United States
U.S. stocks rebounded sharply on Friday as the absence of new negative headlines on tariffs encouraged investors to dip back into the market after steep declines over the past two weeks. The S&P 500 gained 2.13%, adding 117 points to close at 5,638.94, with all sectors finishing higher. The best-performing sectors were technology and energy. The Dow Jones Industrial Average climbed 674 points (+1.66%) to 41,488, while the Nasdaq Composite led gains, surging 2.61% to 17,754.09.
The recent market pullback had seen the S&P 500 drop more than 10% and the small-cap Russell 2000 decline by 20%, prompting some analysts to suggest it was an opportune time to buy. Beaten-down technology stocks saw strong recoveries, with Nvidia jumping 5.27% to $121.67 and Meta rising 2.97% to $607.60. The “Magnificent 7” index advanced 2.8%.
Financial stocks outperformed the broader market, with JPMorgan Chase rising 3.2% and Bank of America gaining 3.08%. Berkshire Hathaway added 2.1%, trading near its all-time high. The company’s large cash reserves are increasingly seen as a strategic advantage, and a recent filing revealed that Warren Buffett’s firm had paused its share buyback program over the past month.
In individual stock moves, DocuSign soared 14.81% after beating earnings expectations, partly driven by its recently launched AI-powered content features. The company is partnering with Microsoft and Google, and its CEO stated that DocuSign has “started to turn the corner on the core business.”
Sentiment data released on Friday pointed to further deterioration in consumer confidence. The University of Michigan’s Consumer Sentiment Index fell to 57.9, its lowest level in two and a half years. The report noted that consumers remain frustrated by the “frequent gyrations in economic policies.” Inflation expectations also spiked, with one-year inflation expectations rising to 4.9% and five-year expectations jumping to 3.9%—a level last seen in 1993.
University of Michigan Inflation Expectations – 1 Year and 5-10 Year
On a positive note, Democratic Senate Majority Leader Chuck Schumer announced that Democrats would allow a stopgap bill to pass, averting a government shutdown.
U.S. bond yields moved higher, with the 10-year Treasury yield rising 4 basis points to 4.31% and the 2-year yield climbing 6 basis points to 4.01%. The U.S. dollar weakened slightly, down 0.17% on the Bloomberg Dollar Index.
This week, investors will turn their attention to the Federal Reserve’s interest rate meeting. While it is widely expected that rates will remain unchanged, markets will be watching closely for any signals from the Fed regarding its outlook on the U.S. administration’s new economic policies and their potential impact on the path of future rate cuts.
Europe
European shares participated in Friday’s relief rally, driven by news that the German government had reached a historic agreement to boost government spending. Chancellor-elect Merz announced on Friday that he had secured a deal with the Greens to move forward with the proposal, allowing the outgoing parliament to vote on the bill on Tuesday.
This news propelled the Euro Stoxx 600 up 1.14% to 546.6, while Germany’s DAX outperformed state indices, rising 1.86% to 22,986. The FTSE 100 also had a strong session, gaining 1.05% to close at 8,632.33—its best performance in over a month.
Ten of the eleven sectors on the Euro Stoxx 600 closed higher, led by industrials (+2.20%) and technology (+2.08%). In the industrial sector, defence stocks surged 4.17%, with Rheinmetall advancing 6.29% and the UK’s BAE Systems climbing 4.18%. The UK government announced a £2 billion expansion in lending to foreign buyers of British-made missiles and aircraft, further boosting defence stocks. European banks also moved higher on expectations of increased business activity stemming from greater government spending and debt issuance.
Mining stocks rebounded following reports that China’s government is expected to introduce new stimulus measures this week. Glencore gained 2.6%, while Anglo American rose 2.57%.
Bond yields in Germany surged on the spending announcement, reaching 2.93%—a six-month high—before easing later in the day to close at 2.87%, up 2 basis points. Meanwhile, Germany’s 2-year bond yields remained unchanged at 2.18%. The euro strengthened, with EUR/USD rising to 1.0879.
