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Archive for Economics & Fundamentals – Page 4

24 Feb

Germany has a new chancellor. The focus of traders’ attention today is on the negotiations on Ukraine

By JustMarkets

On Friday, the Dow Jones Index (US30) declined by 1.69% (for the week -2.89%). The S&P 500 Index (US500) fell by 1.71% (down -1.67% for the week). The Nasdaq Technology Index (US100) was down 2.06% (week-to-date -1.93%). The US stocks fell on Friday as economic data heightened concerns about a slowing US economy and persistent inflation, prompting investors to seek safer assets. Consumer sentiment also suffered, with the University of Michigan Index falling to 64.7, reflecting growing concerns about inflation, which consumers expect to rise to 4.3% next year. Meanwhile, S&P Global’s US manufacturing PMI rose to 51.6 in February 2025 from 51.2 in January, beating market expectations of 51.5, preliminary estimates showed. This is the highest reading since June 2024, indicating the sector’s continued recovery.

Mexico’s GDP contracted by 0.6% in Q4, the sharpest contraction since Q3 2021, underscoring the weakness in the economy. Nevertheless, strong remittances, fiscal discipline and Mexico’s attractiveness for asset transactions are supporting the peso, while dollar softness is generally adding to its resilience.

In Canada, a 0.4% decline in January retail sales, the first in seven months, points to a slowdown in consumer spending after a boom in December, raising concerns about domestic market dynamics. In addition, lingering uncertainty over US tariff threats targeting a significant portion of Canadian exports has dampened the outlook for loonie demand. Conversely, strong inflationary pressures have highlighted the Bank of Canada’s challenge in balancing growth and price controls.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) fell by 0.12% (week-to-date -1.34%), France’s CAC 40 (FR40) closed up 0.39% (week-to-date -0.33%), Spain’s IBEX 35 (ES35) lost 0.12% (week-to-date +0.06%), and the UK’s FTSE 100 (UK100) closed negative 0.04% (week-to-date -0.84%). European equities closed slightly higher, retreating from record highs reached earlier in the week. Markets were assessing the latest PMI data and corporate reports, and positioned ahead of the German elections. Friedrich Merz announces his victory in the German elections, while Scholz concedes defeat. Friedrich Merz, the leader of Germany’s conservative opposition, is expected to form a coalition government aimed at fiscal reforms. Also, Friedrich Merz actively supported Ukraine and condemned the Russian invasion during the election campaign. On February 24 (the anniversary of Russia’s invasion of Ukraine), many heads and officials of European countries will come to Kyiv to discuss the situation on the further settlement of the bloody conflict. In turn, the British prime minister will travel to the United States on Monday to present his plan for a settlement of the conflict.

Iraq’s oil ministry announced that it has completed all necessary procedures to resume oil exports through the Iraqi-Turkish pipeline, signaling a possible resolution to the nearly two-year dispute that has disrupted regional crude flows. Traders also continue to keep an eye on talks to end the war in Ukraine, as a peace deal could lead to an easing of sanctions on Russian oil, potentially boosting global supply. Meanwhile, in the Middle East, the Gaza ceasefire is facing problems, with Hamas accusing Israel of jeopardizing a five-week truce by delaying the release of Palestinian prisoners. The first phase of the truce ends in early March, and details of a planned follow-up phase have yet to be agreed.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) was down 0.81%, China’s FTSE China A50 (CHA50) added 2.83%, Hong Kong’s Hang Seng (HK50) increased by 3.18%, and Australia’s ASX 200 (AU200) was negative 2.82%.

Singapore core consumer prices in January 2025 came in at 0.8% y/y on an annualized basis, down sharply from a revised 1.7% y/y in the previous month and below market estimates of 1.5% y/y. This is the lowest core inflation rate since June 2021, mainly due to lower inflation in almost all major categories.

The New Zealand dollar rose to around $0.577 on Monday, rebounding from the previous session’s losses and trading at a more than two-month high after domestic data showed strong retail sales. New Zealand’s Q4 2024 retail sales rose by 0.9% quarter-on-quarter, the biggest increase in three years, following a revised figure for the previous period. This supported expectations of a slower pace of rate cuts, consistent with the RBNZ’s statement last week that future cuts are likely to be smaller and that the easing cycle is nearing completion.

S&P 500 (US500) 6,013.13 −104.39 (−1.71%)

Dow Jones (US30) 43,428.02 −748.63 (−1.69%)

DAX (DE40) 22,287.56 −27.09 (−0.12%)

FTSE 100 (UK100) 8,659.37 −3.60 (−0.04%)

USD Index 106.64 +0.27 (+0.25%)

News feed for: 2025.02.24

  • Singapore Inflation Rate (m/m) at 07:00 (GMT+2);
  • German Ifo Business Climate (m/m) at 11:00 (GMT+2);
  • Eurozone Consumer Price Index (m/m) at 12:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
22 Feb

A fiscal crisis is looming for many US cities

By John Rennie Short, University of Maryland, Baltimore County 

Five years after the start of the COVID-19 pandemic, many U.S. cities are still adjusting to a new normal, with more people working remotely and less economic activity in city centers. Other factors, such as underfunded pension plans for municipal employees, are pushing many city budgets into the red.

Urban fiscal struggles are not new, but historically they have mainly affected U.S. cities that are small, poor or saddled with incompetent managers. Today, however, even large cities, including Chicago, Houston and San Francisco, are under serious financial stress.

This is a looming nationwide threat, driven by factors that include climate change, declining downtown activity, loss of federal funds and large pension and retirement commitments.

Spending cuts abound in many U.S. cities as inflation lingers and pandemic-era stimulus dries up.

Why cities struggle

Many U.S. cities have faced fiscal crises over the past century, for diverse reasons. Most commonly, stress occurs after an economic downturn or sharp fall in tax revenues.

Florida municipalities began to default in 1926 after the collapse of a land boom. Municipal defaults were common across the nation in the 1930s during the Great Depression: As unemployment rose, relief burdens swelled and tax collections dwindled.

