The strong rebound in European stocks was fueled by impressive earnings in the luxury sector. Meanwhile, across the Atlantic, America’s leading tech stocks weighed on the broader market following the release of China’s DeepSeek R1 AI model. However, stronger-than-expected US economic growth, coupled with policy uncertainty, has strengthened the dollar and pushed bond yields higher.

China reported a GDP growth of 5% for 2024, aligning with Beijing’s target. December’s industrial production and retail sales exceeded expectations, yet China’s economic outlook remains uncertain due to the risk of US-imposed tariffs.

The Federal Reserve maintained interest rates at 4.25%–4.5%, pausing further cuts to evaluate inflation trends and economic conditions. This unanimous decision follows a full percentage point reduction since the US began easing monetary policy in September. Notably, the Fed’s statement adopted a more hawkish tone, removing previous references to inflation progress and instead describing it as “somewhat elevated,” while also noting that unemployment has “stabilized at a low level.” These adjustments suggest potential delays in future rate cuts.

In the Eurozone, weak inflation and slowing growth justified a 25-basis-point rate cut, with additional reductions expected in the coming months. However, as the European Central Bank nears a neutral policy stance, future rate decisions could become more contentious.

Meanwhile, Donald Trump returns to the White House with tariffs as a key priority. He acknowledges that Americans may face short-term economic discomfort but believes the long-term benefits will outweigh the immediate challenges. The administration is prioritizing an “America First” approach, emphasizing self-sufficiency and boosting domestic manufacturing.