Australia
The Australian share market is set to open higher this week, following a strong rebound in U.S. markets that lifted overnight futures. ASX200 futures surged 85 points, closing on Saturday morning with a 1.09% gain. Meanwhile, the Australian dollar (AUDUSD) will start the week at 0.6324, up 0.62% from Friday morning.
The global equities rebound began in Australia, with the ASX200 gaining 0.52% on Friday, adding 50 points to close at 7,789.70. Eight of the eleven sectors finished higher, led by utilities and materials.
The materials sector saw a double boost, benefiting from rising iron ore and gold prices, which drove increased demand for mining stocks. Fortescue advanced 2.66% to $16.27, while BHP gained 1.07%, adding 41 cents to close at $38.65. Rio Tinto (RIO) shares rose 0.96% to $117, amid reports that workers at its Paraburdoo operations were petitioning for higher wages. Gold broke through the US$3,000 mark in Asian trading, propelling gold miners Newmont up 5.72% to $73.43 and Evolution Mining 4.64% higher to $6.76. Sims Group, the metal recycler, surged 6.09% to $14.64 after market sentiment improved on the stock last week. This followed news that a unit of Toyota had acquired U.S. competitor Radius Recycling, implying a higher valuation for Sims shares.
The utilities sector was the day’s best performer, rising 1.77%, with strong gains in Origin Energy and AGL. AGL advanced 3.51% to $10.52, while Origin rose 1.86% after brokers upgraded their price targets for both stocks.
The financial sector was slightly weaker, with insurers posting gains but major banks weighing on performance. Sector heavyweight Commonwealth Bank (CBA) declined 1.14% to $142.36.
In individual stock moves, A2 Milk soared 8.81% to $8.65 after local governments in China introduced subsidies to promote births. There is also growing anticipation that the Chinese government will announce additional stimulus measures to boost consumer spending this week.
Australian bonds were little changed, with the 10-year yield starting the week at 4.42% and the 2-year yield at 3.74%.
Commodities
Gold briefly surged past US$3,000 per ounce in Asian trading on Friday before retreating to end the week at US$2,984.16, down 0.17% (-US$5.02). Despite the rebound in risk assets, safe-haven demand for gold remained evident. Goldman Sachs issued a note suggesting that demand from sovereign buyers and safe-haven investors will continue to support gold prices, with a potential target as high as US$3,300. Meanwhile, silver slipped 0.20% to US$33.80.
Bitcoin rallied alongside other risk assets, climbing 3.4% from Thursday’s close to trade at US$83,059.
Iron ore saw strong gains in Singapore, finishing at US$103.98 per tonne, up 1.7%. However, the rally faded in U.S. trading, with prices slipping back to US$102.25. Expectations of further stimulus from the Chinese government to boost consumption, along with a 2.43% rally in Chinese equities, contributed to Friday’s positive sentiment and demand for iron ore. Copper remained flat at US$9,780 after a minor US$3 decline in London but ended the week 1.7% higher.
Oil prices advanced on Friday, with West Texas Intermediate (WTI) rising 63 cents to close at US$61.78, a 0.95% gain. Brent crude gained 1% to finish at US$70.58. Despite Friday’s rally, oil prices were unchanged on the week as hopes for a swift ceasefire agreement in Ukraine diminished. Over the weekend, the U.S. administration launched strikes in Yemen and warned Iran against supporting Houthi rebels. The escalating tensions in the Middle East could contribute to increased oil price volatility in the coming week.
Economic Calendar
China:
- Retails Sales (Jan/Feb) – 1:00pm
- Industrial Production (Jan/Feb) -1:00pm
US:
- Retail Sales (Feb) – 11:30pm
- NY Empire State Manufacturing Index (Feb) – 11:30pm
- NAHB Housing Market Index (Mar) – 1.00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
