US stocks declined on Friday as investors responded to the potential for additional tariffs from the Trump administration, while also processing a surge in inflation expectations and a jobs report. The S&P 500 and Nasdaq lost 0.9% and 1.3%, respectively, while the Dow Jones dropped 443 points. Markets took a sharp downturn after reports suggested President Trump was considering reciprocal tariffs, which could lead to higher rates on US trading partners. Adding to investor anxiety, the University of Michigan’s consumer sentiment report revealed that one-year inflation expectations surged to 4.3%, the highest since November 2023. Meanwhile, the January jobs report showed the US economy added 143K jobs, slightly below expectations, but the unemployment rate ticked down to 4.0%. Amazon shares slumped 4% after issuing weak revenue guidance, overshadowing its strong quarterly earnings. For the week, the S&P 500 and Nasdaq added 1.5% each, the Dow gained 0.8%.
The Nikkei 225 Index fell 0.72% to close at 38,787 while the broader Topix Index lost 0.54% to 2,737 on Friday, with Japanese shares breaking three straight days of gains as a strong rebound in domestic personal spending reinforced a hawkish outlook on Bank of Japan monetary policy. Household spending in Japan rose by 2.7% year-on-year in real terms, marking the first increase in five months and significantly surpassing the forecasted 0.2% gain. The BOJ has emphasized its desire for a "virtuous cycle" of rising prices and wages to support further interest rate hikes. Among the notable decliners were key index stocks such as Lasertec (-2.9%), Toyota Motor (-2.6%), and IHI Corp (-8.2%). Tokyo Electron also slid 3.9% after reaffirming its expansion plans, despite concerns over the sustainability of its AI spending amid intensifying competition.
The Sensex failed to hold onto early gains to close slightly about 0.3% down at 77,860 on Friday, marking the third straight session of decreases, as investors engaged in profit-taking amid an anticipated RBI's rate cut and foreign fund outflows. The Reserve Bank of India slashed the repo rate by 25bps to 6.25% to support growth, marking the first reduction in almost five years, and opted for a "neutral stance", although some investors had anticipated a further liquidity boost through a reduction in the banks' cash reserve ratio (CRR). Financials and state-owned companies dragged the index down. In the meantime, ITC dipped over 2% after the diversified entity reported a 7.3% decline in consolidated net profit for the December quarter on account of subdued demand and sharp escalation in input costs. For the week, the index added 0.5%, marking the second straight weekly rise, supported by a personal tax reduction plan in the Union Budget to boost domestic demand.
The FTSE 100 edged lower on Friday after hitting a record high the previous day but still posted a weekly gain, supported by the Bank of England’s rate cut. Marks & Spencer fell over 2% after announcing the departure of Richard Price, its clothing, home, and beauty chief. Homebuilder stocks dropped more than 3% following Halifax data showing UK house prices rose 0.7% in January, exceeding forecasts of 0.2%. Meanwhile, Legal & General advanced after selling its US protection business to Japan’s Meiji Yasuda in a $2.3 billion deal, with Meiji acquiring a 5% stake in L&G. On the policy front, BoE Chief Economist Huw Pill said inflation is expected to rise this year but is unlikely to trigger second-round effects, though strong wage growth remains a concern for future rate cuts. In the US, steady but slowing US job growth and rising inflation expectations suggest the Federal Reserve will keep interest rates unchanged.
