed's GDPNow tanked to -1.5%!

The EURUSD started the week on a positive note after slipping below its 50-day moving average on Friday. European futures gained on prospects of higher spending that could boost growth.

On the data front, Friday’s economic data was bitter-sweet. The core PCE index, the Federal Reserve’s (Fed) favourite gauge of inflation, came in line with expectations. But the combination of higher-than-expected personal income but lower-than-expected – and unexpectedly negative - spending growth in January raised worries regarding US growth prospects. This week, the market will focus on US employment numbers.

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Despite beating both revenue and earnings expectations and the forecasts for the current quarter, Nvidia got beaten by the market. The share price tanked 8.50% in yesterday’s post-earnings session and pulled the broader technology sector down with it.

New tariff talk from Donald Trump weighed on the sentiment, as well, sending the US dollar higher, the European indices lower with the exception of European defense stocks some of which traded at all-time high levels.

On the data front, the US GDP data confirmed yesterday that the US grew 2.3% in Q4, as expected, but the price pressures were stronger than pencilled in by analysts. Initial jobless claims, on the other hand, hit the highest level since last October, with a visible rise in Washington’s jobless claims – as Federal workers are being thanked en masse by Elon Musk’s DOGE. Will the latter soften the Federal Reserve (Fed) outlook and increase bets for more rate hikes this year? It depends on the inflation’s trajectory. Due today, the US will reveal its latest core PCE data – the Fed’s favourite gauge of inflation - that could show easing in January.

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Nvidia continues to do an amazing job. But the latest record-breaking results failed to impress investors. As such, Nvidia may not boost the market sentiment in the same way it boosted over the past two years after its results, but the AI mascot’s earnings will sure not harm the AI outlook, or be an additional drag. S&P500 and Nasdaq futures are up this morning. Let’s see if optimism could survive to the tariff talk, with the ongoing confusion regarding when Trump’s 25% tariffs on Mexico and Canada would go live: March, April?

Of course, the tariff threats are weighing on global sentiment but also on US’ own growth expectations.

In Europe, sentiment got a boost by hope of seeing the end of the war in Ukraine. If the European Central Bank (ECB) continues to give support with lower rates, that would be even better. But the ECB’s ability to cut rates depends on inflation outlook, as well. So watch Spain release its preliminary CPI update for February today, and France, Italy and Germany update their numbers tomorrow.

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