Stocks Rally, Bitcoin Struggles, and Gold Gains as Economic Uncertainty Looms | Weekly Market Analysis

Key events this week:

Monday, March 3, 2025

• Eurozone - CPI (YoY) (Feb)
• USA - S&P Global Manufacturing PMI (Feb)
• USA - ISM Manufacturing PMI (Feb)
• USA - ISM Manufacturing Prices (Feb)

Wednesday, March 5, 2025

• USA - ADP Nonfarm Employment Change (Feb)
• USA - S&P Global Services PMI (Feb)
• USA - ISM Non-Manufacturing PMI (Feb)
• USA - ISM Non-Manufacturing Prices (Feb)
• USA - Crude Oil Inventories

Thursday, March 6, 2025

• Eurozone - Deposit Facility Rate (Mar)
• Eurozone - ECB Interest Rate Decision (Mar)
• USA - Initial Jobless Claims
• Eurozone - ECB Press Conference

Friday, March 7, 2025

• USA - Average Hourly Earnings (MoM) (Feb)
• USA - Nonfarm Payrolls (Feb)
• USA - Unemployment Rate (Feb)
• USA - Fed Monetary Policy Report USA - Fed Chair Powell Speaks

US stocks closed sharply higher on Friday, shaking off early volatility triggered by escalating geopolitical tensions. The meeting between President Donald Trump and Ukrainian President Volodymyr Zelenskyy briefly rattled investor sentiment, but markets rebounded as traders refocused on economic data and corporate earnings. The S&P 500 climbed 1.5%, while the Nasdaq Composite gained 1.6%. The Dow Jones Industrial Average surged 600 points, or 1.4%, as investors shrugged off initial concerns and rotated back into equities.

Meanwhile, Bitcoin struggled to maintain stability, paring some losses but still heading for a steep monthly decline. Market sentiment remained cautious as concerns over US trade policy weighed on risk appetite. Cryptocurrency-related stocks also declined as traders assessed the broader impact of potential regulatory changes. Bitcoin initially surged following Trump’s election victory in November, driven by optimism that his administration would introduce more favorable policies for digital assets. However, expectations for immediate regulatory shifts have faded, while uncertainty over trade tariffs has further pressured speculative investments. As a result, Bitcoin is set to drop more than 17% in February, according to data from CoinMarketCap.

The Australian Dollar rebounded on Monday, snapping a six-day losing streak as a weaker US Dollar provided some relief. The greenback came under pressure following the release of January’s Personal Consumption Expenditures inflation data, which aligned with expectations and tempered concerns about inflationary surprises. The PCE Price Index increased by 0.3% for the month, maintaining the same pace as December’s rise - the largest since April 2024. On an annual basis, PCE inflation moderated slightly to 2.5% from 2.6%, in line with market projections. The core PCE measure, which strips out food and energy prices, cooled to 2.6% year-over-year from 2.9% in December.

In a surprising development, US consumer spending contracted by 0.2% in January, reversing from an upwardly revised 0.8% increase in December. Economists had expected spending to rise by 0.2%, making the decline a potential concern for policymakers evaluating the broader economic outlook. The unexpected dip in consumer spending, which accounts for a significant portion of US economic activity, added to the mixed signals facing the Federal Reserve as it assesses the path of interest rates in the months ahead.

In Australia, inflation data added to the narrative of a slowing price environment. The TD-MI Inflation Gauge fell 0.2% in February, reversing a 0.1% increase from January. This marked the first monthly decline since August and followed the Reserve Bank of Australia’s decision to lower its cash rate by 25 basis points to 4.1% in its first policy meeting of the year. Despite the monthly dip, the inflation gauge rose 2.2% year-over-year, slightly lower than the previous reading of 2.3%.

The Australian Dollar also found support from stronger-than-expected economic data from China, a key trading partner. The Caixin Manufacturing Purchasing Managers’ Index rose to 50.8 in February, up from 50.1 in January, surpassing market expectations of 50.3. The improvement in China’s manufacturing sector provided an additional boost to the AUD, reinforcing its recovery from recent lows.

The Japanese Yen maintained its strength against the US Dollar as investors anticipated further interest rate hikes from the Bank of Japan. Market participants have been pricing in a more hawkish stance from the BoJ, which has led to higher Japanese government bond yields and reinforced the yen’s position. The USD/JPY pair struggled to hold gains above the 151.00 level, with renewed dollar weakness limiting upside momentum.

Bank of Japan Governor Kazuo Ueda reiterated last week that ongoing uncertainty surrounding Trump’s tariff policies could influence the global economic outlook, requiring a careful approach to monetary policy. While this added a degree of caution to yen bulls, expectations of tighter monetary conditions in Japan continued to underpin the currency’s strength.

Gold prices saw renewed buying interest on Monday, bouncing off a three-week low near the $2,832 level reached on Friday. Investor sentiment remained cautious as market participants priced in the likelihood that the Federal Reserve will implement two 25-basis-point rate cuts before the end of the year. Weaker consumer sentiment data reinforced the case for a more accommodative policy stance, weighing on the US Dollar and supporting demand for non-yielding assets like gold.

Additionally, concerns over geopolitical risks and the potential economic fallout from Trump’s trade policies added to gold’s appeal as a safe-haven asset. However, broader market optimism and positive risk sentiment limited the metal’s upside momentum. Traders remained focused on key upcoming economic reports, including the US ISM Manufacturing PMI due later on Monday and the highly anticipated nonfarm payrolls report set for release on Friday.

As global markets continue to digest shifting economic data and political developments, investors are navigating a complex landscape marked by inflation trends, monetary policy expectations, and geopolitical risks. The interplay between these factors will likely shape market sentiment in the coming weeks, with volatility remaining a key theme across asset classes.