Trump's heightened tone continues

In a span of just a few hours that unsettled global markets, U.S. President Donald Trump announced sweeping tariffs on Colombia. However, he quickly retracted the threat after reaching a deal regarding the return of deported migrants.

The White House declared victory late on Sunday, stating that Colombia had “agreed to all of President Trump’s terms” without delay, including the acceptance of deportees on U.S. military aircraft. Earlier, Colombian President Gustavo Petro had refused to allow two military planes carrying deported migrants to land, objecting to the use of shackles and handcuffs on detainees.

Colombian Foreign Affairs Minister Luis Gilberto Murillo stated in a video that both countries had resolved the diplomatic “impasse,” adding that the president’s plane would be ready to return the Colombians who were set to be deported back to their home country.

DeepSeek disrupts stock market

Chinese artificial intelligence (AI) startup DeepSeek made waves in the global technology stock market on Monday, raising concerns about America’s technological dominance.

Over the weekend, buzz grew about DeepSeek’s latest AI model, which is cost-effective and operates efficiently on less advanced chips. This has cast doubt on the high valuations of companies like Nvidia Corp., which has been at the forefront of the global AI stock boom with its chips deemed essential for technological advancements.

As a result, Nasdaq 100 futures dropped nearly 2.5%, while S&P 500 contracts fell by 1.4%. These declines reflect ongoing losses from Friday’s trading session, as U.S. shares cooled off after gains earlier in the week following President Donald Trump’s inauguration.

Eyes on the Fed and the ECB this week

The European Central Bank (ECB) is poised to enter a new phase of monetary policy this week as officials respond to the rising threat of unchecked inflation.

Facing prices that are soaring at an unprecedented rate, President Christine Lagarde and her colleagues are set to conclude trillions of euros in asset purchases and solidify plans to exit eight years of negative interest rates. Investors are speculating that the end of the sub-zero policy could happen as early as July.

While consumer prices, rising at more than four times the 2% target, are alarming, it is the long-term economic outlook that will influence the ECB’s decision-making. Projections are expected to indicate that inflation will not return to the target level until at least 2024.

In the United States, the Federal Reserve is anticipated to maintain its hawkish stance next week, laying the groundwork for interest rates to reach 5% by March 2023. This trajectory appears likely to lead to a recession, according to economists surveyed by Bloomberg. Officials are expected to announce their fourth consecutive 75 basis-point rate hike on Wednesday, followed by a 50 basis-point increase in December.

Meanwhile, U.S. high-grade issuers have taken advantage of a relatively positive market sentiment this week, with tighter bond spreads and rising stocks. They successfully priced $34.5 billion in high-grade bonds through Thursday, significantly surpassing estimates of $25 billion. This helps bring the total volume close to projections of $75 billion for October.

Oil prices fluctuate

Oil prices fluctuated as investors reacted to rapid trade actions by the Trump administration, which included the U.S. threatening—and then pausing—a broad package of restrictions against Colombia. Brent crude fell toward $78 a barrel but later recovered from a deeper intraday loss, while West Texas Intermediate hovered around $74.

This situation arose following a dispute over migrants. Initially, President Donald Trump ordered tariffs against Bogotá; however, the White House paused these actions after Colombia agreed to Trump’s conditions. Meanwhile, the U.S. dollar strengthened, putting additional pressure on most commodities.

Adding to the bearish sentiment surrounding crude oil were signs that China’s economic activity showed signs of slowing at the beginning of the year. Factory activity in the world’s largest oil importer shrank in January after three months of growth.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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