Fed Holds Rates, Adjusts Growth and Inflation Forecasts
Financial markets experienced continued volatility last week as the Federal Reserve kept interest rates steady at 4.25%–4.5%, maintaining a cautious policy stance amid a backdrop of slowing economic growth and trade uncertainty. While the Fed continues to project two rate cuts in both 2025 and 2026, it downgraded its 2025 growth estimate to 1.7% and increased inflation projections slightly.
In a key policy adjustment, the Fed announced it would slow the pace of its balance sheet reduction starting in April, reducing the speed at which Treasury holdings are run off. This move is expected to ease financial conditions. Despite these adjustments, the Fed’s policy remains restrictive and is expected to stay on hold until more clarity is obtained regarding upcoming trade tariffs, which are anticipated to be detailed in early April.
Global Market Performance Mixed as Trade and Policy Uncertainty Lingers
Equities and Bonds Overview
Markets globally showed a mixed performance, with international equities and bonds outperforming U.S. stocks. European markets saw gains driven by increased infrastructure and defence spending, while Chinese equities rebounded on expectations of further stimulus.
In the U.S., Treasury yields declined in response to lower growth expectations, boosting bond prices. This benefited investment-grade and emerging-market debt, which delivered strong returns. Economic data revealed a cooling but resilient economy, with steady job growth and a surge in manufacturing output. However, uncertainty around tariffs continues to cloud the outlook.
While lower interest rates and supportive policy shifts could bring some market stability later this year, current volatility is likely to persist due to trade and monetary policy concerns.
Market and Economic Update: Regional Movements and Investor Sentiment
Asian Markets
Asian equities traded in a tight range on Monday as investors digested the impact of softened U.S. trade tariffs. Meanwhile, Japanese markets declined following weak business activity data. In contrast, Chinese shares rebounded on growing optimism around domestic AI developments, with Ant Group reportedly using locally produced chips to develop cost-effective AI training techniques.
U.S. Market Outlook
U.S. equity futures signalled a positive start to the week, with S&P 500 and Nasdaq 100 futures up 0.6% and 0.8%, respectively. Investor attention remained focused on upcoming economic data and Donald Trump’s proposed tariff hikes. Meanwhile, Treasury yields held steady, and equity markets remained cautious due to persistent trade uncertainty after a volatile start to the year.
European Equities
European equities declined on Friday, with the STOXX 600 falling 0.6%, marking the third straight day of losses. The UK’s FTSE 100 also came under pressure, partly due to a fire-related closure at Heathrow Airport. The travel and leisure sector saw notable losses, with IAG, Lufthansa, and Ryanair all trading lower. Basic resource miners and industrials also posted declines. However, Germany’s market gained 0.5% on the week, supported by the approval of major economic reforms.
Currency and Commodity Markets
U.S. Dollar Performance
The U.S. dollar hovered just below a three-week high on Monday, with traders awaiting more detail on Trump’s tariff proposals. The euro rose 0.24% to $1.0836, rebounding after recent declines, while sterling edged up 0.15% to $1.2934. Despite earlier weakness this year, expectations of higher tariffs and slower U.S. growth have lent some support to the dollar, although its performance has remained mixed against other major currencies.
Oil Market Developments
Oil prices dipped overnight as investors assessed the impact of potential Russia-Ukraine ceasefire talks, which could increase the supply of Russian oil. These developments came alongside OPEC+ production plans. Additionally, new U.S. sanctions on Iran introduced fresh supply-side concerns, while the broader outlook remained uncertain amid expectations of increased exports and mixed demand signals.
Equities on the Move: Company News and Analyst Ratings
Several high-profile companies experienced notable share price changes last week due to analyst actions, quarterly results, or other news:
Ant Group
Ant Group, backed by Jack Ma, has reportedly developed less costly AI training methods using Chinese-made semiconductors, potentially reducing training costs by up to 20%. The company is also continuing to explore alternatives to Nvidia chips. These developments reflect China’s push for AI self-sufficiency amid U.S. chip restrictions, which have contributed to a rally in Chinese equities during 2025.
Boeing
President Donald Trump awarded Boeing a $20 billion contract to build the U.S. Air Force’s next-generation F-47 fighter jet, replacing the F-22 Raptor. This announcement gave Boeing’s stock a significant boost, while Lockheed Martin, a competitor for the deal, faced a setback.
Tesla
Tesla plans to produce 5,000 units of its Optimus humanoid robot in 2025, integrating its self-driving technology into development. CEO Elon Musk encouraged employees to retain their shares during a recent all-hands meeting, and highlighted plans to scale production to 50,000 units by 2026.
Johnson & Johnson
Johnson & Johnson announced plans to invest over $55 billion in the U.S. over the next four years. The investment includes building a biologics manufacturing facility in North Carolina, aimed at creating thousands of jobs, supporting R&D, and boosting production of next-gen medicines.
Carnival Corporation
Carnival Corporation reported better-than-expected Q1 earnings and revenue, supported by strong demand and higher onboard spending. The company reported adjusted EPS of $0.13 and record revenue of $5.81 billion. Despite raising its full-year earnings outlook, shares fell by over 1%. Carnival expects a 30% increase in adjusted net income for 2025, driven by continued growth in ticket prices and onboard sales.
Nio
Nio shares fell by 4.5% on Friday after the company posted a larger-than-expected Q4 loss and issued disappointing guidance for the current quarter. The company’s revenue missed analyst expectations, and its first-quarter delivery forecast came in below estimates, raising concerns about its future performance, despite strong vehicle sales in 2024.
Analyst Actions
Sanofi: Initiated with a “neutral” rating by Goldman Sachs and a price target of €120, citing strong long-term potential but highlighting dependency on successful pipeline developments, especially itepekimab and tolebrutinib, to offset the loss of Dupixent patent exclusivity in 2031.
Airbus: Upgraded from “sell” to “hold” by Berenberg, following revised earnings estimates. The bank remains cautious on Airbus’s reliance on end-of-year deliveries and production targets.
L’Oréal: Upgraded to “outperform” by RBC Capital Markets, pointing to growth in hair and skincare, as well as increased R&D spending and strong e-commerce momentum.
Mercedes-Benz Group: Barclays raised its rating to “Equal Weight” from “Underweight” after stronger-than-expected Q4 results, improved product mix, and cost control measures. Price target raised to €57.5, but tariff risks remain a concern.
Norwegian Cruise Line Holdings: Upgraded to Equal-Weight from Underweight by Morgan Stanley, which cited a more balanced risk-reward outlook after recent underperformance.
Super Micro Computer: Upgraded to “Neutral” from “Underweight” by JPMorgan, highlighting strong server demand, higher average selling prices, and forecasting significant revenue growth. However, the firm cautioned about potential margin pressures and working capital risks in FY26, which could limit earnings growth. Price target raised to $45 for December 2025.
FedEx: Downgraded to “Sell” from “Hold” by Loop Capital, due to fears over U.S. tariffs and rising recession risks. The firm reduced its price target to $221 from $283, following weaker-than-expected fiscal Q4 guidance and a revised earnings outlook.
Upcoming Data and Economic Events
In the coming week, market participants will focus on a range of important economic indicators, including:
- U.S. personal income and spending
- PCE price indices
- Q4 U.S. GDP
- March PMI data for the UK, France, Germany, and the Euro Area
- Inflation data from the UK, France, and Spain
- Updates on Germany’s unemployment rate and IFO business climate index
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