Trump Floats 25% Tariffs on Autos, Chips, Pharmaceuticals President provides further details about his expected tariff moves

Tariffs will be “in the neighborhood of 25%” on those industries and may increase over time, he told reporters at his Mar-a-Lago club in Florida. He added they would “go very substantially higher over the course of the year.”

Trump also said companies in the U.S. may be given a phase-in period on items they import, giving them time to move production to the U.S. He said he would allow “a little bit of a chance” to re-shore production, without providing details. (…)

Those tariffs could come on top of  the “reciprocal” tariff action that the Trump administration says will equalize U.S. tariffs with the duties and non-trade barriers charged by other countries.

The administration has said that action is likely after the completion of its trade policy review on April 1. (…)

Trump indicated that countries may be able to negotiate for lower tariffs, reiterating his claim that the European Union had agreed to reduce auto tariffs in response to his recent threats—an assertion the EU denies. (…)

It wasn’t immediately clear if new automotive tariffs would apply to all cars, or exempt those that comply with the U.S.-Mexico-Canada Agreement, the updated Nafta pact that Trump signed in 2020. The administration previously told U.S. automakers it would consider exemptions for those vehicles when Trump had threatened tariffs on Canada and Mexico earlier this month.

• Bloomberg:

New levies on automobiles would have sweeping effects on the industry. The roughly 8 million passenger cars and light trucks brought into the US last year accounted for about half of US vehicle sales. European carmakers including Volkswagen AG and Asian companies including Hyundai Motor Co. would be among the most affected.

Trump didn’t specify whether the measures would target specific countries or apply to all vehicles imported to the US. It’s also unclear whether cars made under a free trade agreement with Canada and Mexico would be spared from industry-specific duties, should they take effect. (…)

Globally, the countries most exposed to the most recent announcement include Mexico and South Korea, where exports of passenger cars to the US are equal to 2.4% and 1.8% of gross domestic product respectively, according to Bloomberg Economics. When it comes to chips, Malaysia and Singapore are among the most exposed.

Malaysia is the sixth largest exporter of semiconductors and exported a record 601 billion ringgit ($136 billion) of semiconductors in 2024. Trump’s announcement came only hours after Singapore Prime Minister Lawrence Wong announced plans to invest about S$1 billion ($744.8 million) for a new R&D semiconductor facility as part of his national budget. (…)

A new 25% tariff would equate to a third of Toyota’s fiscal 2025 profit guidance and nearly half of Honda’s, Bloomberg Intelligence research shows. (…)

The European Union’s top trade official is traveling to Washington this week to meet counterparts for a last-ditch effort to avoid getting hit by duties in April. Trump, however, has signaled there’s not much any one country can do to get out from the tariffs if he views the trading relationship as unbalanced. (…)

Altogether, Trump’s moves, if enacted, stand to remake supply chains and trade flows — and US prices. Tariffs are paid by importers and often passed onto consumers, though sometimes offset by price reductions abroad.

“It seems like no one is really getting through this unscathed,” said Katrina Ell, head of Asia Pacific economies at Moody’s Analytics. “I hope they’re using them as a negotiating tool. What we know from the past is that these tariffs don’t work as Trump wants them to work.”

Also from BB:

Trump has been demanding that the EU lower tariffs for US cars, which are currently at 10%, compared with the US’s 2.5% tariff level. But any such move would force the bloc to lower duties for all the World Trade Organization members.

The commission pointed out that the US imposes a 25% tariff on pickup trucks, which is the largest segment of the US auto market, around one-third of all vehicle sales.

The EU also pointed out that despite Trump’s complaints of a massive trade deficit with the EU, when both goods and services are factored in, the EU runs a “small” surplus with the US of €48 billion ($50.2 billion), or 3% of total US-EU trade. (…)

BTW:

The impact from tariffs will be much bigger for Japan’s auto sector compared to other industries, as car and car parts made up a little over a third of Japan’s exports to the US last year. There’s a good chance that Japanese automobiles will be targeted given Japan is among the top car exporters to the US.

That would be a hit to many workers in Japan, as auto-related companies including material providers employ 5.58 million people in the country, or 8.3% of the total workforce, according to the Japan Automobile Manufacturers Association.