In 1934 Congress amended the U.S. bankruptcy code to allow municipalities to file formally for bankruptcy. Subsequently, 27 states enacted laws that authorized cities to become debtors and seek bankruptcy protection.

Declaring bankruptcy was not a cure-all. It allowed cities to refinance debt or stretch out payment schedules, but it also could lead to higher taxes and fees for residents, and lower pay and benefits for city employees. And it could stigmatize a city for many years afterward.

In the 1960s and 1970s, many urban residents and businesses left cities for adjoining suburbs. Many cities, including New York, Cleveland and Philadelphia, found it difficult to repay debts as their tax bases shrank.

A tabloid newspaper with a photo of President Gerald Ford and the headline 'Ford to City: Drop Dead'
The New York Daily News, Oct. 30, 1975, after U.S. President Gerald Ford ruled out providing federal aid to save the city from bankruptcy. Several months later, Ford signed legislation authorizing federal loans.
Edward Stojakovic/Flickr, CC BY

In the wake of the 2008-2009 housing market collapse, cities including Detroit, San Bernardino, California, and Stockton, California, filed for bankruptcy. Other cities faced similar difficulties but were located in states that did not allow municipalities to declare bankruptcy.

Even large, affluent jurisdictions could go off the financial rails. For example, Orange County, California, went bankrupt in 2002 after its treasurer, Robert Citron, pursued a risky investment strategy of complex leveraging deals, losing some $1.65 billion in taxpayer funds.

Today, cities face a convergence of rising costs and decreasing revenues in many places. As I see it, the urban fiscal crisis is now a pervasive national challenge.

Climate-driven disasters

Climate change and its attendant increase in major disasters are putting financial pressure on municipalities across the country.

Events like wildfires and flooding have twofold effects on city finances. First, money has to be spent on rebuilding damaged infrastructure, such as roads, water lines and public buildings. Second, after the disaster, cities may either act on their own or be required under state or federal law to make expensive investments in preparation for the next storm or wildfire.

In Houston, for example, court rulings after multiple years of severe flooding are forcing the city to spend $100 million on street repairs and drainage by mid-2025. This requirement will expand the deficit in Houston’s annual budget to $330 million.

In Massachusetts, towns on Cape Cod are spending millions of dollars to switch from septic systems to public sewer lines and upgrade wastewater treatment plants. Population growth has sharply increased water pollution on the Cape, and climate change is promoting blooms of toxic algae that feed on nutrients in wastewater.

Increasing uncertainty about the total costs of mitigating and adapting to climate change will inevitably lead rating agencies to downgrade municipal credit ratings. This raises cities’ costs to borrow money for climate-related projects like protecting shorelines and improving wastewater treatment.

Underfunded pensions

Cities also spend a lot of money on employees, and many large cities are struggling to fund pensions and health benefits for their workforces. As municipal retirees live longer and require more health care, the costs are mounting.

For example, Chicago currently faces a budget deficit of nearly $1 billion, which stems partly from underfunded retirement benefits for nearly 30,000 public employees. The city has $35 billion in unfunded pension liabilities and almost $2 billion in unfunded retiree health benefits. Chicago’s teachers are owed $14 billion in unfunded benefits.

Policy studies have shown for years that politicians tend to underfund retirement and pension benefits for public employees. This approach offloads the real cost of providing police, fire protection and education onto future taxpayers.

Struggling downtowns and less federal support

Cities aren’t just facing rising costs – they’re also losing revenues. In many U.S. cities, retail and commercial office economies are declining. Developers have overbuilt commercial properties, creating an excess supply. More unleased properties will mean lower tax revenues.

At the same time, pandemic-related federal aid that cushioned municipal finances from 2020 through 2024 is dwindling.

State and local governments received $150 billion through the 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act and an additional $130 billion through the 2021 American Rescue Plan Act. Now, however, this federal largesse – which some cities used to fill mounting fiscal cracks – is at an end.

In my view, President Donald Trump’s administration is highly unlikely to bail out urban areas – especially more liberal cities like Detroit, Philadelphia and San Francisco. Trump has portrayed large cities governed by Democrats in the darkest terms – for example, calling Baltimore a “rodent-infested mess” and Washington, D.C., a “dirty, crime-ridden death trap.” I expect that Trump’s animus against big cities, which was a staple of his 2024 campaign, could become a hallmark of his second term.

Detroit officials respond to disparaging remarks about the city by Donald Trump during a campaign speech in Detroit, Oct. 10, 2024.

Resistance to new taxes

Cities can generate revenue from taxes on sales, businesses, property and utilities. However, increasing municipal taxes – particularly property taxes – can be very difficult.

In 1978, California adopted Proposition 13 – a ballot measure that limited property tax increases to the rate of inflation or 2% per year, whichever is lower. This high-profile campaign created a widespread narrative that property taxes were out of control and made it very hard for local officials to support property tax increases.

Thanks to caps like Prop 13, a persistent public view that taxes are too high and political resistance, property taxes have tended to lag behind inflation in many parts of the country.

The crunch

Taking these factors together, I see a fiscal crunch coming for U.S. cities. Small cities with low budgets are particularly vulnerable. But so are larger, more affluent cities, such as San Francisco with its collapsing downtown office market, or Houston, New York and Miami, which face growing costs from climate change.

One city manager who runs an affluent municipality in the Pacific Northwest told me that in these difficult circumstances, politicians need to be more frank and open with their constituents and explain convincingly and compellingly how and why taxpayer money is being spent.

Efforts to balance city budgets are opportunities to build consensus with the public about what municipalities can do, and at what cost. The coming months will show whether politicians and city residents are ready for these hard conversations.The Conversation

About the Author:

John Rennie Short, Professor Emeritus of Public Policy, University of Maryland, Baltimore County

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Economics & Fundamentals Opinions
21 Feb

Investors value corporate tax responsibility – at least when the company is based somewhere with a lot of inequality, research shows

By Erica Neuman, University of Dayton and Curtis Farnsel, University of Dayton 

When corporations based in areas of above-average income inequality pay more taxes, it’s not just the public that appreciates it – investors do, too. That’s the key finding of our recent research published in the journal Accounting and the Public Interest.

