Weekly house view | A spirit of dialogue at Davos
The week in review
Last week saw geopolitical tensions rise as US President Donald Trump threatened to apply fresh tariffs of 10% on eight European countries until they agree to support his ambition to acquire Greenland. In response, European Union states are considering hitting the US with EUR 93 bn worth of tariffs or restricting access to the single market for American companies.
As tensions rose, the S&P 500 ended a choppy week 0.4%1 (in USD) lower. The issue will play out at this week’s World Economic Forum meeting in Davos, which Trump is scheduled to attend on Wednesday. The theme of the annual meeting is “a spirit of dialogue”.
In positive trade news, the EU and the South American Mercosur bloc signed a free trade agreement after 25 years of negotiations, creating the largest free trade zone in the world. In the corporate world, fourth-quarter earnings season began strongly in the US, with large banks’ results slightly better than expected on average.
In a sign that life may be returning to subdued parts of the US economy, industrial production rose more than expected. US consumer price inflation (CPI) came in lower than expected, existing home sales accelerated, retail sales rebounded.
Quote of the week
“True peace is not merely the absence of tension; it is the presence of justice.” – Martin Luther King, Jr. (US markets are closed on Monday for Martin Luther King Jr. Day)
Key data
US December CPI in came below expectations for a large rebound after a modest reading in November. Core rose by 0.24% and headline rose 0.31%, but the components going into the core personal consumption expenditures (PCE) price index remain strong. US industrial production rose by 0.4% in December, above expectations. US retail sales rose more than expected.