Last year, auto exports accounted for 17% of all outbound shipments for Japan, with more than a third of them going to the US. That played a big role in keeping Japan’s trade surplus with the US at a high level, a fact that risks Trump’s ire as the president aims to use tariffs to lessen the US’s trade deficits and pressure other nations to build factories in the US.

Still, Japanese manufacturers already make more cars in the US than they export to the market from their home country, according to JAMA estimates. In 2023, Japanese carmakers made 3.3 million cars in the US, more than twice the 1.5 million cars they exported to the nation. (BB)

BYD’s strategy shift is bad news for global automakers The Chinese company is undercutting rivals by making advanced driver assistance systems a standard feature at no extra cost

(…) BYD, the world’s largest electric vehicle maker, is making advanced driver assistance systems a standard feature across most of its line-up — at no additional cost. (…) Tesla, for example, charges $8,000 for its driver assistance software in the US as of April. Mercedes-Benz and GM are among many carmakers banking on monetising assisted driving technology. (…)

In the UK, BYD outsold Tesla in January, with sales growing sixfold from the previous year, while Tesla’s fell 8 per cent. In Singapore, BYD has overtaken Toyota as the best-selling car brand in the city-state, a feat given this includes both EVs and petrol cars. In Brazil, the story is much the same with sales growing fourfold last year.

CNBC:

(…) BYD also said it was integrating artificial intelligence from Chinese startup DeepSeek into at least the most advanced version of the new driver-assistance system. Such systems use a combination of software, AI and cameras or other sensors to control a vehicle, minimizing the need for human intervention.

“The DeepSeek integration is very significant,” said Tu Le, founder and managing director of Sino Auto Insights, “because now there’s a homegrown standalone AI technology that BYD can work with to offer equivalent intelligent features offered by their competitors.”

Trump Proposals Would Cut German Growth, Bundesbank’s Nagel Says “A drastic policy shift in the U.S. would pose significant risks for economic growth in Germany,” Joachim Nagel said

(…) Taken together, tariff increases, tax relief, the consequences of a large-scale deportation of immigrants, as well as retaliatory tariffs and macroeconomic uncertainty, would mean economic output in 2027 would be almost 1.5 percentage points lower than forecast, Nagel said.

In its December forecasts, which didn’t take into account U.S. tariffs, the Bundesbank said the German economy would grow 0.9% in 2027. It also projected just 0.2% growth this year.

However, while new models showed that inflation could rise, how much remained uncertain. Nagel said that in the near term there is a good chance that it would fall back down to the 2% target of the European Central Bank.

How the EU Can Capitalize on America’s Economic Chaos By creating an alternative to Treasuries, the bloc could reap some of the immense financial benefits the US has long enjoyed.

(…) It’s hard to overstate the benefits the US has derived from its Founding Fathers’ decision, in the late 18th century, to grant its treasury the power to issue federal obligations and collect the taxes to pay them. Since then, US Treasury securities have become the haven where the world keeps its money. They form the foundation of America’s capital markets, facilitating investment in everything from infrastructure to artificial intelligence.

The new administration’s economic policies could well undermine that special status. Its ill-considered, chaotically imposed tariffs will fuel inflation and uncertainty, making Treasury securities a riskier proposition. If Congress makes the 2017 tax cuts permanent, the multitrillion-dollar debt issuance required to finance the yawning budget deficit will further burden a government-debt market that has already shown signs of strain. (…)

If some other entity could establish a high-quality, highly liquid safe asset to compete with Treasuries, it could reap some of the immense financial advantages the US has long enjoyed. Yet who has the necessary credibility, scale and capacity to absorb global capital?

That’s where the EU comes in. It needs to raise hundreds of billions of euros in the coming years to invest in EU-wide public goods, including stronger defenses against a belligerent Russia, better infrastructure and a greener economy. It also desperately needs a common safe asset to help unite its fragmented, underdeveloped capital markets. EU bonds, backed by the joint fiscal resources of its member states, could offer a solution to all these problems. (…)

Political obstacles abound. Northern member states, notably Germany, worry about free riding. The benefits of defense spending, for example, won’t necessarily be distributed equitably across EU members: Some are closer to Russia; some will receive more military orders than others. Such problems can be addressed by focusing any mutually financed investment on clearly EU-wide public goods (think air defense or combating climate change) and by forming different coalitions for different goals. Ideally, the EU would designate specific revenue for repayment — green-transition bonds, for instance, could be backed by proceeds from an expanded emissions-trading system.

