Multi-Asset Weekly | Global Equities Endure Whiplash After Volatile Tariff Decisions
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Chief Investment Office10 Feb 2025
  • Equities: Worries of reciprocal tariffs by the US and resurgent inflation saw global markets slide
  • Credit: A/BBB credit remains the most attractive relative to history
  • FX: Tariff noise adds to volatility, but US macro fundamentals are still USD-positive
  • Rates: Divergence among G3 central banks remains as key theme; BOJ most hawkish among central banks
  • The Week Ahead: Keep a lookout for US Change in Initial Jobless Claims; Japan PPI Number
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Equities: Markets slide on tariff and inflation worries

Prospects of reciprocal tariffs spook markets. The last week saw much volatility as equity markets whipsawed their way through tariff developments; stocks fell on Monday (3 Feb) after 10% tariffs on China were announced, yet gained the next three consecutive days after 25% levies on Canada and Mexico were deferred, before falling again on Friday (7 Feb) after Trump’s comments on reciprocal tariffs. The Dow Jones and S&P 500 indices fell 0.7% and 0.3% respectively, while the NASDAQ composite managed to eke out a 0.3% gain for the week. Market sentiment was further dampened by a buoyant jobs report that showed falling unemployment and higher-than-expected hourly earnings for January which stoked inflation worries.

Against this backdrop, Asia equity markets also logged tepid returns during the week; the Shanghai composite index and Hang Seng index were flat for the week, while the Nikkei-225 shed 2.6% during the same period. Europe equities managed to buck the trend, closing at a record high on Thursday (6 Feb) on the back of positive company earnings and an interest rate cut from the Bank of England. The STOXX 600, STOXX 50, and FTSE 100 indices gained 1.0%, 0.6%, and 0.9% respectively for the week.

Topic in focus: Global Hypermarts – Navigating through tariffs and inflation. US inflation rose 2.9% y/y in Dec 2024 with urban food and beverage prices up 2.4%, following a 25 bps Fed rate cut during the same month. Trump’s potential tariff policies could also lay further pressure on inflation. This is reflected in the University of Michigan’s consumer survey in February which showed that respondents expect inflation to be 4.3% a year from now, i.e. a 1% jump from January and the highest since Nov 2023.

Given the potential resurgence of inflation, consumers are likely to shift spending from discretionary items to essentials and groceries, mirroring a trend seen during 2H21 till 1H23. This backdrop should prove beneficial to players like Walmart and Costco which dominate the affordable grocery category and are steadily gaining market share from higher-income households. Historically, excluding COVID panic-buying effects, Walmart and Costco’s comparable sales have shown strong positive correlation with US inflation. Given the trading down effect, as well as efforts to diversify supply chains away from China, we believe that the overall impact on earnings will be manageable for these players.


Figure 1: Quarterly comparable sales growth of selected players vs US inflation

Source: Company data, Bureau of Labor Statistics, DBS
Note: Numbers of Walmart and Costco are comparable sales growth in the US



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