📆 Thursday, February 20
► European markets recover from some of Wednesday's sharp losses which was the biggest decline in two months. The Stoxx 600 trades more than 0.5% higher, driven by gains in industrial goods and services, while UK’s FTSE lagged (-0.2%) as major companies, including BP and AstraZeneca, traded ex-dividend. Defensive stocks took a breather, with defense stocks slipping 1.2% after surging 18% year-to-date on expectations of increased military spending. US-exposed European defense firms like BAE Systems (-2.4%) and Qinetiq Group (-1.2%) were pressured by Trump’s plans to cut military spending. Corporate earnings were mixed. Schneider Electric (+5.8%) surged after posting record annual sales and profits, while Renault (-1.0%) delivered a record operating profit but lost initial gains. Meanwhile, Airbus (-1.1%) disappointed, reporting an 8% drop in adjusted operating profit despite a 6% revenue increase.
► The S&P 500 closed slightly higher yesterday after initial losses – still a record closing at 6,144.15. However, futures remain muted, as investors weighed the Federal Reserve’s cautious stance on inflation and Trump’s latest tariff threats. The Fed minutes signaled concerns over inflation, warning that Trump’s tariffs could push prices higher. Policymakers reaffirmed that interest rate cuts will not come until inflation shows further progress, prompting Treasury yields to decline. Trump’s escalating trade war risks weighed on sentiment, with potential new 25% tariffs on lumber, autos, semiconductors, and pharmaceuticals. The USD fell, as markets reassessed the impact of tariffs on global trade. Tesla is under pressure but recovered from sharp losses in pre-market trading, as China demand concerns resurfaced amid weak earnings from Chinese automakers.
► Asian markets struggled, tracking Wall Street’s cautious tone as Trump’s new tariffs rattled investors. Japan’s Nikkei plunged 1.29%, dragged lower by SoftBank (-3.2%) and Tokyo Electron (-2.7%), as the US targets semiconductor imports. China’s markets slipped, with the Shanghai Composite trading flat, retreating from previous gains. Investors digested China’s central bank decision to hold key lending rates steady, prioritizing financial stability over stimulus. Hong Kong’s Hang Seng fell 1.6%, marking its second consecutive session of losses, with tech stocks under pressure following Alibaba’s (-2.8%) earnings miss. Meituan (-6.9%) tumbled after announcing expanded worker benefits, raising cost concerns. Australia’s ASX 200 declined 1.27%, as unemployment unexpectedly rose to 4.1%, signaling potential economic slowdown. New Zealand stocks also extended losses, as traders reacted to continued corporate earnings disappointments.