The European Commission is supposed to propose a new long-term budget this year, which could be propitious timing. Europe’s leaders increasingly recognize that they can’t address their investment challenges without greater cooperation. If they can demonstrate the political will to raise the necessary public capital, private capital will follow. There may never be a better chance.

China’s holdings of US Treasuries fall to lowest level since 2009

(…) The decline in China’s holdings was likely to have been exaggerated by some assets being moved to securities depositaries such as Belgium-based Euroclear and Luxembourg-based Clearstream, added Setser, which would boost those countries’ holdings in the official data. (…)

Data from the World Gold Council showed China was the third-biggest buyer of gold in the final three months of 2024, adding 15.24 tonnes to its reserves. (…)

China New-Home Prices Barely Fall in Sign Market Stabilizing Prices of new homes in major cities fell 0.07% on month

New-home prices in 70 cities, excluding state-subsidized housing, fell 0.07% from December, when they declined 0.08%, National Bureau of Statistics figures showed Wednesday. Values of used homes, which are subject to less government intervention, fell 0.34%, compared with a 0.31% drop a month earlier. (…)

The slump eased on a year-on-year basis too. New-home prices fell 5.43% in January, compared with 5.73% in December, the statistics bureau said. Existing-home prices dropped 7.8%, versus 8.11% a month earlier. (…)

But figures from researcher China Real Estate Information Corp. showed residential sales resumed falling in January after being flat in December.

“Key indicators we are tracking do not yet point to a bottom in China’s property market,” Moody’s analysts led by Roy Zhang wrote in a report this week. “We continue to expect the value of contracted sales to decline in 2025, although at a slower pace.”

Reuters:

Local governments in many cities give developers unofficial guidance on how much they can adjust prices of new homes, making them an imperfect gauge of market demand.

Home prices in the secondary market have fallen 30% from their peak, according to Zhang Dawei, a property analyst at Centaline. In January, data showed year-on-year falls in existing home prices of 5.6%, 6.0%, and 8.2% in tier-one, tier-two, and tier-three cities, respectively.

Moody’s ratings estimates this week indicate that secondary market transactions of residential property, which made up 59% of all transactions in 2024, have significantly increased since 2022 and are expected to continue rising.

Official data from January showed unsold new homes totalled 390.88 million square metres in 2024, marking a 16.2% increase from the previous year. Furthermore, new construction starts, measured by floor area, plummeted 23.0% annually last year.

FYI, U.S. home prices dropped 27% from peak to trough over 6 years in 2006-212. In China, the peak was in mid-2021.

Inflation in Canada rises to 1.9%, with higher energy prices offsetting GST break

The Consumer Price Index rose 1.9 per cent in January year-over-year, up from 1.8 per cent in December, Statistics Canada reported Tuesday. It was the first acceleration in inflation in three months and matched analysts’ expectations. (…)

The central bank’s two preferred core inflation measures, which strip out volatile price movements, rose to an average of 2.7 per cent, up from 2.55 per cent in December. That suggests price pressures are building underneath the headline CPI number, which has been weighed down by the two-month GST/HST break that started in mid-December and ended Feb. 15.

(…) rent was up 6.3 per cent year-over-year, compared with 7.1 per cent the month before. (…)

US Factory Costs Jump Most in Two Years in New York Fed Survey

Measures of prices paid and received by producers both climbed for a second month in the New York Fed’s February manufacturing survey published Tuesday. The prices paid index jumped 11 points to 40.2, the highest in nearly two years. (…)

Overall, the headline business conditions index in the New York Fed’s February survey climbed 18 points to 5.7, while measures for firm optimism and future business activity both declined sharply.

The Empire manufacturing index rose by 18.3pt to 5.7. New orders jumped 20.0pt to 11.4 and shipments +15.9pt to 14.2.

