Investment Rating - The report suggests a positive outlook for Indonesia's trade integration efforts, indicating potential GDP gains through structural reforms and trade liberalization, aiming for high-income status by 2045 [5][12]. Core Insights - Indonesia is pursuing greater trade openness to leverage external demand for economic growth, with a focus on reducing non-tariff barriers and implementing structural reforms to enhance trade integration [5][12]. - The analysis indicates that significant GDP gains can be achieved through unilateral actions to reduce non-tariff barriers, complemented by trade agreements with major partners [5][12]. - Structural reforms in human capital and logistics are essential to further enhance trade integration and reduce trade costs, thereby broadening Indonesia's comparative advantages across sectors [5][12]. Summary by Sections A. Key Policies and Structural Factors Affecting Trade - Indonesia's average tariffs on manufactured goods have declined, but non-tariff barriers remain elevated compared to regional peers, indicating room for further reductions [18][19]. - The impact of non-tariff barriers on trade is substantial, with potential GDP increases of 5% from removing major NTBs [19]. B. Model and Scenario Description - A quantitative trade model is used to assess the implications of deeper trade integration, focusing on reducing non-tariff barriers and enhancing logistics and human capital [33][36]. C. Main Results - The ambitious trade integration scenario could boost Indonesia's real GDP by 4.1% in the medium to long term, primarily through lower non-tariff barriers and improved access to intermediate goods [41][42]. - Unilateral reductions in non-tariff barriers can benefit many sectors, leading to overall GDP increases despite some sectoral reallocations [43][46]. D. Exploiting Complementarities between Trade Integration and Other Structural Reforms - Structural reforms are crucial for achieving high-income status, with key areas including logistics, governance, and human capital development [53][54]. - Trade liberalization can support the development of new comparative advantages, particularly in GVC-linked sectors and modern services [53][54].

Core Insights - The U.S. economy is experiencing conflicting signals with a sharp deceleration in growth and unexpectedly stubborn inflation, complicating the outlook for potential interest rate cuts later this year [1] Inflation Data - The Core Personal Consumption Expenditures (PCE) Price Index rose to 3.0% year-over-year, exceeding the 2.9% forecast and up from November's 2.8% [1] - The headline PCE index increased by 2.9% annually, surpassing both the previous month's data and forecast, with both core and headline prices rising by 0.4% monthly, marking the sharpest monthly growth since February [1] Economic Growth - Real GDP expanded at an annual rate of 1.4% in the fourth quarter of 2025, a significant decline from the 4.4% growth in the third quarter and only half of the 2.8% forecast [1] - The expansion was primarily driven by increases in consumer spending and business investment, but these gains were offset by declines in exports and government spending [1] Consumer Sentiment - The University of Michigan Consumer Sentiment Index rose to 56.6, reaching a six-month peak, although it fell short of the 57.3 forecast and remains historically low [1] - The "current conditions" subcomponent rose for the second month, while the "expectations" subcomponent fell for the first time in four months due to ongoing price pressures [1] - Near-term inflation expectations cooled to 3.4%, the lowest in over a year, while long-term expectations remained unchanged at 3.3% [1] Market Reactions - The S&P 500 posted a weekly gain of 1.1%, marking its first weekly gain since January, while the S&P Equal Weight Index rose by 0.6% [1] - The 10-year Treasury yield finished the week at 4.08%, and the 2-year note at 3.48% [1] - The CME FedWatch Tool indicates a 96% chance that the Federal Reserve will hold rates steady at their next meeting, with markets pricing in two 25 basis point cuts in 2026 [1]

Market Overview - Markets opened positively following the US Supreme Court's ruling against President Trump's emergency tariffs, with the Sensex rising to ₹83,336.04, up ₹521.33 or 0.63% [1] - The Nifty 50 also saw gains, climbing to ₹25,731.00, an increase of ₹159.75 or 0.62% [1] Tariff Changes - The Supreme Court's decision invalidated approximately $160–175 billion in tariffs imposed under the International Emergency Economic Powers Act (IEEPA) [2] - President Trump responded by invoking Section 122 of the Trade Act of 1974, imposing a new 10–15% global tariff for 150 days, which is expected to face legal challenges [2] - For India, this effectively reduces tariffs on exports to around 10% [2] Market Sentiment and Technical Analysis - The US Supreme Court's ruling is viewed positively, but it may not lead to a sustained market rally as fundamentals are still key [3] - The Nifty's immediate pivot is at 25,500, with resistance levels at 25,700–25,750; a move above 25,800 could lead to 26,000 [3] Sector Performance - Banking stocks led the market recovery, with the Bank Nifty closing at ₹61,172, up 432 points, and trading above key moving averages [4] - Among Nifty 50 gainers, Adani Ports rose by 2.86% to ₹1,554.80, and Axis Bank increased by 2.02% to ₹1,395.90, indicating strength in financial services and infrastructure [5] Underperformers - ONGC was the worst performer, falling 2.14% to ₹272.70 due to rising crude oil prices amid US-Iran tensions [6] - IT stocks like Infosys and Wipro also faced declines, contributing to a broader technology sector downturn [6] Institutional Flows - Foreign Institutional Investors sold equities worth ₹934 crore, while Domestic Institutional Investors bought equities worth ₹2,637 crore [7] Corporate Developments - IDFC First Bank reported a significant internal fraud estimated at ₹590 crore, prompting a forensic audit [8] Market Caution - Analysts caution that market sentiment may remain weak as long as it stays below the 50-day SMA of 25,770/83,200 [9]

Economic Developments - The U.S. gross domestic product (GDP) grew at an annualized rate of 1.4% in the fourth quarter of 2025, indicating a sharp slowdown in the economy [4] - The Federal Reserve's preferred inflation rate unexpectedly rose, adding to economic concerns [4] Trade and Tariffs - Republican lawmakers oppose President Trump's new 10% global tariff, following a Supreme Court ruling that trade authority rests with lawmakers [2] - The new tariff was imposed after the Supreme Court blocked Trump's previous attempt to justify broad import taxes using emergency powers [2] Market Indicators - U.S. heavy vehicle sales are signaling caution, indicating a potential economic slowdown as fleets halt capital expenditures when nervous about freight demand [3] Housing Market - The White House is intensifying efforts to implement Trump's proposed ban on large-scale home investors, targeting those owning more than 100 single-family homes [5]

Core Insights - Consumer spending is shifting towards services as spending on goods softens, indicating a deliberate spending posture and a slower pace of overall growth in the U.S. economy [1][5] Economic Indicators - Personal income rose by 0.3% month over month in December, while personal consumption expenditures increased by 0.4%. Disposable income growth matched November's 0.3% gain, but wages and salaries only expanded by 0.2%, the slowest increase since June [3][4] - Real GDP grew at an annualized rate of 1.4% in the fourth quarter of 2025, down from 4.4% in the third quarter, marking the slowest year-end growth since 2018. For the full year, GDP increased by 2.2% [8][12] Consumer Behavior - Spending on goods declined by 0.1% in December, the first drop in six months, while services expenditures rose by 0.7%. Durable goods were the weakest category, falling by 0.3% [4] - Households are reallocating their spending towards services such as housing, healthcare, travel, and dining, while discretionary goods purchases are showing signs of constraint [5] Labor Market Insights - The Labor Economy workers, earning $25 per hour or less, represent over one-third of U.S. employees and account for 15.1% of total U.S. spending, equivalent to more than $1.7 trillion annually [6] - Only 29.4% of Labor Economy workers expect their financial situation to improve by 2026, while nearly half anticipate unchanged pay and rising monthly expenses [7] Consumer Sentiment - Consumer sentiment improved slightly in February, with the University of Michigan's final sentiment index rising by 0.4% from January. However, the February reading remains 12.5% below its year-ago level [13][14] - Nearly 46% of consumers cited high prices as a strain on personal finances, although inflation expectations eased modestly [14] Credit and Spending Behavior - Credit usage, particularly Buy Now Pay Later (BNPL) options, remains a structural component of household cash-flow management, especially among younger consumers [15][16] - In December, 25% of bridge millennials used BNPL, a 56% increase from November, indicating that BNPL is becoming a recurring budget infrastructure for specific cohorts [16]

Market Reaction - The US stock market surged following a Supreme Court ruling that invalidated President Trump's broad tariff policy, leading to a recovery from an early 200-point loss in the Dow Jones Industrial Average [3][20] - The Dow Jones climbed to 49,515.45, up 120.29 points (0.24%), while the S&P 500 rose 39.06 points to 6,900.95 (+0.57%), and the Nasdaq Composite surged 192.37 points to 22,875.10 (+0.85%) [3][20] Tariff Impact - The Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize sweeping global tariffs, which undercut a key trade policy tool used by the Trump administration [5][20] - The ruling is expected to reduce cost pressures for companies reliant on imports from China and other Asian markets, leading to margin expansion for retail and e-commerce companies [6][20] Company Performance - Amazon, which sources a significant portion of its goods internationally, saw its stock rise approximately 2.6% to $210.27, while shares of Home Depot and Five Below also advanced [10][20] - Big-cap tech stocks, including Nvidia and Tesla, contributed significantly to the market rally, with Nvidia trading near $189.92, up about 1% [10][20] Economic Data - US GDP growth slowed to an annualized rate of 1.4% in the fourth quarter, below the expected 2.5%, indicating cooling economic momentum [12][20] - Core PCE inflation remained steady at 3%, above the Federal Reserve's target of 2%, suggesting persistent inflationary pressures despite the tariff ruling [14][20] Commodity Market Reaction - Commodity markets reacted with gold prices climbing to approximately $5,092 per contract, up nearly 1.9%, and silver surging almost 7% to around $82.97, indicating investor hedging behavior amid economic uncertainty [18][20]

Editor’s note: This story was updated to add details, context.U.S. gross domestic product grew at an annualized rate of 1.4% in the fourth quarter of 2025, according to advance estimates released Friday by the Bureau of Economic Analysis.The figure marks a sharp slowdown from the prior quarter's 4.4% expansion pace and came in sharply below economists' expectations for 3% growth.In a separate release, the Personal Consumption Expenditures (PCE) price index inched up from 2.8% year-over-year in November to 2 ...

🔔US Q4 2025 GDP GROWTH DROPS TO 1.4%, WELL BELOW EXPECTATIONS OF +3%December PCE inflation rose to 2.9%, beating expectations, with Core PCE climbing to 3.0%, its highest level since November 2023.Core inflation is now at its highest level in over a year. https://t.co/3TfmB3zdRb ...

US stocks rose on Friday after the Supreme Court ruled that President Trump's sweeping "Liberation Day" tariffs are unlawful, saying he lacked the authority to impose them using emergency powers. The S&P 500 (^GSPC) and the Dow Jones Industrial Average (^DJI) both moved up 0.4%, coming off the end of a three-day winning streak on Thursday. The tech-exposed Nasdaq Composite (^IXIC) led the way higher, rising 0.6%. Stocks reversed course on the heels of the decision, having slid at the open as investors d ...

US stocks slid on Friday as investors digested economic data that showed US economic growth cooling in the fourth quarter, while the Fed's favored inflation gauge heated up to end last year. Wall Street also kept an eye out for US-Iran tensions, private credit jitters, and a potential Supreme Court tariff decision. The S&P 500 (^GSPC) moved down roughly 0.3%, while the Dow Jones Industrial Average (^DJI) fell by a steeper 0.4%, coming off the end of a three-day winning streak on Thursday. The Nasdaq Compo ...