Market Update – 26th February 2025.

This week has been relatively quiet for financial markets, but there are signs of renewed momentum in Europe’s luxury goods sector which, after a period of sluggish performance, appears to be enjoying moderate revival. Hermès and Cartier, two of the biggest names in luxury retail, reported strong earnings this month, signalling a potential turnaround. Economists suggest that this means the worst may be behind us, with robust demand from US and European consumers driving recovery.

However, Chinese consumers—long the backbone of the luxury sector—remain a key uncertainty. While Western demand is fuelling growth, analysts are closely monitoring the impact of US tariffs and economic headwinds on Chinese spending. If higher costs trickle down to consumers, a full return to pre-pandemic spending levels could take longer—a challenge not just for China, but for shoppers worldwide.

Meanwhile, data on Tuesday revealed that Germany’s economy shrunk by 0.2% in Q4 2024, confirming earlier estimates, as exports plunged 2.2%—the steepest drop since mid-2020. While GDP saw a modest 0.1% rise in Q3, the full-year decline of 0.2% marks the second straight year of contraction. Rising energy costs, foreign competition, high interest rates, and mounting economic uncertainty continue to drag down Europe’s largest economy, raising concerns about its recovery path.

The data was published shortly off the back of the preliminary results of the snap election in Germany this month. The CDU is expected to win 208 seats in the German Parliament, based on provisional results from the German election held on February 23, 2025. Although this would make the CDU the biggest party, they would still have too few seats to form a government and would therefore have to enter into a coalition with one or more of the other parties. Both the Euro and German stock markets are likely to see positive momentum in the short term amid election optimism.

The ‘my wealth invest’ app will be available to clients who hold investments with my wealth, which is a trading name of Wealth at Work Limited, part of the Wealth at Work group.

In the US, a new administration is prioritising retaining jobs on American soil and reducing bureaucracy to support domestic businesses. However, on Tuesday, the Conference Board’s consumer confidence index fell to 98.3 in February from 105.3 in January. While views on current business conditions improved slightly, perceptions of the labour market weakened, and pessimism about future business conditions, income prospects, and employment opportunities reached a 10-month high.

Investors are also closely watching developments on President Trump’s latest proposed tariffs. On Monday, Trump announced that tariffs on Canada and Mexico will take effect next month, following a brief suspension, as part of his broader efforts to counter what he views as unfair import taxes from other countries, which he argues have harmed US manufacturing jobs.

Still to come this week, tech-chip giant Nvidia is set to release its earnings report, with investors watching closely to see if its remarkable growth streak continues. The company has consistently outperformed expectations, exceeding consensus estimates by an average of $1.8 billion over the past five quarters. Market participants are particularly eager to gauge revenue from Nvidia’s Blackwell chips, amid growing concerns over how US tariff threats and export controls could impact its future prospects.

Also to come this week we have US GDP and PCE data, Tokyo CPI and Japan’s retail sales data, and China’s PMI data.

Nicola Tune, Portfolio Specialist

The latest market updates are brought to you by Investment Managers & Analysts at Wealth at Work Limited which is a member of the Wealth at Work group of companies.

Links to websites external to those of Wealth at Work Limited (also referred to here as 'we', 'us', 'our' 'ours') will usually contain some content that is not written by us and over which we have no authority and which we do not endorse. Any hyperlinks or references to third party websites are provided for your convenience only. Therefore please be aware that we do not accept responsibility for the content of any third party site(s) except content that is specifically attributed to us or our employees and where we are the authors of such content. Further, we accept no responsibility for any malicious codes (or their consequences) of external sites. Nor do we endorse any organisation or publication to which we link and make no representations about them.