Our finding challenges traditional economic theory holding that investors see corporate taxes as a transfer of wealth from shareholders to the state. That would suggest investors value only strategies that minimize taxes. The reality isn’t so simple.

As accounting professors at the University of Dayton, we study the intersection of corporate taxes and corporate social responsibility. We wanted to better understand how corporate taxes affect firm value and stock prices, and whether that relationship changes if a company is headquartered in an area with high income inequality.

So we looked at financial data from over 1,500 firms over a 10-year period between 2011 and 2019, as well as the income inequality in the metro areas where they’re headquartered. For the latter point, we used the Gini coefficient, a measure of income distribution in a given place. This is a particularly useful context for looking at corporate taxes, since one of the key functions of taxation is to counter inequality.

We found that there’s a negative relationship between corporate taxes and firm value for companies headquartered in areas of average inequality. In other words, paying more corporate taxes lowers firm value. That’s in line with previous research and traditional economic theory.

However, we found that when local income inequality rises above the average, the relationship between corporate taxes and firm value flips. This flip suggests that some companies actually receive a financial benefit from paying corporate taxes.

Why? We found that these companies enjoy a reputational benefit for being socially responsible taxpayers. Indeed, our results were driven by businesses that are are otherwise widely viewed as good corporate citizens. For those companies, paying taxes represents one of many socially responsible behaviors.

Why it matters

Our research offers evidence that investors view corporate taxes positively when they’re consistent with other socially responsible behaviors. Given that corporations have a fiduciary duty to their shareholders, this finding suggests that corporate taxes can play a role in a company’s corporate social responsibility, or CSR, efforts.

Our findings also align with a 2023 KPMG survey of more than 300 chief tax officers that found more than half said they cared more about looking like good corporate citizens than reducing their tax burdens.

An extensive body of research has shown that companies’ investments in CSR activities aren’t just selfless – they’re linked with improved operational and financial outcomes. There’s evidence that businesses that prioritize CSR are better able to attract quality employees; have improved corporate reputations; and are more profitable as judged by return on assets, return on equity and return on sales.

While work on tax responsibility has lagged behind other CSR research, evidence is mounting that paying corporate taxes has positive effects. Much of this research indicates that companies that aggressively minimize tax payments and gain a reputation as “tax avoiders” face harm to their reputation – and therefore, the bottom line.

Our study dovetails this research and identifies a specific context in which investors view corporate taxes favorably. At a time of tax reform both globally and in the U.S., and as lawmakers and pundits continue to call for greater tax transparency, companies should be aware of the role of corporate tax responsibility in their overall CSR portfolio.

What’s next

Corporate tax responsibility is complex and not yet well defined. Our current research examines other circumstances that lead investors to value corporate taxes, which will help companies to quantify the value of including taxes in their CSR portfolios.

The Research Brief is a short take about interesting academic work.The Conversation

About the Author:

Erica Neuman, Assistant Professor of Accounting, University of Dayton and Curtis Farnsel, Assistant Professor of Accounting, University of Dayton

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Economics & Fundamentals Opinions
21 Feb

Hong Kong Index reached the maximum for 19 weeks. European indices are declining amid weak corporate reports

By JustMarkets

The Dow Jones Index (US30) fell by 1.01% on Thursday. The S&P 500 Index (US500) was down 0.43%. The Nasdaq Technology Index (US100) fell by 0.48%. Despite beating earnings expectations, Walmart’s cautious outlook for fiscal year 2026 caused the company’s stock to fall 6.5%, pulling down other retailers such as Target (-2%) and Costco (-2.6%). Investor sentiment deteriorated further when Palantir’s shares fell 5.3% amid reports of impending Pentagon budget cuts and a new divestment plan by its CEO.

Banxico minutes signaled cautious easing amid global uncertainty. The minutes revealed that several board representatives expected a 50bp rate cut at the March 27 meeting if disinflation continues, signaling a potential acceleration in the easing cycle.

Equity markets in Europe were mostly falling on Thursday. Germany’s DAX (DE40) was down 0.53%, France’s CAC 40 (FR40) closed up 0.15%, Spain’s IBEX 35 (ES35) added 0.29%, and the UK’s FTSE 100 (UK100) closed negative 0.57%. European stocks closed mostly lower on Thursday amid mixed corporate earnings data, while markets continued to assess the impact of potential trade barriers from the US and increased defense spending from EU members. Airbus lost 2.3% after reporting pessimistic results and saying it may have to postpone deliveries to the US to focus on other customers if the US government continues to impose tariffs. At the same time, Mercedes Benz reported a 40% drop in sales of its automotive division in 2024. On the other hand, Schneider Electric jumped 3% after it posted record sales and earnings in 2024 and also provided strong expectations for 2025.

WTI crude oil prices rose to $73 a barrel on Thursday on the back of a weaker dollar and continued risks of supply cuts. OPEC+ delegates said they may postpone supply increases, citing concerns over market volatility as cartel members have previously failed to cut production to target levels. On the other hand, the latest EIA data showed that US crude inventories rose by 4.6 million barrels in the second week of February, exceeding market expectations for a 3 million barrel increase, and marking the fourth consecutive increase in inventories.

Asian markets were mostly down on Thursday. Japan’s Nikkei 225 (JP225) decreased by 1.24%, China’s FTSE China A50 (CHA50) was down 0.10%, Hong Kong’s Hang Seng (HK50) lost 1.60% and Australia’s ASX 200 (AU200) was negative 1.15%. Alibaba’s stock price rose more than 9% to a 3-year high after the company reported its strongest revenue growth in more than a year. The Hang Seng Index hit its highest in 19 weeks on Friday, kicking off its sixth consecutive week of gains and marking its longest winning streak in nearly a year, up about 2% thus far. Enthusiasm for China’s artificial intelligence sector, especially after the emergence of DeepSeek, continues to boost sentiment. Meanwhile, Beijing this week encouraged foreign companies to invest in the Chinese stock market, expecting foreign capital to encourage long-term investment.

