Major U.S. indexes fell last week, with the S&P 500 faring best, dropping just 0.24%. Stocks dropped sharply at the start of last week following President Trump’s Friday announcement of 25% tariffs on Mexico and Canada and 10% on Chinese imports. However, by Monday’s close, Trump delayed the Mexico and Canada tariffs for 30 days, offering some relief and helping stocks recover part of their early losses.

Markets largely shrugged off the China tariffs, as Trump had previously threatened tariffs as high as 60% during his campaign. China responded with 15% tariffs on under $40 billion in U.S. imports, effective February 10, while also initiating antitrust probes into U.S. tech firms and tightening export controls on key minerals. Although no tariffs have been imposed on the European Union yet, Trump warned on Sunday that they “definitely will”.

U.S. earnings reports also played a key role in shaping sentiment as investors processed a busy week of releases. According to FactSet, 77% of S&P 500 companies that reported fourth-quarter results through Friday exceeded earnings expectations, with an average growth rate of 16.4% (compared to the 11.9% forecast). Additionally, 63% of these companies beat sales projections.

U.S. Treasury Secretary Scott Bessent said the Trump administration is focused on the 10-year Treasury yield, not the federal funds rate, and isn’t pressuring the Fed to cut rates. The administration aims to reduce energy prices, lower government size, and boost growth.

On the economic data side, the U.S. manufacturing sector expanded in January for the first time since October 2022, but services slowed. The key economic event of last week was Friday’s nonfarm payrolls report. The U.S. economy added 143,000 jobs in January, below expectations and down from December’s revised 307,000. The unemployment rate unexpectedly dropped to 4.0% from 4.1%.

The Bank of England cut its base rate by 0.25% to 4.5% in a 7-2 vote, with two members advocating for a larger cut. Governor Andrew Bailey expects further rate reductions. Inflation is expected to rise temporarily to 3.7%, while the 2025 growth forecast was halved to 0.75%. UK equities reacted positively, with the FTSE 100 reaching a record high, ending last week up 0.31%. Meanwhile, the Euro Stoxx 50 led developed markets, rising 0.73% w/w.

Mainland Chinese stock markets rose in a shortened trading week, as strong consumer spending during the Lunar New Year holiday helped offset President Trump’s decision to impose a 10% tariff on Chinese imports. The Shanghai Index climbed 1.63% from Wednesday to Friday, while in Hong Kong, the Hang Seng Index gained 4.38%, marking its best weekly performance in four months, fuelled by strong gains in tech stocks.