Political stock markets
In an eventful month for the markets, the stock markets in Europe performed particularly well. The German share index DAX rose by 3.77%, slightly more than the broad European index Stoxx Europe 600, which increased by 3.27%. In the USA, the broad S&P 500 fell by -1.21%, while the Nasdaq technology index recorded a larger drop of -2.55%. In Japan, the Nikkei index fell by -3.15%. Overall, global equities, as measured by the MSCI World Index, fell by -0.60% - all index figures in euro terms.
US tariff policy determined the mood on the markets. At the beginning of the month, the announcement that tariffs would be imposed immediately on imports from Mexico and Canada (25% each) and China (10%) caused an initial dip in share prices. However, only the tariffs on Chinese imports were introduced; the others were canceled at the last minute, resulting in a relief rally. Further tariff ideas came from the USA, including a 25% import duty on all steel and aluminum imports. Towards the end of the month, the USA announced its intention to introduce the previously postponed tariffs against Canada and Mexico at the beginning of March. In the context of these tariff discussions, the European automotive sector in particular experienced sharp ups and downs in share prices. Inflation was also affected: the US inflation rate rose to 3.0% in January (2.9% in December) compared to the same month of the previous year, and investors began to expect inflation to rise further.
Towards the middle of the month, the US government began talks with Russia with the aim of ending the war in Ukraine. As a result, the oil price fell and the European stock markets outperformed the US. The strongest beneficiary was the European defense sector due to the ongoing discussion about a sharp increase in national defense budgets in Europe. By contrast, the technology sector fell the most, as investors had hoped for higher profits during the reporting season, particularly from the tech giants.
Another factor weighing on the US stock market was falling consumer confidence, which reached its lowest level since November 2023, mainly due to fears that consumer spending could become significantly more expensive in light of US tariff policy. By contrast, the German stock market performed similarly well to its European counterparts, as the outcome of the Bundestag elections was largely in line with expectations.
On the bond markets, the US tariff policy (positive for US bonds) and the discussions about a debt-financed increase in defense spending in Europe (negative for European bonds) were particularly noticeable. The strongest performers were 10-year US government bonds, whose yields fell by 33 basis points to 4.21%. By contrast, the yield on their German counterparts only fell by 5 basis points. The trend was similar for high-quality corporate bonds, whose yields in the USA fell by 22 basis points to 5.08%, while those of their euro counterparts fell by only 8 basis points to 3.06%.
Gold was again in high demand in February, partly due to inflation concerns, partly due to the sense of uncertainty in Europe associated with the discussion about increasing defense spending and partly due to increased central bank purchases. The fine ounce rose by 2.12% to 2,857.83 US dollars.
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