The Australian dollar rose to around $0.64 on Friday, hitting its highest level in ten weeks, as strong economic data bolstered expectations of a more gradual easing cycle from the Reserve Bank of Australia. The data showed that private sector growth in Australia continued for the fifth consecutive month in February, with both manufacturing and services sectors maintaining positive momentum.

The offshore yuan slid to 7.24 per dollar despite the People’s Bank of China pledging to support the currency amid mounting pressure from a strengthening US dollar. In an attempt to stabilize the yuan, the PBOC has pledged to increase cross-border use of the currency and expand the offshore yuan market.

Malaysia’s annual inflation rate in January 2025 stood at 1.7%, unchanged for the second consecutive month and in line with market estimates. The rate remains the lowest in the past eleven months. Core consumer prices, excluding volatile fresh food and administrative expenses, rose by 1.8% y/y in January after rising 1.6% in December. On a month-on-month basis, consumer prices rose by 0.1%, maintaining the same pace as in December.

S&P 500 (US500) 6,117.52 −26.63 (−0.43%)

Dow Jones (US30) 44,176.65 −450.94 (−1.01%)

DAX (DE40) 22,314.65 −118.98 (−0.53%)

FTSE 100 (UK100) 8,662.97 −49.56 (−0.57%)

USD Index 106.38 −0.79 (−0.74%)

News feed for: 2025.02.21

  • Australia Manufacturing PMI (m/m) at 00:00 (GMT+2);
  • Australia Services PMI (m/m) at 00:00 (GMT+2);
  • Japan National Core CPI (m/m) at 01:30 (GMT+2);
  • Japan Manufacturing PMI (m/m) at 02:30 (GMT+2);
  • Japan Services PMI (m/m) at 02:30 (GMT+2);
  • UK Retail Sales (m/m) at 09:00 (GMT+2);
  • German Manufacturing PMI (m/m) at 10:30 (GMT+2);
  • German Services PMI (m/m) at 10:30 (GMT+2);
  • Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
  • Eurozone Services PMI (m/m) at 11:00 (GMT+2);
  • UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
  • UK Services PMI (m/m) at 11:30 (GMT+2);
  • Canada Retail Sales (m/m) at 15:30 (GMT+2);
  • US Manufacturing PMI (m/m) at 16:45 (GMT+2);
  • US Services PMI (m/m) at 16:45 (GMT+2);
  • US Existing Home Sales (m/m) at 17:00 (GMT+2);
  • Canada BOC Gov Macklem Speaks at 19:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
21 Feb

Week Ahead: GER40’s outlook hinges on German election showdown

By ForexTime 

  • Opinion polls point to CDU/CSU return to power
  • GER40 ↑ 12% YTD, one of best performers in FXTM universe
  • Fragmented parliament outcome could spark GER40 selloff
  • Beyond politics, German data to move GER40 via ECB cut bets
  • Technical levels: 22955.9, 22000, 21600

Europe’s largest economy goes to the polls on Sunday 23rd February.

And the outcome will shape its political and economic outlook over the next few years.

Beyond Germany’s snap election, the week ahead is packed with key data and corporate earnings from across the globe:

 

Saturday, 22nd February

  • US President Donald Trump speech

Sunday, 23rd February

  • GER40: German federal election

Monday, 24th February

  • GER40: Germany IFO business climate
  • EUR: Eurozone CPI
  • SG20: Singapore CPI
  • UK100: BOE Deputy Governors Clare Lombardelli and Dave Ramsden speech

Tuesday, 25th February

  • GER40: Germany GDP
  • MXN: Mexico international reserves, current account
  • TWN: Taiwan industrial production
  • USDInd: US consumer confidence, Fed speech

Wednesday, 26th February

  • TWN: Taiwan GDP
  • NAS100: Nvidia earnings, Fed speech
  • G-20 finance ministers and central bankers meet in Cape Town

Thursday, 27th February

  • EUR: Eurozone consumer confidence, ECB minutes
  • MXN: Mexico unemployment, trade balance
  • SPN35: Spain CPI
  • US500: US GDP, initial jobless claims, Fed speech

Friday, 28th February

  • CAD: Canada GDP
  • FRA40: France CPI, GDP
  • GER40: Germany CPI, unemployment
  • JP225: Japan Tokyo CPI, industrial production, retail sales
  • USDInd: US PCE inflation, income and spending, Fed speech

 

What is happening?

Millions of voters in Germany will be heading to the polls on Sunday 23rd February to elect a new parliament.

Polls close at 6 pm, after which the first election result projections are published.

The lowdown…

Germany’s ruling coalition collapsed in November 2024 after Chancellor Olaf fired a key minister and called for a no-confidence vote. After losing this vote in December, this triggered a snap general election for 23rd February.

Who are the major players?

  • CDU/CSU = Christian Democratic Union /Christian Social Union
  • AfD = Alternative for Germany
  • SPD = Social Democratic Party
  • Greens = Green Party
  • Left = Left Party
  • BSW = Bündnis Sarah Wagenknecht
  • FDP = Free Democratic Part

According to opinion polls, the CDU/CSU alliance is leading with around 30% support and is likely to return to power.

Note: No party will have enough seats to form a government alone, so a coalition needs to be formed that makes up more than 50% of the seats in the Bundestag.

politico

Source: Politico

 

What does this mean?

A new government led by the CDU/CSU is seen as a market-friendly outcome with a stable coalition easing economic uncertainty.

Investors are banking on the prospect of lower corporate taxes, falling energy prices and less bureaucracy under their leadership to revive growth in Europe’s largest economy.

What could go wrong?

The election outcome is a fragmented parliament, resulting in fresh political uncertainty and exposing Germany’s economy to downside risks.

How will this impact European markets?

FXTM’s GER40 which tracks the benchmark DAX index has gained 12% year-to-date.

These gains have been fuelled by hopes around the next German government enforcing much-needed reforms to jumpstart Germany’s economy.

