BentinPartner Weekly
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Please find below our latest Weekly Trend Report.
Have a nice start of the week.
Marc Bentin,
Bentinpartner GmbH
With the exception of a late squeeze on Friday, US stocks dropped across the board as the (otherwise relatively good) Nvidia earnings report failed to revive investors’ optimism on the stock (which dropped -7% on the week), on the tech sector and AI in particular. Prior to the Nvidia’s release, investors’ sentiment was dampened by TD Cowen reporting that Microsoft had canceled an unspecified number of data center leases amid the AI spending boom, suggesting Microsoft could potentially be in an oversupply position with a down-shift in their appetite for capacity tied to OpenAI, after the surprisingly competitive release of China’s Deepseek.
Weaker than expected US economic data also catalyzed some weakness whilst bonds rallied on reviving expectations for more Fed rate cuts this year (2 cuts expected this year from just 1 one week earlier) with US consumer confidence plummeting 7 points in February, the biggest monthly decline in more than four years while inflation remained elevated and a trade war a distinct risk. According to a monthly poll of small business owners from the National Federation of Independent Business, the uncertainty index in January also rose 14 points to 100, the third highest recorded reading, after two months of decline. Initial filings for unemployment benefits for the week ended Feb. 22 totaled a seasonally adjusted 242,000 (+ 22,000) from the previous week and higher than the expected 225,000.
On a more positive side, new orders for key US manufactured capital goods surged in January, pointing at a rebound in business spending on equipment in Q1. Non-defense capital goods orders excluding aircraft, a proxy for business spending plans also increased 0.8% (from +0.2% in December), showing the positive effects of on-shoring pressed by D. Trump.
“Tense” and “conflictual” international relations in response to US efforts to get a negotiated settlement for the war in Ukraine, played their part in depressing investors’ sentiment. Keeping track of US tariffs’ announcements was also difficult.
This deleterious context triggered more deleveraging/derisking across the board in risk assets, ingulfing equities, credit markets, commodities, precious metals and cryptos. “Hedge funds exited US tech at the fastest pace in six months, according to Goldman while speculators ‘aggressively’ dumped both long and short positions in AI-related equipment, media, and communications equipment companies, according to the Goldman note.
Also last week, investors sold more than $1bn from spot Bitcoin exchange-traded funds (on Tuesday), marking their biggest one-day outflow since the debut last January.
The extent of negative sentiment fueled a short covering late on Friday.
The week started with the Trump administration and the EU putting forward rival UN resolutions on Monday with the US voting with Russia against Ukraine and EU nations in the UN General Assembly.
The EU warned that it would vigorously fight any wholesale tariff of 25% on all EU products with the transatlantic rift taking a turn for the worse when D. Trump warned that Washington would drop security guarantees. ‘I’m not going to make security guarantees beyond very much,’ Trump said… ‘We’re going to have Europe do that” because ‘Europe is the next-door neighbor’.”
The EU’s foreign policy chief K. Kallas did not meet US Secretary of State Marco Rubio during her visit to Washington ‘due to scheduling issues’ and, more likely, unreconcilable views between the two trade representatives.
She met with US senators of the opposition instead to discuss the war in Ukraine and the transatlantic relationship. Later in the week, she declared that ‘the free world needs a new leader’, as EU leaders threw their support behind Ukraine’s president, V. Zelenskyy, following the White House confrontation between him and D. Trump.
G20 Finance Ministers and governors from developed and developing nations also gathered in South Africa last week for a two-day meeting and it was marked by the absence of U.S. Treasury Secretary S. Bessent who said he couldn’t attend because of commitments in Washington.
Adding to last week’s gloom, corporate bond spreads widened for eight trading sessions in a row, the longest period of increasing spreads in over a year, due to rising fears about the economy and the impact of tariffs. High yields spreads climbed 9bps.
In the meantime, hopes of some economic revival transpired in Europe and Germany in particular, with Friedrich Merz opening talks with the Social Democrats to quickly approve as much as €200 billion in special defense spending. Officials from Merz’s Christian Democrats and the SPD are discussing ways to get around Germany’s tight restrictions on government borrowing to free up resources to rebuild the dilapidated military. Bundesbank president J. Nagel also urged Germany’s next government to embark on sweeping reforms to reinvigorate the German economy, as the central bank declared a €19.2bn loss. Nagel said the coalition would need to enact supply-side reforms and cut red tape to boost an economy facing another year of economic stagnation in 2025.
Over the past week, the S&P500 dropped -1,0% (1,4% YTD) while the Nasdaq100 sold off by -3,4% (-0,6% YTD). The US small cap index dropped -1,4% (-2,9% YTD). AAPL dropped -1,5% (-3,4%).
The Equally Weighed SP500 gained 0,2% (2,8% YTD), outperforming the S&P500 by 1,2%. The median SP500 YTD return closed the week at 2,1%.
Cboe Volatility Index rallied 7,8% (13,1% YTD) to 19,63.
The Eurostoxx50 dropped -0,1% (11,7%), outperforming the S&P500 by 0,8%.
Diversified EM equities (VWO) sold off by -3,6% (1,6%), underperforming the S&P500 by-2,6%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies gained 1,1% (-0,1%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) dropped -0,8% (0,9%).
10Y US Treasuries rallied -17bps (-34bps) to 4,23%. 10Y Bunds dropped -6bps (4bps) to 2,41%. 10Y Italian BTPs dropped -2bps (2bps) to 3,54%, underperforming Bunds by 4bps.
US High Yield (HY) Average Spread over Treasuries climbed 9bps (-7bps, Z-score 2,2) to 2,80%. US Investment Grade Average OAS climbed 9bps (9bps, Z-score 2,8) to 0,96%.
In European credit markets, EUR 5Y Senior Financial Spread climbed 1bps (-6bps) to 0,57%.
Gold sold off by -3,1% (9,0%) while Silver sold off by -3,5% (8,0%). Major Gold Mines (GDX) sold off by -2,6% (17,1%).
Goldman Sachs Commodity Index sold off by -2,9% (2,9%). WTI Crude dropped -0,7% (-2,1%).
Overnight in Asia…
S&P future +13 points; Hong Kong +1.1%; Nikkei +1.8%; China +0.5%
Asian shares rallied this morning following the strong US close, on optimism over an increase in Chinese fiscal spending and following the release of a stronger than expected Chinese Caixin Manufacturing PMI (50.8 vs. 50.1 last and 50.4 expected).
European leaders scrambled to get Zelenskiy back to the table with US President D. Trump and to assemble a "coalition of the willing" in support of Ukraine following the clash between D. Trump and Zelenski on Friday which abbreviated Zelinski’s visit to the White House and prevented a planned rare earth deal to be signed. The European Council will meet to discuss a €20bn military package for Ukraine and to boost defense spending and send a common special envoy to represent the bloc in possible talks to end the conflict as communication channels between the US/Russia negotiating parties and the European Commission dual leadership appear clogged.
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