“You [Zelensky] should have never started it” (Trump)

Retail sales dragged down by weather and LA fires

We thought a soft January retail sales report was likely given the cold weather and the Los Angeles fires, but it is worse than even our pessimistic forecasts.

Headline sales were down 0.9% month-on-month in nominal terms (consensus -0.2%) while the control group that excludes the volatile autos, food service, building materials and gasoline and supposedly better tracks broader consumer trends fell 0.8% (consensus +0.3%).

As these are nominal value changes and we know prices rose 0.5% MoM according to the CPI report, this implies very weak volume sales growth. It is the volume measure that feeds through into GDP growth.

Auto sales fell 2.8% MoM, largely because of a big unit volume drop, which we already knew about, while furniture dropped 1.7%, electronics fell 0.7%, health spending fell 0.3%, clothing down 1.2%, sporting goods dropped 4.6% and internet sales fell 1.9%.

Surprisingly, eating and drinking out actually rose 0.9% – we had expected this to drop because of very cold weather and there was a sense that the Los Angeles fires would also have a depressing effect, but somehow this was one of the very few sources of strength. (…)

Keep in mind that retail sales rose 7.4% annualized in Q4 after 5.4% in Q3. January’s softness is no big deal in this context.

On a YoY basis, sales were up 4.2% in January, the average of the last 3 months and up from 2.3% on average in the previous 3 months. Labor income (black) is up 5.0% in the last 3 months.

Bank of America data:

Consumer spending started 2025 on solid footing, following a strong end-of-year performance in 2024. Spending per household was up 1.9% year-over-year (YoY) in January, following the 2.2% YoY rise in December, according to Bank of America aggregated credit and debit card data. While on a seasonally-adjusted (SA) basis spending per household was down 0.4% month-over-month (MoM) in January, the three-month seasonally-adjusted annualized rate (SAAR) was up a solid 2.8%. (…)

According to Bank of America aggregated card data, the wintery weather in the South had the greatest impact on in-person retail spending throughout the region. While in-person retail spending growth in southern states was a full percentage point lower than the overall US, it appears many Southerners stayed at home and shopped online instead.

We’re Headed Toward a Landlord-Friendly Era. Expect Higher Rent Prices. Prospect of rising apartment rents could further stoke inflation and give the Fed another reason to pause

A spike in rents during the early years of the pandemic sparked a historic apartment construction boom in 2023 and 2024. That crush of new inventory, especially in hot Sunbelt markets like Austin and Phoenix, led to oversupply and caused rents to fall in much of the country.

But more people now are renting longer, as mortgage rates stay high and the costs of homeownership remain unaffordable for many Americans. Landlords say that the new construction pipeline should be mostly drained by year-end, setting the stage for rents to rise nationwide later this year. (…)

Rising rents would complicate the inflation picture and likely give the Federal Reserve another reason to pause on future rate cuts. Shelter costs account for roughly a third of the consumer-price index, which means that a significant portion of the overall inflation measure is attributed to housing costs. (…)

Shelter costs increased 4.4% in January from last year. That was the smallest annual uptick since January 2022, and well below the peak period of 2023, according to the Bureau of Labor Statistics.

Now, the looming prospect of higher rents could reverse that progress. Rents have already been on a steady climb in certain parts of the country where new supply has been more muted, such as the Midwest, Northeast and parts of the West Coast.

By the end of this year, every major metropolitan market is expected to see positive rent growth, said Jay Lybik, national director of multifamily analytics at CoStar.

President Trump’s policy mix, meanwhile, might slow the pace of new construction even further. Migrant deportations and threats to hit Canada and Mexico with tariffs would likely boost the cost of construction labor and materials as well as delay building timelines.

The U.S. depends on Canada and Mexico for roughly 25% of its building material imports, according to the National Association of Home Builders. And undocumented workers make up about 13% of the construction workforce. (…)

And demand for rentals is rising steadily. The multifamily vacancy rate is now below its long-term average for the first time in about two years.

More tenants are in heated battles for vacant space. Last year, an average of nine prospective renters were competing for every open apartment unit on the market, according to RentCafe. (…)

Multifamily asking rents are still trending relatively flat nationally, but they are headed upward. On average, apartments were three dollars more expensive nationwide in January, the first increase in six months, according to property data firm Yardi Matrix.