In the FXTM universe, the GER40 has outperformed most of its global peers:

  • CHINAH: +18.6%
  • HK50: +17.8%
  • GER40:  +12%
  • SPN35: +11.8%
  • EU50: +11.5%
  • FRA40: +10%
  • NETH25: +6.8%
  • UK100: +6%
  • AU200: +5.8%
  • US500: +4%
  • NAS100: +5%
  • TWN: 2.7%
  • RUS2000: +1.4%
  • JP225: -2.8%

The GER40 which recently hit a fresh all-time high could see extended gains on a market friendly election outcome.

An unfavourable election outcome could spark a selloff as uncertainty over Germany’s political landscape fuels risk aversion.

 

German data dump could mean more volatility

Beyond politics, top-tier data from Germany throughout the week could bring more trading opportunities on the GER40.

On Monday, the latest IFO business climate figures will be published, followed by GDP on Tuesday and inflation report on Friday.

Traders are currently pricing in a 97% probability of a 25bp ECB rate cut by March with the odds of another cut by April at 62%.

  • The GER40 could push higher if data boosts bets around faster ECB rate cuts.
  • Should data cool bets around ECB rate cuts, the GER40 could trade lower.

 

Looking at the technical…

The GER40 is firmly bullish on the daily charts as there have been consistently higher highs and higher lows. Prices are trading above the 21, 50, 100 and 200-day SMA.

  • Should the 21-day SMA prove reliable support, this may trigger a rebound toward 22500, the all-time high at 22955.9 and beyond.
  • A break below 22000, may trigger a selloff toward 21600 and 21050.

GER40

By the way…

FXTM also offers the GER40 as a futures CFD named GER40H5 on our platform.

Trading futures as CFDs offer several advantages, particularly for longer-term traders. One of the biggest is the swap-free element – meaning you won’t need to pay swaps or related charges for keeping your position open overnight.

ger40 FUTURES

Click here for more information on futures trading with FXTM.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Financial News
20 Feb

Natural gas prices jumped to a 2-year-high. The Mexican peso depreciates to a 3-year low.

By JustMarkets 

The Dow Jones (US30) was up 0.16% on Wednesday. The S&P 500 Index (US500) was up 0.24%. The Nasdaq Technology Index (US100) was up 0.05%. The minutes from the Fed’s January meeting emphasized that policymakers are drawing attention to the need for more evidence of sustained disinflation but warned of inflation risks from potential changes in trade, immigration, geopolitical shocks, and high household spending. The minutes echoed Chairman Powell’s previous statement that the Fed was in no hurry to cut rates further. At the same time, President Donald Trump announced plans to impose 25 percent tariffs on imports of automobiles, semiconductors, and pharmaceuticals beginning April 2. Investors are currently factoring in one rate cut for 2025, with some suggesting the possibility of a second.

The Mexican peso (MXN) weakened to 20.4 per US dollar, nearing a three-year low, amid increased risk aversion following renewed tariff threats from US President Donald Trump. The peso was also pressured by the Bank of Mexico’s (Banxico) recent 50 bps rate cut to 9.50% and its recommendations for further easing, which could narrow the policy gap with the Fed, whose cautious stance reflects stalled disinflation.

Equity markets in Europe mostly fell on Wednesday. Germany’s DAX (DE40) fell by 1.80%, France’s CAC 40 (FR40) closed down 1.17%, Spain’s IBEX 35 (ES35) lost 1.63%, and the UK’s FTSE 100 (UK100) closed 0.63% yesterday. On the political front, European leaders held a second, larger summit in Paris to discuss defense spending plans after US authorities signaled a reduction in defense integration and a softening stance towards Russia.

WTI crude prices fell below $72 a barrel on Thursday, halting three days of gains, after an industry report showed another increase in US crude inventories. API data showed that US crude inventories rose by more than 9 million barrels last week, well above expectations for a 2.8 million barrel increase. If official data is confirmed later today, this could be the fourth consecutive weekly increase.

The US natural gas (XNG) prices climbed to $4.3/MMBtu, nearing a two-year high reached on January 16, as extreme cold weather boosted heating demand and froze oil and gas wells, reducing production. Over the past 13 days, production has fallen by 6.7 Bcf/d to a four-week low of 100.1 Bcf/d.

Palladium (XPD) prices climbed above $1,000 an ounce, extending their 13% gain this year, led by the precious metal’s rally amid growing trade war fears. US President Trump’s tariff threats against countries that continue to impose duties against the US have raised fears of a contraction in global trade, prompting investors to buy safe-haven assets. At the same time, dovish policies from central banks, including the ECB, PBoC, and others, also supported prices.

Asian markets were mostly declining on Wednesday. Japan’s Nikkei 225 (JP225) was down 0.27%, China’s FTSE China A50 (CHA50) was up 0.26%, Hong Kong’s Hang Seng (HK50) decreased by 0.14% cheaper, and Australia’s ASX 200 (AU200) was negative 0.73% for yesterday.

China’s central bank (PBoC) left key lending rates unchanged for the fourth consecutive month in February 2025 amid fluctuations in the yuan and the continued impact of US President Trump’s aggressive trade policies. The one-year prime rate, which serves as a benchmark for most corporate and home loans, remained unchanged at 3.1%, while the five-year prime rate, used as a benchmark for real estate mortgages, remained unchanged at 3.6%. These rates remain at record lows after declines in October and July 2024.

Malaysia’s trade surplus narrowed to MYR3.6 billion in January 2025 from MYR10.2 billion in the same month in 2023, well below market estimates that suggested an increase of MYR14.1 billion. This was the smallest trade surplus since April 2020, when the trade balance showed a deficit, mainly due to a surge in imports.

Australia’s seasonally adjusted unemployment rate rose to 4.1% in January 2025 from December’s 4.0%, matching market estimates. This is the highest unemployment rate since October last year, as the number of unemployed rose by 23,400 to 627,500.

S&P 500 (US500) 6,144.15 +14.57 (+0.24%)

Dow Jones (US30) 44,627.59 +71.25 (+0.16%)

DAX (DE40) 22,433.63 −410.87 (−1.80%)

FTSE 100 (UK100) 8,712.53 −54.20 (−0.62%)

USD index 107.17 +0.12 (+0.11%)

News feed for: 2025.02.20

  • Australia Unemployment Rate (m/m) at 02:30 (GMT+2);
  • China PBoC Prime Rate (m/m) at 03:00 (GMT+2);
  • Switzerland Trade Balance (m/m) at 09:00 (GMT+2);
  • Hong Kong Inflation Rate (m/m) at 10:30 (GMT+2);
  • US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
  • US Natural Gas Reserves (w/w) at 17:30 (GMT+2);
  • US Crude Oil Reserves (w/w) at 18:00 (GMT+2);
  • New Zealand Trade Balance (q/q) at 23:45 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
19 Feb

The RBNZ expectedly cut the rate by 0.5%. Canada’s median inflation rate remains above the target of 2%

By JustMarkets 

On Tuesday, the Dow Jones (US30) Index was up 0.02%. The S&P 500 Index (US500) added 0.24%. The Nasdaq Technology Index (US100) was up 0.23%. Weakness in the consumer staples and communication services sector, highlighted by a 2.7% drop in Meta Platforms shares and a 0.9% decline in Amazon shares, pressured the broader market. However, energy stocks excelled, with Exxon Mobil up 1.8% and Energy Transfer up 1.6%. Market participants are keeping a close eye on policy decisions by the Fed and the White House, especially on tariffs and interest rates.

The Canadian dollar weakened to 1.42 per US dollar, halting its rebound from a 22-year low of 1.455 on January 31, as investors digested mixed inflation data. Annual inflation rose to 1.9% in January from 1.8%, staying at or below the Bank of Canada’s 2% target for the 6th consecutive month and supporting expectations of further easing. While higher gasoline prices led to the increase, tax incentives helped lower food costs. Nevertheless, key indicators such as median and truncated average rates remained at a high of 2.7%, above expectations.

Equity markets in Europe were mostly up on Tuesday. Germany’s DAX (DE40) rose by 0.20%, France’s CAC 40 (FR40) closed 0.21% higher, Spain’s IBEX 35 (ES35) gained 0.98%, and the UK’s FTSE 100 (UK100) closed negative 0.02%. The ZEW Economic Sentiment Indicator for Germany for February 2025 rose 15.7 points to 26, exceeding market expectations of 20 and reaching its highest level since July 2024. It also marked the largest increase in investor confidence since January 2023, ahead of the federal elections, as optimism grew that the new German government would be able to act. Investors also kept an eye on peace talks between Russia and Ukraine and speculated on increased defense spending in Europe. The US and Russian diplomats agreed to set up negotiating teams, although an informal summit of European leaders in Paris ended without concrete action as a proposal to send peacekeeping troops to Ukraine remains divisive.

WTI crude oil prices held near $72 a barrel on Tuesday as diplomatic talks between the US and Russia aimed at ending the war in Ukraine boosted hopes of reduced geopolitical risks. Hopes for an end to the war in Ukraine rose after talks between Russia and the US, but officials warned that one meeting would not ensure a lasting peace.

Asian markets were mostly down on Tuesday. Japan’s Nikkei 225 (JP225) was up 0.25%, China’s FTSE China A50 (CHA50) was down 0.10%, Hong Kong’s Hang Seng (HK50) decreased by 1.59% and Australia’s ASX 200 (AU200) was negative 0.66%.

The RBNZ cut the official money rate by 50bps to 3.75%, bringing the total amount of easing over the past six months to 175bps. The decision came amid signs of slowing inflation, with policymakers keen to revive the struggling economy. While the Central Bank indicated that further easing was possible, it signaled that future steps would be more modest and that the end of the easing cycle was approaching. Governor Adrian Orr hinted at a possible 25bp rate cut in April and May, which would bring the money rate closer to the neutral range from 3.0%.

The offshore yuan depreciated to 7.28 per dollar, marking the third straight session of losses, after US President Donald Trump announced new tariff plans. On Tuesday, Trump unveiled plans to impose 25% tariffs on automobiles, as well as similar duties on semiconductors and pharmaceutical products. Further influencing the sentiment was Donald Trump Jr, the president’s eldest son, noting that the US should be prepared to confront any potential military challenges from China while remaining open to diplomatic talks with its rival.

S&P 500 (US500) 6,129.58 +14.95 (+0.24%)

Dow Jones (US30) 44,556.34 +10.26 (+0.02%)

DAX (DE40) 22,844.50 +46.41 (+0.20%)

FTSE 100 (UK100) 8,766.73 −1.28 (−0.02%)

USD Index 107.03 +0.46 (+0.43%)

News feed for: 2025.02.19

  • Japan Trade Balance (m/m) at 01:50 (GMT+2);
  • Australia Wage Price Index (m/m) at 02:30 (GMT+2);
  • New Zealand RNBZ Interest Rate Decision at 03:30 (GMT+2);
  • New Zealand RNBZ Monetary Policy Statement at 03:30 (GMT+2);
  • New Zealand RNBZ Press Conference at 04:00 (GMT+2);
  • UK Consumer Price Index (m/m) at 09:00 (GMT+2);
  • US Building Permits (m/m) at 15:30 (GMT+2);
  • US FOMC Meeting Minutes at 21:00 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
19 Feb

USDJPY eyes key support zones ahead of Japan CPI

By ForexTime

  • Yen best performing G10 currency YTD
  • USDJPY ↓ 2% MTD ahead of Japan CPI
  • Traders see 62% chance BoJ hikes by June
  • Japan CPI sparked moves of ↑ 0.3% & ↓ 0.4% over past year
  • Bloomberg FX model: 74% USDJPY – (149.77 – 153.63)

The Japanese yen is the best-performing G10 currency in the year to date.

It’s gained 3.6% against the dollar, with prices trading around 151.60 as of writing.

YTD

Appetite for the Yen has been boosted by tariff fears with positive Japan data and hawkish BoJ officials fuelling the currency’s upside gains.

Note: Japan published stronger-than-expected GDP figures on Monday. GDP Annualized rose 2.8% in Q4 compared to the 1.1% estimate.

The yen could experience more volatility due to the FOMC meeting minutes this evening and Japan CPI report on Friday.

Taking a quick look at the technicals, prices are under pressure on the weekly charts with weakness below the 21 & 50-week SMA.

USDJPY weekly

Considering how the Yen is expected to be the most volatile G10 currency versus the USD over the next one-week, this could provide fresh trading opportunities.

yen volll

 

Here are 3 things that may trigger big moves:

 

    1) FOMC meeting minutes

Fed Chair Jerome Powell has repeatedly stated that the Fed is in no rush to cut interest rates.

With consumer prices rising more than expected in January and Trump’s tariff drama fuelling inflation fears, the Fed is likely to adopt a cautious approach.

Traders are currently pricing in a 50% probability of a 25bp Fed cut by June with a cut only priced in by September.

  • If the minutes reflect this caution, the dollar could appreciate – boosting USDJPY.
  • However, any whiff of hawks could lend the dollar some support – weakening USDJPY.

Over the past 12 months, the Fed minutes have triggered upside moves of as much as 0.2% or declines of 0.3% in a 6-hour window post-release.

 

    2) Japan January CPI report

The consumer price index, which measures headline inflation could offer clues about when the BoJ will hike rates.

Annual inflation is expected to jump 4.0% from 3.6% in the previous month, while the core reading (excluding food and energy) is seen rising 2.5% to 2.4%.

Traders are currently pricing in a 62% probability of a 25bp BoJ hike by June with a hike fully priced in by September 2025.

If the incoming CPI report triggers major shifts to these bets, it could translate to yen volatility.

Over the past 12 months, the Japan CPI has triggered upside moves of as much as 0.3% or declines of 0.4% in a 6-hour window post-release.

 

    3) Technical forces

Looking at the charts, the USDJPY is down over 2% month-to-date, trading around support at 151.60.

  • Sustained weakness below 151.60 could open a path toward 150.90 and 149.77 – the lower bound of Bloomberg’s FX model.
  • Should 151.60 prove reliable support, this may trigger a rebound toward the 200-day SMA, 100-day SMA and 153.63 – the upper bound of Bloomberg’s FX model.

usdjpy 23

Bloomberg’s FX model points to a 74% chance that USDJPY will trade within the 149.77 – 153.63 range over the next one-week period.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Economics & Fundamentals Financial News
18 Feb

The RBA has cut interest rates for the first time since 2020. European countries will increase spending on the army

By JustMarkets

US stock indices did not trade yesterday due to the bank holiday.

The Mexican peso held steady at 20.3 per US dollar, showing resilience despite Banxico’s dovish stance, supported by a still high interest rate differential and the temporary postponement of US tariffs on Mexican goods. While the Bank of Mexico’s recent 50bp rate cut to 9.50% and its recommendations for further easing may narrow the policy gap with the Federal Reserve and put pressure on the peso, continued investor demand for high-yielding assets provided support.

Equity markets in Europe were mostly up on Monday. Germany’s DAX (DE40) rose by 1.26%, France’s CAC 40 (FR40) closed 0.13% higher, Spain’s IBEX 35 (ES35) gained 0.47%, and the UK’s FTSE 100 (UK100) closed positive 0.41%. European indices rose thanks to gains in defense sector stocks amid expectations of increased military spending by European governments. European leaders met in Paris to discuss Russia’s invasion of Ukraine after the US signaled limited support and US-Russian talks on the conflict are due to begin this week in Saudi Arabia, although uncertainty remains over Ukraine’s involvement and Europe’s exclusion. Meanwhile, President Trump confirmed plans to impose tariffs on foreign cars from April 2, adding to trade tensions between Europe and the US.

Brent crude oil remained just below $75 a barrel on Monday as investors watched progress on a possible peace deal between Russia and Ukraine that could ease sanctions and boost oil supply. US President Donald Trump has said he may soon meet with Russian President Vladimir Putin to discuss ending the war, with the first talks between the US and Russia due to take place this week in Saudi Arabia. If the talks are successful, more Russian oil could flow to global markets, increasing supply. In addition, Iraq’s Kurdistan region said oil exports could resume next month.

Asian markets were mostly down on Monday. Japan’s Nikkei 225 (JP225) was up 0.06%, China’s FTSE China A50 (CHA50) was down 0.14%, Hong Kong’s Hang Seng (HK50) was 0.02% cheaper, and Australia’s ASX 200 (AU200) was negative 0.22%. On Chinese indices yesterday, traders were taking profits after a rally in the technology sector as they awaited further policy signals from Chinese President Xi Jinping’s meeting with private enterprises including Alibaba, Meituan, Xiaomi Corp, and BYD Co.

The Australian dollar fell below $0.635 on Tuesday, reversing previous gains after the Reserve Bank of Australia (RBA) cut its cash rate by 25 basis points to 4.1%, in line with expectations. This is the first rate cut since November 2020, driven by easing inflationary pressures. The decision recognizes positive progress on inflation, but the council remains cautious about the prospects for further policy easing. The statement also signals the Central Bank’s intention to gradually remove any further monetary restrictions.

The New Zealand dollar slid to $0.571 on Tuesday, breaking a three-day winning streak and retreating from a two-month-high, as investors await the Reserve Bank of New Zealand’s policy meeting. The RBNZ is expected to cut the official money rate by 50 bps on Wednesday, bringing it to 3.75% amid rising unemployment, lower economic growth, and inflation concerns. Traders will also pay attention to RBNZ Governor Adrian Orr’s press conference after the rate decision, which could provide insight into the interest rate outlook. It is expected that the Central Bank may cut the benchmark rate by 25 bps at each of its next two meetings in April and May.

