Thursday's Markets Update (February 27, 2025)

27 Feb 2025 by rate3

On Thursday, tech stocks are down on weak earnings reports, together with the broader market including industrials in the Dow despite durables jumped to a 6-month high, driven by aircraft. Meanwhile, jobless claims rose to a 2-month high, the regional manufacturing index reached a 5-month low, and the economy decelerated to 2.3%—slowed expansion over 3 quarters—as exports fell and investments contracted despite increased consumer spending and government expenditures. The economic picture was further darkened by a rise to 2.3% in core PCE—the first increase in four quarters—and sharply dropping home sales for the second month in a row.

World's Markets:

EU stocks are in the red after 25% tariffs on all imports were announced, with autos and tech hit particularly hard.
French unemployment skyrocketed by approximately 200K—80% among those aged below 25—marking the sharpest rise in recorded history, except for 2020.
Spanish inflation increased for the 5th month in a row, driven by electricity prices.
UK car production is down 18% compared to a year ago, due to weakening domestic and international demand.
The Brazilian real weakened slightly amid investor concerns over mounting government expenditures without backing it up with revenues. The local market is also in the red due to high unemployment, which jumped to 6.5% from 6.2%, and disappointing corporate reporting, especially from Petrobras.
The Indian market is flat as metals and banks advanced on rising rates while autos fell due to tariffs.
Chinese stocks are mixed as traders await next week's government sessions to outline their stimulus policies.
South African producer inflation accelerates, led by food.
Commodities and Currencies:

Gas prices increased in Europe, reflecting concerns that American LNG costs will rise. Copper prices jumped as new Trump levies loomed over it.
Crypto:

BTC is slumping further down to 80K, joined by the rest of the market in a continuing sell-off, as industry participants reassess their positions in light of Trump's ongoing trade war and politicians further delaying BTC reserves and regulatory clarity.
The State Of Markets: Down, the intensifying trade war is leading to higher producers' costs and rising consumer inflation, preventing central banks from easing rate pressure.

Comment: EU Is So Back?

According to objective economic data, the initiation of the trade war against the whole world has suddenly played heavily into the hands of Europeans, Chinese and Brazilians. It is reminiscent of what happened to the Russian economy after all major Western brands withdrew from the local market, freeing it for domestic producers.

Similarly, Trump's "sanctioning" of Europe and China might now free market niches for local industries as American corporations are forced to re-shore their production back home, which sharply increases costs and decreases their competitiveness in foreign markets.

Smaller countries not yet sanctioned by Trump are in a particularly privileged position as they can now have the best of both worlds—shielded from American competition, they can still continue to produce for both internal and American markets.

That is perfectly logical from a macroeconomic point of view. The era of American corporate dominance ended right after the American political class recognized that it did not have enough military and financial power to keep dominating literally all the world's markets. So, now America's piece of the global wealth pie is destined to be reduced as multiple competitors continue to claim larger and larger portions of it.

Despite all the talk about "competing with China," there is not going to be any "competition"; it will be only the "organized retreat" - deciding how much of the world's pie could America afford to itself to defend.