Supreme Court Rulings Shape Global Markets (23-27 February)

Global markets experienced a sharp shift in sentiment this week following a landmark US Supreme Court ruling that struck down President Trump’s "reciprocal" tariffs.

The administration quickly countered by announcing plans to raise global tariffs from 10% to 15%, a move that immediately pressured the dollar and ignited a rush into safe-haven assets. Trade tensions escalated further as Europe’s trade chief proposed suspending the ratification of a US trade agreement, while India delayed negotiations on an interim deal.

Precious metals surged on the news, with gold reaching a three-week high above $5,150/oz and silver extending its winning streak. In contrast, crude oil retreated as diplomatic progress between the US and Iran signaled a potential reduction in supply risk.

Market Drivers & Catalysts

• Tariff Policy Volatility: After the Supreme Court rejected broad emergency tariffs, President Trump’s immediate pledge of a 15% global levy fueled global trade uncertainty.
• Escalating Trade Standoffs: Retaliatory signals from the EU and a pause in negotiations with India have increased the risk of a broader trade conflict.
• US-Iran Diplomatic Shift: Reports of a "win-win" solution and an upcoming meeting in Geneva between the Iranian foreign minister and US envoy Steve Witkoff have eased energy risk premiums.
• UK Growth Outperformance: Private-sector activity in the UK expanded at its fastest pace since April 2024, supported by strong manufacturing and services PMIs.
• Japanese Disinflation: Headline inflation in Japan dropped to 1.5%, which isthe lowest since March 2022. It provides the BOJ with a more complex landscape for future tightening.

Fixed Income

• United States 10-Year Treasury: The yield edged higher to 4.09%. Investors are navigating a tug-of-war between the court-ordered removal of reciprocal tariffs and the anticipated inflationary impact of a new 10% global tariff executive order.
• United Kingdom 10-Year Gilt: Yields fell toward 4.35%, a six-week low. The move was supported by a record £30.4 billion public sector surplus in January, the highest monthly surplus since records began in 1993.
• Japan 10-Year Government Bond: The yield declined toward 2.1% as inflation pressures cooled. Core inflation matched the BOJ's 2% target, marking the slowest pace of growth in two years.
• Germany 10-Year Bund: Yields remain sensitive to regional growth signals as Germany’s CPI showed a renewed uptick in price pressures to start the year.

Commodities

Gold climbed nearly 1% to roughly $5,150/oz on Monday. The move reflects a sharp increase in safe-haven demand following the Supreme Court’s ruling and the subsequent hike in global tariff threats.

Silver jumped 2% to trade above $86/oz, marking its fourth consecutive session of gains as investors pivot toward metals to hedge against trade-related volatility.

Currencies

• U.S. Dollar Index (DXY): The index fell below 97.5 on Monday. The currency is struggling to maintain momentum as the Supreme Court ruling and retaliatory trade threats from major partners weigh on the greenback.
• Euro: The euro rose toward $1.18 as the dollar fell after the SCOTUS tariff reversal. Strong PMI growth and Lagarde’s term commitment supported the euro, despite a 0.7% weekly decline.
• British Pound: Sterling recovered above $1.35, rebounding from monthly lows. The currency found strength in the S&P Global UK PMI, which showed its fastest expansion in nearly two years.
• Japanese Yen: The yen strengthened toward 154 per dollar. Recouping last week's losses, the yen is benefiting from a flight to safety as the new 15% US tariff announcement undermines dollar confidence.

Economic Data Highlights

• U.S. Core PCE Price Index (Dec): Core inflation rose to 3.0% YoY, up from 2.8% in November, indicating that underlying price pressures were still accelerating at year-end.
• U.S. S&P Global Services PMI (Feb): The flash estimate fell to 52.3 (from 52.7), missing expectations and marking the softest expansion in services activity in 10 months.
• German CPI (Jan): Inflation rose 2.1% YoY. According to Destatis, this indicates a renewed uptick in price pressures at the start of 2026.
• Japan Inflation (Jan): Headline inflation eased to 1.5% (from 2.1%), while core inflation reached the 2.0% target, influenced by government cost-of-living relief measures.
• UK Public Sector Net Borrowing (Jan): Posted a record £30.4 billion surplus, significantly exceeding OBR projections and historical records dating back to 1993.

Macro Calendar Highlights

• U.S. Second Estimate GDP (Q4)
• U.S. Personal Income and Outlays (PCE)
• Japan Tokyo-area CPI Report
• EU-US Trade Ratification Discussions
• Geneva Diplomatic Summit (US-Iran)