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- Equities: US equities fell amid sharpest monthly decline in US consumer confidence since Aug 2021, highlighting economic concerns; Asia ex-Japan equities declined amid tariffs concerns
- Credit: Credit spreads are more vulnerable when core inflation is too low rather than moderately high; at current levels, IG spreads should remain stable in 2025, supporting the call to stay invested in high-quality credit
- FX: Tariff narrative is coming back with a vengeance
- Rates: Market participants face a range of consideration this week and this uncertainty may keep US yields at their current depressed levels
- The Week Ahead: Keep a lookout for US Change in Nonfarm Payrolls; China CPI numbers
Related Insights
Major markets mostly decline amid weak US consumer confidence and tariff concerns. US equities fell as US consumer confidence index saw the sharpest monthly drop since Aug 2021. The February Conference Board consumer confidence index saw a 6.6% m/m decline, falling from 105.3 in January to 98.3 in February, reflecting growing consumer concerns over the economy. As such, the S&P 500 and NASDAQ lost 1.0% and 3.5% respectively. European stocks advanced despite uncertainty surrounding Trump’s tariffs. The STOXX 600 was up 0.6%.
Asia ex-Japan equities also fell with the CSI 300 and Hang Seng Index declining 2.2% and 2.3% respectively. The decline was driven by President Trump’s announcement of an additional 10% tariffs on Chinese imports on top of the 10% introduced earlier in February, set to take effect on 4 Mar. This week, keep a close watch on China’s two sessions which are expected to commerce on 4 Mar as well. This important political event will outline China’s policy direction for the year ahead and introduce key economic goals.
Topic in focus: STOXX 600 earnings surprise consistent with previous quarter. As we reach the midpoint of the earnings season with c.60% of the companies having reported their earnings (as of 28 Feb 2025), earnings surprises are largely in line with those seen from the previous quarter. So far, c.53% of companies have delivered positive earnings surprises with technology and consumer discretionary producing the highest positive earnings surprises at 81% and 80% respectively.
From a sectoral perspective, we continue to advocate exposure in Europe technology, especially in semiconductor where industry leaders hold strong IP and near monopolistic positioning within the market. Furthermore, the semiconductor space is expected to benefit from AI becoming increasingly commoditised as chipsets continue to hold a vital role in the AI ecosystem.
Within the consumer discretionary sector, we continue to favour the luxury segment, in particular “Quiet Luxury”. International tourist arrivals are expected to grow at c.12% y/y in 2025, surpassing 1.6bn visitors and exceeding pre-pandemic levels. Furthermore, the share of luxury purchases linked to tourist spending has recovered from 30% in 2023 to 35% in 2024 globally with the share expected to normalise to c.40% in 2025. “Quiet Luxury” companies stand to benefit as affluent consumers increasingly favour understated elegance and refined craftmanship over overt displays of wealth, positioning these companies for sustained growth.
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