This report is from today’s TNC’s Daily Open, our international markets update. TNC Daily Open keeps investors informed on everything they need to know, no matter where they are.
Investor enthusiasm that fueled the stock market in late 2024—driven by expectations of favorable policies under U.S. President Donald Trump and the AI boom—appears to be cooling in early 2025. The once-unshakable confidence in both factors has given way to growing uncertainty.
The announcement of new tariffs on steel and aluminum imports, alongside Trump’s warning of potential reciprocal trade measures, has unsettled investors. Stocks hit following his remarks, reflecting concerns over heightened trade tensions. Similarly, the artificial intelligence sector, which propelled market gains last year, now faces scrutiny as questions arise about the sustainability of massive spending on the space.
What To Note Today
Trump’s Steel and Aluminum Tariffs Spark Sell-Off
Trump has confirmed plans to impose an additional 25% tariff on all steel and aluminum imports, which will be formally announced on Monday. This decision adds to existing duties and shifts toward more aggressive trade policies. While aimed at protecting domestic manufacturers, the move raises concerns about potential retaliatory measures from key trade partners, including Canada, Mexico, and Japan.
During a joint press conference with Japanese Prime Minister Shigeru Ishiba, Trump revealed that Nippon Steel will invest in U.S. Steel but not be allowed to take a controlling stake, reinforcing his administration’s push for economic nationalism.
China’s Economy Sends Mixed Signals
China’s economic landscape remains uncertain. In January, consumer prices rose 0.5% year-over-year, marking an uptick from December’s 0.1% increase. However, producer prices declined for the 28th month, falling by 2.3%. The disparity reflects ongoing deflationary pressures despite government efforts to stabilize demand.
Meanwhile, China’s electric vehicle market is experiencing aggressive pricing competition. Automakers are rolling out discounts and interest-free loan offers to stimulate sluggish sales amid a fiercely competitive industry.
U.S. Job Growth Slows, But Wages Rise
The U.S. labor market slowed in January, with employers adding 143,000 jobs—well below the revised 307,000 figure from December and missing the 169,000 estimate. However, the unemployment rate dipped to 4% from 4.1%, and wage growth outpaced expectations at 0.5% for the month. The stronger-than-anticipated wage data could influence Federal Reserve decisions on interest rates.
Markets React: U.S. Stocks Decline, Asia Gains
U.S. stocks ended last week on a downbeat note, with the S&P 500 dropping 0.95%, the Dow Jones Industrial Average slipping 0.99%, and the Nasdaq Composite falling 1.36%. The decline followed Trump’s tariff announcement, which rattled investor confidence.
In contrast, Asian markets opened the week on a positive note. Hong Kong’s Hang Seng Index gained 1.8%, while Singapore’s Straits Times Index hit an all-time high, driven by a strong performance from DBS Group Holdings.
AI Spending Continues Despite Cost Concerns
Despite questions surrounding AI’s cost efficiency, major tech firms are pushing ahead with massive investments. SoftBank is reportedly close to finalizing a $40 billion investment in OpenAI at a $260 billion valuation. Meanwhile, Meta, Amazon, Alphabet, and Microsoft plan to spend over $320 billion on AI and data centers.
Google DeepMind CEO Demis Hassabis weighed in on the competitive landscape, acknowledging DeepSeek’s progress in China but downplaying its scientific breakthroughs.
Looking Ahead: Inflation Data in Focus
Investors are bracing for key economic reports this week. The consumer and producer price indexes for January are set for release on Wednesday and Thursday, respectively. Combined with the latest jobs data, these inflation indicators will likely shape market sentiment and influence the Federal Reserve’s policy direction.
Bottom Line
Investor optimism surrounding Trump and AI, once a key driver of market momentum, is giving way to caution. Rising trade tensions and uncertainty over AI investment returns are fueling volatility. As markets adjust to shifting economic dynamics, upcoming inflation data and policy developments will be critical in determining the market’s next direction.
