Markets Jitter as Inflation, Tariffs, and AI Deals Collide

Key Takeaways

1. German inflation surprise: Prices jumped 2.4%, adding pressure on the ECB while central banks stayed hawkish in tone but held rates steady.

2. BoJ rate hike debate: The Bank of Japan discussed raising rates, a rare move, but ultimately held steady as the yen weakened.

3. Trade tensions escalate: US, EU, and China slapped new tariffs on pharmaceuticals and auto parts, sparking market volatility.

4. AI mega-deals raise bubble talk: Nvidia, CoreWeave, and Meta signed multi-billion cloud contracts, fueling concerns about related-party finance and hype.

5. Markets wobble, gold shines: Stocks slipped modestly, yields climbed, gold neared record highs, and layoffs plus UK profit warnings highlighted cost pressures.

The big headline was Germany’s inflation report. Prices there rose faster than expected, hitting 2.4%. Not the end of the world, but enough to keep central bankers sweating. The ECB and Fed sat tight on rates, though their officials kept talking tough. Europe’s price pressures, especially in energy, make you wonder if we’ve really seen the last of this inflation cycle. Spoiler: probably not.

Meanwhile, Japan’s central bank debated a rate hike. Yes, you read that right. The Bank of Japan, famous for negative rates and endless patience, is now tiptoeing toward change. They didn’t pull the trigger this time, but the fact it’s even on the table is like spotting a unicorn. The yen weakened anyway, which shows markets still aren’t convinced Tokyo has the stomach for real tightening.

Trade tensions took center stage instead of politics. The US and EU moved forward with fresh tariffs on China, targeting pharmaceuticals and auto parts. Naturally, China hinted at retaliation, while Europe started rushing to line up alternative trade deals with partners like Indonesia. For markets, this was gasoline on the volatility fire. Investors love certainty, and nothing says uncertainty quite like tit-for-tat tariffs between the world’s biggest economies.

Speaking of jumpy, equity markets spent the week sliding a bit. The S&P 500 lost about 0.6%, the Nasdaq about 0.9%. German Bund yields pushed higher, and US Treasury yields spiked midweek before calming down. Futures got extra choppy on the last day of the month as traders freaked out over tariffs and inflation data. A reminder that markets are often like toddlers: loud, messy, and reacting to whatever’s right in front of them.

Corporate news added to the drama. Nvidia and CoreWeave wrapped up their $6.3 billion cloud deal, while Meta signed a whopper $14 billion AI cloud contract with CoreWeave. If you’re sensing a theme here, you’re not alone. Analysts are already warning about “round-trip finance,” where companies sell to firms they’re also invested in. Sounds more like a family business barbecue than free-market competition.

This AI gold rush is fueling bubble chatter. Critics are pointing out that the capex, opaque contracts, and related-party deals echo past bubbles. It’s not that AI is useless—far from it—but when you see every big player rushing to outspend the next guy, it starts looking more like 1999 than 2025. For a value investor, this is the kind of noise that tests your patience. You don’t have to predict when the music stops, just make sure you aren’t the one paying for the band when it does.

Elsewhere, gold flirted with record highs while oil stayed in its lane, and UK retailers kept serving up profit warnings, tortilla wraps included. Layoffs at Intel, Salesforce, and Paramount reminded us that even big names aren’t immune to belt-tightening. The big picture? Inflation is sticky, politics are messy, trade tensions are hot, and tech is bubbly. In other words, just another week in markets. If you know someone who could use a reality check among all the hype, go ahead and forward them this email. They’ll thank you later—probably.

Happy investing!
Josh

The information is provided for educational purposes only and does not constitute financial advice or recommendation and should not be considered as such. Do your own research.