Apartment absorption, a metric of rental demand that measures the change in how many units are leased, was higher last quarter than any other fourth quarter since at least 1985, according to real-estate firm CBRE. (…)

SENTIMENT WATCH

Risk appetite slumps in February as investors reassess policy impact

Risk appetite among US equity investors has slumped in February amid a re-evaluation of policy impact, according to the latest S&P Global’s Investment Manager Index™ (IMI™) survey. The IMI’s headline Risk Appetite Index has fallen from +15% in January to -27% in February.

The sharp decline signals a return to risk aversion on balance, contrasting with the revival of risk appetite seen in the prior three months following the Presidential election.

February’s reading takes risk appetite further from December’s 44-month high, down close to the level plumbed last September. In fact, since data were first collected in October 2020, only four months have recorded higher risk aversion than that currently being reported.

February has also seen investors’ expectations of US equity returns over the coming month turn sharply negative, falling further from the near-survey high recorded back in November to now sit at one of the most pessimistic levels in over four years of survey history.

The single biggest change to investors’ views on what’s driving the markets is a perceived deterioration in the political environment, which is now reported as the biggest drag on US equities barring only concerns over high valuations – albeit with concerns over the latter now at the highest since the survey began in October 2020.

However, February has also seen a major reassessment of the US macroeconomic environment, which investors now perceive to be only a negligible positive driver of equity returns. In contrast, the prior two months had witnessed investors consider the US economy the most important driver of equities. February is likewise seeing investors report the global macro environment as an increasing drag on US equities.

Concerns are focused on tariffs and the scope for escalatory trade protectionism to weaken economic growth both within the US and globally, with concerns also intensifying in relation to second-round effects, such as higher US inflation and an accompanying hawkishness from the Fed. Whereas late-2024 saw investors view central bank policy as a key driver of equity returns, Fed policy has now been viewed as a drag for two successive months.

Similarly, despite pledged tax cuts, fiscal policy is now perceived as a drag on equities in February, exerting its biggest pull for over a year.

That leaves shareholder returns and equity fundamentals as the only two significantly perceived market drivers in February. Moreover, in both cases, these are viewed as exerting a reduced influence compared with January, especially in the case of fundamentals, which has in turn been reflected in lower earnings expectations. When asked about the key risks to dividend growth, investors remained cautious, citing the uncertainty at play given the increased risks for prolonged tariff implementation.

Yet, equity flows are positive and rising everywhere…

• Investors Buy Stocks as Cash Levels Hit 15-Year Low: BofA Survey – Bloomberg: “Investors are bullish, long stocks and short everything else, with cash levels hitting 3.5%, their lowest level since 2010, Bank of America says. Strategists led by Michael Hartnett write equity investors rotate to bond-sensitive assets and Europe as 82% of respondents see no recession, 77% expect Fed cuts.”

While the nearly 300 participants to S&P Global’s Investment Manager survey with $3.5T AUM are getting cautious on earnings growth, actual earnings are literally booming:

EARNINGS WATCH

383 companies in the S&P 500 Index have reported earnings for Q4 2024. Of these companies, 74.4% reported earnings above analyst expectations and 17.5% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 78% of companies beat the estimates and 17% missed estimates.

In aggregate, companies are reporting earnings that are 6.3% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.2% and the average surprise factor over the prior four quarters of 6.6%.

Of these companies, 62.8% reported revenue above analyst expectations and 37.2% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 62% of companies beat the estimates and 38% missed estimates.

In aggregate, companies are reporting revenues that are 1.1% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.3% and the average surprise factor over the prior four quarters of 1.2%.

The estimated earnings growth rate for the S&P 500 for 24Q4 is 15.3%. If the energy sector is excluded, the growth rate improves to 18.7%.

The estimated revenue growth rate for the S&P 500 for 24Q4 is 4.9%. If the energy sector is excluded, the growth rate improves to 5.5%.

The estimated earnings growth rate for the S&P 500 for 25Q1 is 8.5%. If the energy sector is excluded, the growth rate improves to 10%.

Analysts are revising downward, in all sectors but 3 (Comm. Services, Tech and Utes).

