Key Points
- European markets saw slight gains, led by luxury stocks such as Hermès.
- US inflation data suggests Trump may be forced to implement milder tariff policies.
- Chinese stocks in Hong Kong surged over 4%, driven by AI sector optimism.
- Gold prices remained near record highs, potentially hitting $3,000 an ounce.
Equities and bonds saw modest movements at the end of a week dominated by trade tariff discussions, Ukraine peace efforts, earnings reports, and persistent US inflation data. In Europe, the Stoxx 600 index edged higher, driven by gains in luxury stocks. Hermès soared to a record high in Paris after reporting strong holiday sales. Meanwhile, S&P 500 futures remained stable following Thursday’s near-record close on Wall Street.
Investor sentiment has been buoyed by speculation that negotiations surrounding US President Donald Trump’s proposed trade tariffs may soften their overall impact. Analysts at Bank of America (BofA) suggest that higher US inflation could benefit markets by forcing Trump to implement less aggressive tariff policies.
On Wednesday, a hotter-than-expected consumer price index (CPI) reading led to a brief dip in stocks and bonds. However, BofA strategist Michael Hartnett believes inflationary pressures could be a “blessing in disguise.” He argues that Trump will likely scale back his tariff and immigration policies in the coming months to prevent further exacerbating inflation.
“The news cycle on tariffs has intensified, but its impact on the dollar is waning,” noted Michael Metcalfe, head of macro strategy at State Street Global Markets. He pointed out that asset managers reduced their dollar holdings in early 2025.
Elsewhere, the yen strengthened, while the British pound reached its highest level against the US dollar this year. US Treasury yields stabilized after Thursday’s rally, with the 30-year Treasury yield hovering around 4.7%.
Meanwhile, Asian equities saw stronger gains. Chinese stocks in Hong Kong jumped over 4% to reach a three-year high, fueled by optimism about the country’s advancements in artificial intelligence. Gold prices remained near record highs, supported by safe-haven demand. They have the potential to test the $3,000 per ounce mark.
