News Recap • Week 5 2025

This has been one of the busiest weeks in a while for the financial markets. Donald Trump, central bank policy, economic growth, and inflation data were all in the headlines.

The DeepSeek launch that caused a 17% crash in Nvidia and made investors question the entire AI trade feels like ages ago. And yet, that all happened on Monday. I wrote about it here if you’re interested in a slightly deeper dive.

And all of this happened in the peak of earnings season. Apple, Microsoft, Meta, and Tesla all reported this week along with Starbucks, Visa, Intel, and many others. I made a quick recap of this week’s earnings here.

For all the other main headlines, keep reading.

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US and EU rate decisions

The US Federal Reserve held interest rates unchanged on Wednesday. The decision was fully expected and priced in by the market, so the more interest aspect was Fed chair Jerome Powell’s press conference afterward. He managed to keep his remarks very neutral, causing risk assets to stay rather flat through Wednesday and Thursday.

The decision reflects the general state of the US economy: Strong and stable. Unemployment remains low at 4.1%, the economy grew at a solid 2.8% pace in 2024, and inflation is has been ranging between 2 and 3% for months.

There’s no strong case for the Fed to move rates in either direction. No need to stimulate the economy with lower rates. No need to combat inflation with higher rates.

The same can’t be said about the situation in Europe. The day after the Fed’s decision, the European Central Bank delivered a 25 basispoint rate cut as expected. This brought down the key rate from 3% to 2.75%. It was the fifth rate cut since the central bank began easing its monetary policy in June last year.

ECB President Christine Lagarde said that the euro area economy “is set to remain weak in the near term.” This also puts the ECB in a different situation than the Fed, opening the door for more rate cuts to come in Europe.

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The Trump tariff bomb

Donald Trump on Friday announced a 25% tariff on imports from Canada and Mexico, and a 10% duty on China. Energy resources from Canada will be spared with just a 10% tariff to “minimize any disruptive effects we might have on gasoline and home heating oil prices” according to a senior administration official.

The tariffs took effect on Saturday and are meant as retaliation for the illegal fentanyl that’s been coming across the border into the US. Canada quickly clapped back with a 25% tariff on a wide range of imports from the US. Mexico has promised to retaliate as well.

Equity markets in all involved countries felt the pain immediately. The IPC Mexico index dropped 1.62% on Friday while the Canadian S&P/TSX Composite fell 1.07%. US markets gave up early gains to close the day in negative territory. The conflict escalated further over the weekend and fears over an outright trade war between the US and various other nations are rising. We could be in for some rough weeks in the markets.

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In other news

Macro

• The US economy grew at an annualized rate of 2.3% in Q4 of last year, less than the 2.6% forecast. GDP growth for all of 2024 landed at 2.8%, slightly below the 2.9% pace in 2023. Slower economic growth increases the likelihood of more rate cuts to come, which may be why the market moved slightly higher after the news.
• The Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditure price index, came in line with expectations. The headline number rose 2.8% annually while core inflation hit 2.6%. Inflation ticked up from the previous data in November but is still relatively close to the Fed’s 2% target. The market reaction was muted, unsurprisingly.
• The eurozone economy flatlined in Q4 and missed expectations for a slight expansion. This came after larger-than-expected 0.4% growth in Q3.
• Germany’s economy contracted by 0.2% in Q4. Economists had expected a 0.1% decline.
• Similarly, France’s economy shrank by 0.1% while consensus was for GDP to flatline.
• Inflation in Germany held steady at 2.8%, in line with expectations.
• Bank of Japan Governor Kazuo Ueda said on Friday that the central bank must maintain an accommodative monetary policy to support economic growth. Investors will likely appreciate a dovish approach from the BoJ who’s been causing some market jitters lately.
• Scott Bessent was confirmed as new Treasury secretary after a 68-29 vote in the Senate.
• Colombia was hit with a 25% tariff from the US but quickly complied with Trump’s demands for them to accepts a military aircraft carrying deported migrants.

Other

• DeepSeek launched a new AI model, seemingly outperforming ChatGPT and all the other existing players with a lot less resources. This made investors question the prospects for Nvidia to sell as many chips as projected, causing a bit of a crash in the US market. Nvidia plummeted 17% on Monday and lost $600 billion in market cap, the largest one-day loss in history for any US stock.
• Even Donald Trump took note of the DeepSeek launch, saying it ‘should be a wake-up call’ for American tech companies.
• On the bright side, many investors and analysts are pointing to the advancement in AI as a possible benefit to a vast range of other companies. Cheaper access to the technology will enable a lot more businesses to be more productive and improve their products and services.
• Alibaba released a new version of its own AI model Qwen 2.5, claiming it surpassed DeepSeek V3.
• Apple has been working with SpaceX and T-Mobile to support Starlink satellite network on iPhone.
• Norway’s sovereign wealth fund reported a record $222 billion profit in 2024.
• The US Navy told all its members to avoid using DeepSeek due to ‘security and ethical concerns’.
• The FDA approved Novo Nordisk’s Ozempic for treatment of chronic kidney disease in patients with diabetes.
• X (formerly Twitter) announced a partnership with Visa, paving the way for integration of financial services to be directly integrated into the platform.
• Microsoft is reportedly considering a bid to buy TikTok’s US operations.
• Voice AI startup ElevenLabs raised $180 million at a $3.3 billion valuation in its series C funding round. The round was co-led by Andreessen Horowitz and Iconiq Growth.
• OpenAI is in talks to raise another $40 billion at a $340 billion valuation. SoftBank would reportedly be leading the round with a contribution between $15 and $25 billion.
• Global arabica coffee prices hit an all-time high this week, mainly due to supply constraints in Brazil.
• Trump Media announced plans to expand into financial services including crypto and ETFs. Shares rallied 6.76% after the news.

Crypto

• India will review its (negative) stance on crypto due to shifting attitudes towards the asset class in other countries. Officials didn’t directly cite the US and Donald Trump’s embrace of crypto, but many assume this is what India is indirectly referring to.