This is our weekly market update, where we start in the US, cross to Europe and Asia, and end in Australia, covering commodities and crypto along the way.
As expected, this was a volatile week, as questions over AI tech, tariffs and inflation all converged to stoke significant volatility across the trading days. Monday saw big falls thanks to DeepSeek emerging with potentially a different economic approach to AI delivery, the Fed held rates during the week, while the ECB and Canada cut their benchmark rates, and late on Friday, President Donald Trump saying he would indeed place 25 per cent tariffs on imports from Canada and Mexico and 10 per cent tariffs on goods from China effective on Sunday and those on imports from the European Union would follow.
Trump said while the new tariffs might cause some disruption short term, he was not concerned about the reaction in markets. He also said there was nothing that Canada, Mexico nor China could do to forestall his plans. “Starting tomorrow, those tariffs will be in place,” White House spokeswoman Ms Leavitt told reporters. “These are promises made and promises kept by the president.”
And in economic news, the latest U.S. prices increased in December while consumer spending surged. The personal consumption expenditures (PCE) price index rose 0.3% last month after an unrevised 0.1% gain in November, the Commerce Department said on Friday. In the 12 months through December, the PCE price index advanced 2.6% after rising 2.4% in November. This mean that U.S. inflation increased by the most in eight months in December amid robust consumer spending on goods and services, suggesting the Federal Reserve would probably be in no hurry to resume cutting interest rates soon.
Gold hit an intra-day all-time high of $2,800.99 in spot trading earlier today, as investors adjusted their positions ahead of US President Trump’s decision on whether to slap 25% levies on Canadian and Mexican imports.
The Australian sharemarket notched its second record high of the week on Friday, capping the bourse’s best month since July. The S&P/ASX 200 closed 0.5 per cent higher at 8532.3 – its largest weekly gain in five weeks. The index rose 4.6 per cent over January.
Bitcoins adoption as a reserve asset by a powerful country could trigger a domino effect, prompting other countries to follow suit. But the path is as yet far from certain.
More broadly, and as expected, markets will remain highly volatile, and global trade norms potentially get reset, and inflation still bubbles along below the surface. Just remember that markets remain in over-valued territory, and Deep Seek is an object lesson in how black swan events can emerge unheralded. Expect a wedge of black swans in the weeks ahead.
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