Preannouncements are not worsening:

Forward earnings don’t assume lower tax rates which, if enacted, could boost annual earnings by 5% according to Goldman Sachs.

2025 earnings are seen rising 11.3% and 18.3% for Comm. Services and Tech respectively. All other sectors: +9.2%, ex-Energy: +9.8%.

Trailing EPS are now $244.36. Full year 2024: $245.56. Forward EPS: $270.46e (down from $272.92 last month). Full year 2025: $270.95e.

Always grateful to Ed Yardeni, the S&P 500 ex-Megacaps-8 P/E is 19.7. The red line above is at 20.0.

The Equal-weigh P/E is 17x. Sounds more reasonable … until you compare that with history:

Price/Sales charts like this one are very popular these days…

Source: @profplum99 Michael W. Green

… but P/S measures must always come with profit margins since a dollar of sales with 26% margin is worth much more than a dollar of sales with 12% margins, isn’t it?. Ed Yardeni has these 2 charts:

The Megacap-8’s P/S is 7.4x, nearly double pre-pandemic levels. Their profit margins grew from 18% to 26% in that period! Non-Megacap-8 margins have only crawled back to their 2018 level where they seem to be stalling.

The current narrative that equity markets are broadening is not supported by expected revenue growth rates, unless inflation materially slows down, or profit margins suddenly turn upwards.

Non-Megacaps are much more economy sensitive than tech companies, thus carrying many uncertainties (tariffs war, inflation, interest rates).

But the market has largely ignored rising policy uncertainty, so far.

Source: @markets   Read full article

US companies falling behind on loans at fastest pace in almost a decade Experts warn tariffs and stubbornly high interest rates could worsen debt distress in 2025

(…) US business borrowers were at least one month late on more than $28bn in bank debt at the end of 2024, up $2.2bn in the final three months of the year and $5.4bn from a year earlier, according to newly released bank regulatory data collated by BankRegData. The data does not include loans from direct lenders and private credit funds, which are an increasingly bigger portion of corporate lending. (…)

“Large companies are doing fine, but there are a growing number of small and midsized companies that the economy is not providing enough help.”

As of Q3’23, delinquency rates were not alarmingly high even for smaller companies:

• Junk Bond Guru Sees Rising Distress Ahead as Banks Tighten Lending (Thanks Terry)

The strong US economy has left distressed debt investors starved of opportunity but that may be about to change, according to veteran high-yield analyst Marty Fridson.

The latest Federal Reserve survey of senior loan officers showed banks raising standards by the most in three years when they’re lending to medium-sized and larger companies. That’ll put the squeeze on borrowers already grappling with higher funding costs and global volatility from escalating trade wars.

“At the margin, a tightening of credit standards puts more companies in serious risk of default,” said Fridson, a former strategist at Merrill Lynch whose debt analysis has been studied by Wall Street for decades.

There’s a correlation of about 0.7 between lending standards and the level of distress in credit markets, Fridson’s data going back to 1997 show. (…)

Of course, the latest Fed survey data may just be a blip — lending standards have been in decline since September 2023 and could loosen up again if banks see beyond trade war volatility and get confident that the US is on a sustainable long-term growth path. Other tailwinds include ample global demand for yield from US issuers and private markets, where there’s a lot of dry power available that offers a lifeline to some struggling borrowers.

But the biggest move up in lending standards since the fourth quarter of 2022 adds pressure to the weakest companies with nearby debt maturities. For some, refinancing costs are unsustainably high, just as new trade and immigration policy threaten to put pressure on input costs and therefore earnings, making debt markets less predictable.

At the same time, corporate bond spreads remain close to the pre-financial crisis tights they hit last year. The narrow gap between risk premiums on notes of different credit quality highlight the fact that there is much more demand for high-yielding debt than net new supply. (…)

An Investing Riddle: Stocks Are in Turmoil but Stock Markets Aren’t While the S&P 500 has been unruffled by DeepSeek and the tariff war, stocks in the index have been volatile and uncorrelated

Judging by the S&P 500’s 4% year-to-date gain, it is hard to glean that it has recently been hit by two big shocks: the rise of Chinese artificial intelligence and the Trump administration’s tariff war. Investors don’t seem concerned about uncertainty ahead either: The Cboe Volatility Index, or Vix, dubbed the market’s “fear gauge,” briefly hit 18.6 earlier this month, but has since fallen to 15. The historical average is 19.5.

