Closing summary
On that note, we are wrapping up for the week – a week that’s seen new tariffs imposed or threatened by Donald Trump, and the EU and Canada announcing countermeasures.
The UK, Australia and other countries have preferred what Keir Starmer calls a “pragmatic approach” (as the UK is trying to negotiate a wider economic deal with the US).
But even Elon Musk’s Tesla has warned that Trump’s trade war could expose the electric carmaker to retaliatory tariffs that would also affect other automotive manufacturers in the US.
Today, news that the UK economy shrank by 0.1% in January, which came as a surprise to economists, has created a headache for Rachel Reeves, the chancellor, who will present her spring statement on 26 March.
Germany’s incoming chancellor Friedrich Merz said today that he has secured the crucial backing of the Green party for a massive increase in state borrowing and reform of debt rules, clearing the way for the outgoing parliament to approve it next week.
The news sent European shares, government bond yields and the euro soaring. Germany’s Dax rose by 1.7% and the French and Italian markets are up by 1.2% and 1.6% respectively, while the UK’s FTSE 100 has gained 0.9%.
Wall Street also rallied, with the S&P 500 up 1.6%, the Dow Jones 1.2% higher and the Nasdaq gaining 1.8%, despite a gloomy consumer sentiment survey from the University of Michigan.
Have a great weekend. We’ll be back next week. – JK
Stephen Brown, deputy chief North America economist at Capital Economics, paints a gloomy outlook for the American economy.
Comments from President Donald Trump and his cabinet members in the past week suggest that neither an economic downturn nor a severe stock market decline will deter the administration from pursuing its America First policy agenda. This raises the prospect that our policy assumptions are too timid and presents downside risks to our GDP forecasts. Nonetheless, with inflation still too hot for comfort, the Fed will be in no hurry to bail out the administration [with an interest rate cut].
