February 28, 2025
Inflation and scale were the main themes. U.K. inflation rose to 3.0% from 2.5%, above the Bank of England's 2.0% target and the 2.8% expected. The Bank had already cut rates to 4.5% and was signaling a gradual path. In the U.S., the Fed held rates at 4.25% to 4.5%, with minutes showing that cuts remained unlikely near term.
Tariff risk was affecting markets and corporate planning. Policy statements around 25% aluminum and steel tariffs increased activity in Asian FX markets. USD/CNH became the second-most traded currency futures contract behind USD/EUR, with daily volume on the Singapore exchange reaching $16 billion in the second half of 2024, up more than 50% from 2023.
Housing also showed tariff and rate pressure. The NAHB Housing Market Index fell five points to 42, below the 50 level that signals negative sentiment. Builders were facing mortgage rates above 7%, rising home prices, and cost worries because 32% of appliances and 30% of lumber came from abroad.
Consumers looked softer. U.S. retail sales fell 0.9% in January, the sharpest decline in nearly two years, with auto sales down 3% and online retail down almost 2%. Walmart projected lower-than-expected sales and profit for the fiscal year, and its shares fell 6%.
Shift4's $1.5 billion acquisition of Global Blue was the main M&A story. The deal values Global Blue at about $2.5 billion including debt and represents a 15% premium. Shift4 already processes more than $250 billion annually across hospitality, retail, entertainment, and travel, while Global Blue adds tax-free shopping relationships with retailers such as Prada, Nike, and IKEA. The deal pushes Shift4 deeper into international commerce and multi-currency transactions.
Cost and scale stories appeared elsewhere. Southwest announced 1,750 layoffs, or 15% of corporate staff, after pressure from Elliott Management, with expected savings of $210 million this year and $300 million next year. HSBC reported $32.31 billion of pre-tax profit, launched a buyback of up to $2 billion, and targeted $1.5 billion of cost reductions. Vanguard's VOO became the world's largest ETF at $631.8 billion, just ahead of SPY at $630.3 billion, helped by its 0.03% fee.