EU stocks crush U.S

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• Calmer markets, soft jobs data drag yields and dollar lower

• Eurozone inflation jumps

• BoE cuts rates despite rising inflation—growth fears take priority

• EU stocks crush U.S. in 2025, biggest outperformance since 2015

• Gold hits record high again

Let’s dissect

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Markets Snapshot

Macro and Fixed Income Markets

• US : The Bureau of Labor Statistics announced that the U.S. economy gained 143,000 jobs in January, missing analysts' projections of 170,000 and reflecting a slowdown from the previous month's increase of 307,000. Nonetheless, it highlighted several encouraging signs: job growth figures for November and December were revised upward by a total of 100,000, and the unemployment rate edged down from 4.1% to 4.0%.

• In additional labor market updates, the Bureau of Labor Statistics reported on Tuesday that U.S. job openings declined to a three-month low of 7.6 million in December, reinforcing the view that the labor market remains stable but is slowly cooling. Similarly, initial jobless claims released on Thursday showed an increase of 11,000, reaching 219,000 for the week ending February 1, while continuing claims rose to 1.89 million from 1.85 million the previous week. Both figures came in slightly above analysts' expectations.

• Weaker-than-expected employment data boosted U.S. Treasuries, pushing the yields down for the third time in four weeks. By Friday, the yield on 10-year Treasury note dropped to 4.49% from 4.80% on January 13. A delay in tariffs on Mexico and Canada also gave traders room to add hedges, adding further support. Traders currently expect two Fed rate cuts this year, with a first 25bps cut fully priced in for July meeting and another by year-end. The USD Index (DXY) fell to around 108, marking its fourth straight decline as easing trade war tensions followed cautious tariff moves by the US and China.

• A Consumer Price Index report due Wednesday will reveal if the trend of slightly higher-than-expected inflation persisted in January. The latest CPI data showed annual core inflation at 3.2% in December, excluding volatile food and energy prices, highlighting the uneven progress toward the Federal Reserve's 2.0% long-term target.

• EU: Eurozone annual consumer price growth remained above the European Central Bank’s (ECB) target for the third straight month in January, rising to 2.5% from 2.4% in December. Core inflation, excluding food, energy, alcohol, and tobacco, held steady at 2.7%, while services inflation—a key focus for policymakers—stood at 3.9%. ECB President Christine Lagarde noted that the uptick was expected, largely driven by base effects from last year’s energy prices.

• UK: The Bank of England (BoE) cut its benchmark rate by 25 basis points to 4.5%. The Monetary Policy Committee voted 7–2 in favor, with two members pushing for a larger half-point cut due to a sharper-than-expected economic slowdown. The BoE slashed its 2025 UK growth forecast to 0.75%, half of its previous estimate. Inflation is now projected to remain above target until 2027, six months longer than previously expected. Governor Andrew Bailey signaled further rate cuts are likely but emphasized a cautious, meeting-by-meeting approach. The stronger push for cuts reflects concerns that the new budget poses a greater risk to growth than inflation.

Equity Markets

• US: U.S. stocks dipped at the start of the week due to new tariffs and ongoing trade talks with Canada, Mexico, and China. However, markets rebounded as some tariffs were temporarily rolled back, leading to modest weekly gains. The S&P 500 rose 1%, the Nasdaq gained 1.6%, while the Dow remained flat week-over-week.

• Midway through earnings season, fourth-quarter results continued to outperform expectations. As of Friday, S&P 500 earnings were projected to grow 16.4% year-over-year, factoring in reported results and estimates for companies yet to announce. This marks a significant improvement from the 11.8% growth rate analysts had forecast before earnings season.

• EU: The German DAX has surged over 9% in dollar terms this year, with a 2.28% weekly gain, while France’s CAC 40 is up about 8% this year and 2.4% week-over-week. Both indices are outperforming the S&P 500, which has posted a 2.45% gain this year. This marks the widest gap between European and U.S. index performance at the start of a year since 2015, according to Dow Jones Market Data. Investors are increasingly weighing valuations—favoring Europe due to prolonged U.S. outperformance—against fundamentals, which still lean toward the U.S

Commodities

• Oil: Prices declined for the third consecutive week as rising trade tensions fueled concerns over weakening demand. By Friday afternoon, crude was trading near $74.7 per barrel, down from a recent peak of around $82.5 on January 15.

• Gold: Prices reached a record high for the second straight week, extending a nearly three-month rally. On Friday, the metal briefly topped $2,900 per ounce before easing to around $2,860 in the afternoon, marking a 2% weekly gain and a 10% rise year-to-date. A year ago, gold was trading just above $2,000 per ounce.

In Motion

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