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Key Stories from the past week: Inflation & Tariffs Rattle Markets
It has been another eventful week in financial markets, with headlines around US CPI inflation and retaliatory tariffs among the key highlights. Fed Chair Jerome Powell testified before Congress and indicated policymakers are unlikely to cut interest rates immediately following the three rate cuts last year. The market is no longer pricing in the next rate earlier than December 2025. Powell also defended the independence of the Federal Reserve, stating that it is crucial for maintaining control over inflation and making decisions based on long-term economic health rather than political pressures.
Hot inflation data
US CPI inflation data ticked higher in January, despite this being a key focus area for the new Trump administration that that promised to lower prices for consumers. Headline inflation showed 0.5% increase m/m against 0.3% expected. Trump was quick to blame Biden on Truth Social tweeting "BIDEN INFLATION UP!".
Trump blames Biden for unexpected uptick in US inflation
Tesla Losing Ground
Tesla was the worst-performing stock in Mag 7 – down 25% from December peak. With market share slipping across key regions & Elon Musk’s array of political controversies, Tesla finds itself in a position with many unknowns.
Tesla’s Road Ahead – Is Musk Steering the Company Off-Road?
Alibaba surges on AI advancements
Alibaba has surged 50% from January lows, driven in part due to advancements in their overall competitive positioning in the global AI race. Benchmarks showed Alibaba’s Qwen AI model cheaper and more efficient than ChatGPT 4.0 & Deepseek, while also securing partnership with Apple in China.
Alibaba: The sleeping giant awakens
Next week, the market's attention will initially be on Japan's Preliminary Q4 GDP report, which could provide further insights into a potential policy adjustment by the BOJ. The market is currently fully pricing in the next rate hike by September 2025. Tuesday and Wednesday see the Reserve Bank of Australia and the Reserve Bank of New Zealand, respectively, announce their interest rate decisions. Both are expected to cut rates, marking the first cut by the Reserve Bank of Australia since the pandemic. The Federal Open Market Committee (FOMC) will conclude the major central bank events next week with the release of their minutes of meeting. Investors will focus on inflation risks and assess the Federal Reserve's stance on potential rate cuts towards the end of 2025. In terms of earnings, the main release will be from Alibaba on February 20th. Alibaba's stock has recently rallied by approximately 40% since January, as the company gains momentum in the Chinese artificial intelligence sector.