Economy Spotlight: The Most Important Events and What's Coming 24/02-2/03/2025

Introduction:

The global economy experienced many things last week, whether in terms of the tariffs that US President Donald Trump continues to impose in various fields, through the news related to the agreement that may lead to ending the Russian Ukrainian conflict and reaching many economic indicators that                 their shadows on the performance of various global financial markets and various assets. 

We will discuss these matters in addition to what awaits the global economy this week in this issue of the "Economy spotlight" report, which will point to one of the most prominent economic indicators that the US economy is greatly awaiting

Economy Spotlight. Major Economies:

First. The US Economy:

Observers and analysts continue to examine the effects of US President Donald Trump's decisions regarding tariffs, which began last week with steel and aluminum and reached semiconductors and medicines and ended with Trump's orders to revive investigations aimed at imposing customs duties on countries that impose taxes on digital services provided by US technology companies. 

Analysts point out that these policies may raise inflation rates or make them more stable for a longer period than expected, in addition to other policies such as the immigration policy that may affect the labor market, where illegal immigrants represent 5% of the workforce, according to Bloomberg data. 

One of the most prominent analysts who warned about Trump's policies last week was Nobel Prize-winning economist Joseph Stiglitz, who said that Donald Trump's threats of tariffs have made the United States a scary place to invest and may unleash stagflation. 

All these concerns coincided with the minutes of the Federal Reserve's January meeting, which revealed Fed members' concerns that tariffs could harm inflation, and they also confirmed that they would not move to cut interest rates unless they were certain that inflation would return to decline and the labor market would stabilize. 

The US economy will test one of the Fed’s preferred inflation readings next week, the Personal Consumption Price Index, after a series of worrying economic indicators last week, most notably the following:

The S&P Global Composite Purchasing Managers’ Index in the US, which tracks the manufacturing and services sectors, fell to 50.4 this month, its lowest reading since September 2023. 

The Philadelphia Manufacturing Index (February) fell sharply from 44.3 to 18.1. 

The Manufacturing PMI rose from 50.2 to 51.6. 

PMI index (February) slipped below the 50 mark, the distinguishing mark between contraction and recovery, falling from 52.9 to 49.7.

Home sales fell by about 200,000 units, falling from 4.29 million units to 4.08 million units in January.

Second. European Economy:

The European economy continues to discuss its impact on the US tariffs, as European Central Bank Governing Council member Fabio Panetta pointed to signs of weakness in the Eurozone economy, stressing that they are more persistent than expected. 

Also, concerns are still rising in the largest economy in the Eurozone, the German economy, which will witness important federal elections on Sunday of this week, amid difficult economic conditions, and more severe concerns due to the US tariffs and how they will affect the economy, which is witnessing the strongest recession since the German Union in 1990. 

As for the good news, it lies in the statement of the European Union Trade Commissioner, who said that his top priority in trade talks with the US President Trump administration will focus on avoiding economic pain for both sides from US tariffs and countermeasures against the European Union. 

Despite these concerns, European stocks witnessed a noticeable improvement, due to the hopes of European markets that Trump will be able to end the Russian Ukrainian conflict, and the possibility of a return to peace, which casts a positive shadow on risky assets such as stocks. 

The Stoxx Europe 600 index ended last week with a slight weekly improvement, but it closed at 550 points, exceeding the average end-of-year target of 540 indicated by the Bloomberg survey of strategists, thus achieving growth of about 9% this year. 

As for economic indicators, the eurozone trade balance recorded a less than expected decrease from $16 billion to $15.5 billion, and despite the decline in economic sentiment according to the ZEW surveys from what was expected, it rose from 18 to 24.2, which is the highest level since August 2024.

Third. Japanese Economy:

One of the most discussed issues among analysts and observers in the Japanese economy is the issue of the Bank of Japan approaching raising interest rates as soon as possible, after the release of core inflation indicators, which recorded their highest level in 19 months, when this indicator recorded a reading of 3.2%. 

Bets for raising interest rates were also strengthened by the rise in Japanese government bond yields for 10 years to their highest level in 15 years, which also reinforces fears that the Japanese economy will be affected by US tariffs. 

For its part, the Japanese government maintained its view that the Japanese economy is recovering moderately, although it is still partially stalled in its latest monthly report, indicating that consumer spending has not yet fully recovered, and that the US tariff plan threatens to slow export growth. 

In the context of enhancing Japanese Chinese trade exchanges, Chinese Minister of Commerce Wang Wentao held talks with a visiting Japanese business delegation to discuss bilateral economic and trade relations, with the two parties focusing on the need for deeper economic integration between the two countries, enhancing communication and removing economic security concerns, and stabilizing industrial and supply chains.

Fourth. Chinese Economy:

The Chinese economy began last week with an important meeting of the Chinese president with senior leaders of technology companies, to express his support for the private technology sector, and urge them to increase investment and face Western competition. 

The Chinese economy continued its efforts to support and stimulate its growth, as the Chinese Ministry of Commerce issued an action plan that would allow greater participation by foreign companies in the telecommunications, healthcare and education sectors in its latest attempt to attract and retain investment from abroad amid escalating geopolitical tensions. 

The Chinese economy also witnessed several important visits, whether by trade officials from Japan or officials from the United Arab Emirates, with the aim of exploring promising investment opportunities. As for the most important economic indicators, the People's Bank of China kept interest rates for one year and five years at 3.1% and 3.6% respectively, in line with expectations that indicated keeping interest rates unchanged due to concerns about a potential trade war with the US.

Economy Spotlight. Economic Calendar and What to Expect in the Markets Next Week:

Global markets will be awaiting the following economic data: