The Week Ahead

There was more tariff chaos over the weekend, when President Trump boosted global tariffs from 10% to 15%, after the Supreme Court ruled against the President’s earlier trade levies. This suggests that the tariff narrative is back, which could have consequences for financial markets as we move through Q1.

Trump’s latest move on tariffs triggers confusion, but no major selloff

European stocks are little changed this morning, suggesting that investors have paused before making decisions about what these threatened tariffs mean for risky assets. For example, although the President said on Saturday that the tariffs would take effect immediately, it is unclear if the new levies are official, and there is some confusion around this. To try and get around the Supreme Court, the President said that he would impose tariffs under Section 122 of the Trade Act, however, this only allows him to collect tariffs for 150 days. After this he would need Congressional approval, right before the November mid-terms.

There are two factors that investors need to think about right now: will there be a wave of corporate refunds now that the previous tariffs have been ruled illegal, which could be positive for stocks, or will the new tariffs counteract this? Right now, we have no answer to these questions, so stocks are not moving, especially in Europe.

Is the Sell America trade back?

The market reaction so far is mixed, European stocks are mostly unchanged; however, US stock futures are pointing to slightly larger declines when US markets open later today. This suggests that, at the margin, these new tariffs, are fueling the sell-America trade, and we could see more European outperformance vs. US stocks in the coming weeks. This comes after European stocks easily outpaced their US counterparts last week.

The dollar is weakening on a broad basis on Monday and is the second weakest currency in the G10 FX space, which adds to the theory that more tariff drama could fuel the de-dollarization trade. The gold price is higher, and is up by more than $40 today, as gold and bonds see some haven inflows.

Tarriff confusion could weigh on euro

The sell-off in the dollar and stocks is not a rout at this stage, but it is worth watching closely, and risk sentiment could be impacted as more details about the tariffs and how they will be implemented come out this week. The EU has said that it is stepping back from its trade agreement with the US, but that will increase the uncertainty about the future of EU/US tariffs and it may not result in a more favourable tariff outcome for the continent.

EUR/USD is above the $1.18 handle this morning, and is one of the top performers in the G10 FX space at the start of this week, however, it is still only barely eking out a gain vs, the USD so far this month, and with tariff uncertainty set to make a comeback, the euro could still be vulnerable as we move through to the end of this month.

US indices trail global peers for February

As we move to the last trading week of the month, US indices are trailing their European counterparts, after a bruising month, that has been categorized by broad US stock sell offs spurred by fears about the latest AI tools.

The Nasdaq is still in the red for the year so far, as the US tech index is a major global underperformer. The Nasdaq is having a repeat of 2025, when the index had its worst start to the year in two decades. In 2022, the index sold off sharply and fell 33% for the full year. It substantially underperformed the S&P 500, and other European indices.

The top global performer this year is Japan’s Nikkei, as it gets a boost from its pro-growth government, who is planning to stimulate the Japanese economy and call for further interest rate cuts. The last time the Nikkei outperformed the Nasdaq was in 2022, so there could be a link between Nasdaq underperformance and Nikkei outperformance, which we will watch closely. Of course, Japan is a major exporter, and the US is an important trading partner for Japan. The latest tariff news could disrupt the Nikkei’s good run, the index was down more than 1% this morning.

What to watch for in the coming week

Looking ahead, the focus is likely to be Nvidia’s results and President Trump’s State of the Union address this week, along with some economic data, including durable goods orders in the US.

Nvidia to remain top of the Mag 7 pack

Nvidia releases its results for last quarter on 25^th February, after the market closes. The market is expecting another monster report, as Nvidia continues to benefit from AI hyper scalers and their extended capex spending binge. Revenues are expected to come in at $65.8bn, with net income at $37.4bn. This is a significant uplift from the $57bn revenue reported for the prior quarter.

GB 200 shipments are expected to boost sales, and although China sales are still effectively offline, sovereign demand for Nvidia chips and non-cloud service providers are expected to provide healthy income streams. Gross margin could exceed estimates, the market expects 75% in gross margin for last quarter, up from 73.4%, and the outlook is also expected to remain strong.

The continued spend from the AI hyperscalers, and the increased uptake of AI tools, should reinforce a positive outlook for Nvidia’s future revenues, and this could support its share price. Nvidia’s share price is flat YTD, but it is higher by 6% in the past month and it is outperforming the major US indices. Along with Apple, it is the top performer in the Magnificent 7, and we expect this to continue, as other members of the Mag 7 could  come under sustained pressure in the foreseeable future.

State of the Union address

President Trump will deliver his second State of the Union address for this Presidency on Tuesday. He is likely to spend the majority of time listing his achievements including on GDP and the reduction in inflation. However, there could be some market moving themes in his speech too. His trade policy and his plans for future tariffs are worth watching, as is any mention of the ‘Donroe Doctrine’ and updates on Nato Arctic security deals, and the prospect of US intervention in Iran.

Any sign that the President is readying another strike on Iran could trigger a major spike in the oil price. The price of Brent crude oil is already above $71 per barrel, although it is falling back on Monday after a relatively quiet weekend for updates on Trump’s plans for Iran.

Thus, after a period when fundamentals and economic data have moved financial markets, geopolitics could be back in focus this week.