S&P 500 (US500) 6,114.63 0 (0%)

Dow Jones (US30) 44,546.08 0 (0%)

DAX (DE40) 22,798.09 +284.67 (+1.26%)

FTSE 100 (UK100) 8,768.01 +35.55 (+0.41%)

USD Index 106.75 +0.04 (+0.04%)

News feed for: 2025.02.18

  • Australia RBA Interest Rate Decision at 05:30 (GMT+2);
  • Australia RBA Monetary Policy Statement at 05:30 (GMT+2);
  • Australia RBA Press Conference at 06:30 (GMT+2);
  • UK Claimant Count Change (m/m) at 09:00 (GMT+2);
  • UK Average Earnings Index (m/m) at 09:00 (GMT+2);
  • UK Unemployment Rate (m/m) at 09:00 (GMT+2);
  • UK BOE Gov Bailey Speaks at 11:30 (GMT+2);
  • German ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+2);
  • Canada Consumer Price Index (m/m) at 15:30 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
14 Feb

The German Index set another high. The GDP of Malaysia and Singapore show steady growth

By JustMarkets

At the end of Thursday, the Dow Jones Index (US30) rose by 0.77%. The S&P 500 Index (US500) was up 1.04%. The Nasdaq Technology Index (US100) is up 1.43%. Stocks found support after Thursday’s release of the January Producer Price Index (PPI) report, which bodes well for the upcoming PCE Price Index report. The US PPI for January rose by 3.5% y/y, stronger than expectations of 3.3% y/y and the largest increase in nearly 2 years. January PPI excluding food and energy rose 3.6% y/y, stronger than expectations of 3.3% y/y. US weekly initial jobless claims fell by 7,000 to 213,000, indicating a stronger labor market than expected at 216,000. Lower bond yields also sparked a rally in microchip stocks, which helped boost the overall market.

The Canadian dollar strengthened above 1.43 per US dollar, hitting a near two-month high, as the Bank of Canada softened its dovish stance. The Bank of Canada’s latest meeting minutes highlighted concerns that lingering uncertainty over potential US tariffs, which are expected to affect business investment and spur inflation, caused policymakers to refrain from making interest rate estimates.

Equity markets in Europe were mostly up on Thursday. Germany’s DAX (DE40) rose by 2.09%, France’s CAC 40 (FR40) closed 1.52% higher, Spain’s IBEX 35 (ES35) added 0.19%, and the UK’s FTSE 100 (UK100) closed up 0.49%. The DAX Index rose sharply on Thursday, setting a new record, marking the fourth day of gains. Market sentiment remained upbeat amid strong corporate earnings and optimism about a possible end to the war in Ukraine, although caution remained on US trade policy. On the corporate front, Rheinmetall shares jumped more than 9% and led the index. Automakers also advanced strongly, with Volkswagen, BMW, Mercedes Benz, and Porsche adding between 4% and 6%. German technology conglomerate Siemens was also among the leaders, rising nearly 6% after reporting better-than-expected first-quarter earnings.

WTI crude oil prices settled at $71.3 a barrel on Friday amid rising fuel demand and a delay in US plans to impose tariffs. According to JPMorgan, global oil demand rose to 103.4 million barrels per day in February, up 1.4 million barrels per day from a year earlier. Crude oil could see a small gain this week, the first since mid-January.

The US natural gas (XNG/USD) prices climbed above $3.76/MMBtu, the highest in three weeks, thanks to higher LNG exports, lower output, and prognoses of colder weather. In addition, the EIA reported that US utilities withdrew 100 Bcf of natural gas from storage in the week ended February 7, bringing total inventories down to 2,297 Bcf, above the expected 92 Bcf.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) rose by 1.28%, China’s FTSE China A50 (CHA50) gained 0.47%, Hong Kong’s Hang Seng (HK50) climbed 0.20%, and Australia’s ASX 200 (AU200) was positive 0.05%.

The People’s Bank of China (PBOC) said in its fourth-quarter monetary policy implementation report that it will adjust policy at the right time to support the economy. The Central Bank recognized strengthening external factors, weak domestic demand, and various potential risks. To address these challenges, the Central Bank plans to use a full range of monetary policy tools, including interest rates and the bank reserve requirement ratio. It also emphasized that the scope and timing of policy measures will be adjusted depending on domestic and global economic conditions.

The New Zealand dollar rose to around US$0.569 on Friday, extending gains from the previous session, helped by a weaker US dollar after President Donald Trump delayed the imposition of significant duties. He said retaliatory tariffs would only take effect after the White House considers appropriate tariff levels for each country. Domestically, the RBNZ is expected to cut rates by 50 bps next week to 3.75%, with markets expecting another 75 bps cut this year.

Malaysia’s economy grew by 5% year-on-year in Q4 2024, beating initial estimates of 4.8% but slowing from an upwardly revised 5.4% in the previous quarter. This is the slowest growth in the past three quarters. Net trade made a positive contribution to GDP, with exports rising 8.5% and imports increasing 5.7%. On a seasonally adjusted quarterly basis, the economy contracted by 1.1%, the first contraction since Q4 2023, following a revised 1.8% growth in Q3. For the full year, Malaysia’s GDP grew by 5.1%.

Singapore’s economy grew 5% year-on-year in Q4 2024, slowing from 5.7% growth in Q3. For the full year, the economy grew by 4.4%, exceeding the 1.8% growth recorded in 2023.

S&P 500 (US500) 6,115.07 +63.10 (+1.04%)

Dow Jones (US30) 44,711.43 +342.87 (+0.77%)

DAX (DE40) 22,612.02 +463.99 (+2.09%)

FTSE 100 (UK100) 8,764.72 −42.72 (−0.49%)

USD Index 107.12 −0.20 (−0.18%)

News feed for: 2025.02.14

  • Switzerland Producer Price Index (m/m) at 09:30 (GMT+2);
  • Eurozone GDP (q/q) at 12:00 (GMT+2);
  • US Retail Sales (m/m) at 15:30 (GMT+2);
  • US Industrial Production (m/m) at 16:15 (GMT+2).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

Economics & Fundamentals Financial News
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