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“German industry ended the year on a very weak footing. The cumulative decline from its late 2010s peak is approaching 20% (around half of that for GVA) with the weakness broad-based. Leading indicators and likely US tariffs dash hopes of a quick turnaround. Wake up call…”
US Data Sinks Bets on an H1 2025 Fed Rate Cut
Friday’s US Jobs Report and Michigan Consumer Sentiment Survey impacted expectations for a Fed rate cut in H1 2025.
The US unemployment rate fell to 4.0% in January, down from 4.1% in December, even as the participation rate increased. Average hourly earnings rose 4.1% year-on-year, matching December’s increase, signaling labor market resilience.
Meanwhile, inflation expectations spooked investors. The Michigan Inflation Expectations Index jumped from 3.3% in January to 4.3% in February. Expectations of higher inflation could boost near-term spending, potentially fueling demand-driven inflation.
Wall Street Tumbled as Traders Braced for Tariff Fallout
US equity markets posted losses on Friday, February 7 as traders reacted to the US data and Trump’s tariff warnings. The Nasdaq Composite Index reversed its Thursday gains, sliding 1.36%, while the Dow and S&P 500 fell 0.99% and 0.95%, respectively.
Despite beating earnings estimates, Amazon.com (AMZN) dropped by 4.05% on a weaker Q1 outlook. Apple Inc. (AAPL) fell 2.40% after reports that China may launch a probe into its policies and fees.
US Economic Calendar: Inflation in Focus
On Monday, February 10, consumer inflation expectations require consideration after Friday’s Michigan Consumer Sentiment Survey. Economists expect consumer inflation expectations to rise 3.1% in January, up from 3.0% in December.
A higher inflation reading could support a more hawkish Fed rate path, potentially weighing on risk assets. A higher-for-longer rate path may raise borrowing costs, affecting earnings. Conversely, softer inflation expectations could boost demand for German-listed stocks.
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