What is truly weird, though, is that while S&P 500 volatility has been contained, the stocks that are part of it have been bouncing wildly. Drops in some have offset surges in others, and vice versa. Take the “Magnificent Seven” technology-heavy companies: Collectively, they are down 2.7% from the close of Jan. 24, when China’s DeepSeek first spooked investors. But Alphabet is down 7.5% and Meta Platforms is up 13.8%. (…)

It isn’t that investors have sold all AI-related companies and bought everything else. Stocks within the Magnificent Seven have become less correlated to one another than during most of the past decade. (…)

Also, this isn’t just about technology. Wolfe Research created a basket of U.S. stocks that contains companies seen as particularly vulnerable to protectionist policies—including Caterpillar, Hasbro and Dollar General. An analysis of the basket shows low correlations, even as the pace of tariff pronouncements from the Trump administration has accelerated. The same thing is happening across sectors of the S&P 500 and within European equity markets. (…)

  Xi’s Embrace of China Tech CEOs Spurs Hope of Big Economic Shift

President Xi Jinping’s embrace of Chinese tech bosses in a rare public meeting is fueling hope Beijing is shifting its stance to give the private sector a freer hand as it fights a trade war with Donald Trump.

Four years after launching a regulatory crackdown that plunged the tech sector into turmoil, China’s top leader sat down publicly for the first time with Alibaba co-founder Jack Ma, whose firm bore the brunt of that campaign. Also on the guest list Monday were rising stars from robotics start-up Unitree, electric car giant BYD Co. and AI newcomer DeepSeek — firms rolling out world-beating innovations despite US export controls.

While a similar show of support from Xi in 2018 proved fleeting, developing national tech champions is core to Beijing’s plan for boosting the economy as it deflates a bubble in the property market that once drove about a quarter of growth. Underscoring the importance of spurring innovation, high-tech industries contributed to 15% of gross domestic product last year and are set to overtake the housing sector in 2026, according to Bloomberg Economics.

(…) the return of a high-profile business leader marks the first definitive sign that regulatory reset has concluded,” he added, referring to Ma. (…)

Xi’s meeting should now make it easier to secure equity financing in hardware technology, AI, and the new energy sectors, according to a senior executive from a privately owned chip gear maker, who said the attendee make-up had pointed to an emphasis in those areas.

The focus now is on an annual parliamentary huddle in March, where Xi is expected to set a growth goal of about 5%. It’s unclear how policymakers will get there, as Beijing still hasn’t articulated a plan for arresting sticky deflation, unlocking consumer spending and overcoming growing hostility to its export glut, from friendly partners as well as the US.

In the meantime, Xi is flexing some muscle by bringing together the nation’s big tech guns. (…)

The FT adds that Xi “took pains to emphasise the entrepreneurs’ importance to China’s economic strength, referring to the “two unshakeable principles” — meaning that both the public and private sector should be supported. But he also reiterated the ruling Chinese Communist party’s control over business, stressing that companies should be “ambitious in serving the country”. (…) The Chinese leader urged the business leaders present at Monday’s meeting to “actively fulfil social responsibilities” and “promote common prosperity”. (…)

The Chinese leader promised a level playing field for private businesses this week, and the resolution of persistent challenges such as high financing costs and late payment by state bodies as well as an end to arbitrary fees, fines and inspections. (…)”

• Addressing an audience which included Alibaba’s Jack Ma, as well as leaders of DeepSeek, CATL, BYD, Tencent, Xiaomi, Huawei and Unitree Robotics, Xi is reported to have said, “It is time for private enterprises and private entrepreneurs to show their talents” and that his government “must resolutely remove various obstacles” faced by private firms.
• Xi said that he would promote the healthy development of the private economy.
• “The private sector in China, which competes with state-owned companies, contributes more than half of tax revenue, more than 60 per cent of economic output and 70 per cent of tech innovation, official estimates show.” (Reuters)