The Davy Digest - 3rd March 2025

Trump and his tariffs continued to dominate headlines in the US and Europe last week, as he hosted Emmanuel Macron, Keir Starmer, and Volodymyr Zelenskyy in the White House. Europe was the subject of the latest round of trade threats, with Trump threatening to impose tariffs of 25% on European auto imports.  Despite this, European equities continued to outperform their American peers. Monday’s German election results boosted markets in Europe, as the prospect of fiscal reform under the CDU came closer to reality. For US equities, Nvidia’s earnings release was the week’s main event. Despite growing net income by 80% from a year earlier, the stock fell by over 8% following the report. The broader US market did not fare much better, with the S&P 500 falling 1% in dollar terms over the week.

Last week's highlights

	Q4 Gross Domestic Product (27/02) – Growth slowed to 2.3%, as expected Personal Consumption Expenditures (28/02) – Fell to 2.5% year-on-year, in line with consensus
	Eurozone Economic Sentiment Indicator (27/02) – Increased to 96.3, above consensus Germany Retail Sales (28/02) – Improved to 2.9% year-on-year during January
	Bank of England Dhingra speech (26/02)
	Tokyo Consumer Price Index (27/02) – Slowed to 2.9% year-on-year, remains above target China NBS Manufacturing PMI (01/03) –  Increased to 50.2 (vs 49.9 expected), back into expansionary territory

This week, the European Central Bank will be meeting and are expected to deliver another 25 basis point rate cut. Preliminary February inflation data for the Eurozone will also be released on Monday. Elsewhere, in the US, employment data and Purchasing Manager Index (PMI) surveys for February will be released.

What's on the radar

	ISM Manufacturing PMI (03/03) ISM Services PMI (05/03) Nonfarm Payrolls (07/03)
	Inflation (HICP) (03/03) HCOB Composite PMI (05/03) European Central Bank meeting (06/03)
	China Caixin Manufacturing PMI (03/03) China Caixin Services PMI (05/03)

Chart of the moment

Who let the DOGE out?

Source: Bloomberg as of 28/02/2025 

• The side effects of Elon Musk’s Department of Government Efficiency (DOGE) are beginning to materialise in US unemployment data.
• In Washington DC – where about 20% of the federal workforce is situated – the number of first-time applicants for unemployment benefits has surged since the start of the year.
• So far, there have been redundancies across a number of US government organisations, including the departments of defence, education, and health.
• Although these job cuts may help to curtail rampant federal spending, the ultimate knock-on effects of DOGE’s actions on the broader US economy remain to be seen.