Global Market News
Global Equities Down
Global equities were down on the week amid volatility, primarily in tech stocks, fueled by Chinese AI startup DeepSeek’s unveiling of its AI model that costs 95% less to develop than others (see details below). The S&P 500 and Nasdaq lost 1.00% and 1.64%, respectively, while the Dow Jones managed a slight gain of 0.27%. The US 10-year Treasury note continued its decline to close Friday at 4.54%. The price of a barrel of West Texas Intermediate crude oil also decreased, ending the week at $72.53. Volatility, as measured by the CBOE Volatility Index, dropped significantly to 15.97.
US Grows While Eurozone Stagnates
In Q4 2024, the US GDP grew at an annual rate of 2.3%, down from 3.1% in Q3, driven mainly by consumer spending and government expenditure, while private investment declined. Meanwhile, the Eurozone’s GDP remained flat, with no growth in Q4, falling short of the expected 0.1% increase. Germany and France saw contractions, Italy had no growth, and Spain and Portugal experienced growth of 0.8% and 1.5%, respectively. The Eurozone’s year-on-year growth was 0.9%, hindered by high energy costs and weak manufacturing in Germany and France.
International Developments
EU To Give Gradual Sanctions Relief Amid Syria’s Leadership Transition
The European Union has agreed to a “step-by-step” roadmap to temporarily ease sanctions on Syria, contingent on progress by the new authorities following the ousting of Bashar al-Assad in December 2024. Ahmed al-Sharaa, leader of Hayat Tahrir al-Sham (HTS), was declared Syria’s interim president on January 29th, with the mandate to form a transitional legislature and oversee constitutional reforms. The first sanctions to be lifted will likely target the banking, energy, and transport sectors to facilitate reconstruction, while restrictions on weapons and dual-use technology will remain in place. The EU’s decision includes a “snapback” mechanism to reinstate sanctions if conditions deteriorate, amid concerns about HTS’s Islamist rule and the broader political transition.
Norway’s Government Collapses Over EU Energy Policy
Norway’s Centre Party has withdrawn from the coalition government, leaving Prime Minister Jonas Gahr Støre to lead a minority Labour government just months before the September 8th elections. The split was triggered by disagreements over EU electricity market regulations, which the Centre Party argues have driven up domestic energy prices and restricted Norway’s ability to control exports. Finance Minister Trygve Slagsvold Vedum blamed previous conservative governments for exacerbating the crisis by approving two undersea power lines to Germany and England and criticized Labour’s adoption of the EU’s fourth energy market package. Despite Norway’s status outside the EU, its integration into the European Economic Area (EEA) has deepened energy ties, fueling political tensions over the country’s reliance on hydropower and rising electricity costs.
UN Warns of Escalating Atrocities in Congo’s M23 Conflict
The United Nations has raised alarm over escalating violence in the eastern Democratic Republic of Congo, where M23 rebels, allegedly backed by Rwanda, have captured most of Goma and are advancing south toward Bukavu. UN officials reported summary executions by M23, widespread displacement of over 400,000 people since the start of the year, and sexual violence committed by both Congolese troops and by escaped prisoners during a mass jailbreak on January 27th. The rebels have occupied schools and hospitals, forcibly conscripted civilians, and expelled internally displaced persons (IDPs) from camps in areas under their control. As concerns mount over further atrocities, UN rights chief Volker Turk has called for urgent investigations to hold perpetrators accountable, warning that the widespread proliferation of weapons in Goma is worsening the crisis.
US Social & Political Developments
DC Plane and Military Helicopter Collision: Investigation and Recovery Efforts
A Bombardier CRJ700 passenger jet operated by PSA Airlines collided midair with a US Army Black Hawk helicopter near Ronald Reagan National Airport on the evening of January 29th killing all 64 people aboard the plane and all three aboard the helicopter. Ongoing investigations have revealed the helicopter may have been flying above the allowed altitude as well as potential lapses in air traffic control staffing, with only one controller managing both airplane and helicopter traffic before the crash. Recovery efforts, hampered by rough weather conditions, have so far retrieved 40 bodies, and authorities are working to locate remaining victims and aircraft debris. The incident has sparked political controversy, with President Trump attributing the crash to past FAA diversity hiring policies, while former Transportation Secretary Pete Buttigieg dismissed these claims as baseless and inflammatory.
White House Rescinds Federal Funding Freeze While Foreign Aid Freeze Continues
The Trump administration reversed its directive to pause trillions of dollars in federal grants and financial assistance just a day after a federal judge blocked the order, citing widespread confusion and legal challenges. The memo, initially issued by the Office of Management and Budget (OMB) on Monday, aimed to halt discretionary funding as part of a broader effort to reassess spending priorities, including cuts to diversity programs. Legal challenges quickly emerged, with Democratic attorneys general from 22 states arguing the move violated congressional authority and federal procedures, leading to a temporary court injunction. However, Trump’s unprecedented 90-day freeze of almost all foreign aid still remains in effect. The order has caused uncertainty and chaos worldwide with hundreds of contractors working for the US Agency for International Development (USAID) being put on unpaid leave and some are being terminated.
Corporate/Sector News
Trump’s Tariff Threat on Canada and Mexico Increases Economic and Political Concern
President Trump’s plan to impose a 25% tariff on imports from Canada and Mexico, set to take effect as early as Saturday, threatens to disrupt North American trade and drive up consumer prices on goods ranging from gasoline to avocados. The tariffs, justified as a measure to curb undocumented immigration and fentanyl trafficking, could unravel the US-Mexico-Canada Agreement (USMCA), which Trump himself negotiated to ensure trade stability. With US trade deficits with Mexico and Canada widening to $161 billion and $72 billion, respectively, Trump is expected to push for stricter manufacturing and tariff rules when the USMCA comes up for renewal next year. In response, Canadian and Mexican leaders, including Chrystia Freeland and President Claudia Sheinbaum, have vowed dollar-for-dollar retaliation, targeting key US industries such as agriculture and manufacturing, heightening trade tensions across the region.
DeepSeek AI Shakes U.S. Tech Market and Sparks Global Debate
The release of China’s DeepSeek AI app caused a sharp selloff in US tech stocks on Monday, wiping nearly $600 billion off Nvidia’s market value before stocks rebounded on Tuesday. DeepSeek, founded in 2023 by Liang Wenfeng in Hangzhou, claims its AI model rivals top US models at a fraction of the cost, raising concerns about America’s AI dominance and investment strategies. President Trump called it a “wake-up call,” while industry leaders like OpenAI’s Sam Altman acknowledged its potential but questioned its long-term competitiveness. While some analysts see DeepSeek’s cost efficiency as an opportunity for AI expansion, others, including Elon Musk and Australian officials, have raised concerns over cybersecurity and China’s access to restricted Nvidia chips.
Tesla and BMW Challenge EU Tariffs on Chinese EVs
BMW and Tesla have filed lawsuits against the European Commission over tariffs imposed on electric vehicles (EVs) made in China, with Tesla’s EVs facing a 7.8% tariff and BMW’s 20.7%. The lawsuits, filed in the EU’s Court of Justice, argue that the tariffs harm global companies and hinder the decarbonization of transport. The EU’s move to impose tariffs comes amid concerns over unfair Chinese government subsidies allowing manufacturers like Geely and BYD to sell EVs at low prices, undercutting European companies. If successful, the lawsuits could potentially remove the EU’s right to impose such tariffs, affecting future trade policies and loss claims.
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