InvestMacro

The Dow Jones (US30) rose 1.65% on Wednesday. The S&P 500 Index (US500) gained 1.83%. The Nasdaq Technology Index (US100) jumped 2.31%. The core inflation rate rose for the third consecutive month to 2.9% in line with expectations, but the core rate unexpectedly slowed to 3.2%. The data added confidence that the Fed may continue to cut interest rates this year. In addition, corporate earnings results from major banks boosted investor sentiment. JPMorgan shares rose about 0.4% after beating earnings and revenue estimates and raising its 2025 net interest income outlook. Wells Fargo shares rose more than 3% after reporting higher earnings. Goldman Sachs climbed 4.8% on better-than-expected earnings and revenue, and BlackRock jumped nearly 2.5% as its assets reached a record $11.6 trillion.

The Canadian dollar strengthened to 1.43 per US dollar, hitting a one-month-high, as the US dollar weakened after weaker-than-expected core inflation figures dampened expectations of a prolonged continuation of high interest rates by the Federal Reserve. Meanwhile, rising crude oil prices and Canada’s status as the largest oil exporter to the US, bolstered by new US sanctions against Russian oil, improved the outlook for demand for the loonie.

The Mexican peso strengthened to 20.5 per US dollar, recovering after falling to a March 2022 low, as the US dollar weakened after lower-than-expected core inflation data dampened expectations of a prolonged continuation of high interest rates by the Federal Reserve. In addition, reports that President-elect Donald Trump’s administration may gradually impose tariffs to ease inflationary pressures eased fears of trade disruptions, lending support to the peso.

Equity markets in Europe were mostly up on Wednesday. Germany’s DAX (DE40) rose by 1.50%, France’s CAC 40 (FR40) closed 0.69% higher, Spain’s IBEX 35 (ES35) gained 1.25%, and the UK’s FTSE 100 (UK100) closed positive 1.21%. In France, the annual inflation rate for December 2024 was confirmed at 1.3%, in line with preliminary estimates and unchanged from the previous month. Among individual stocks, financial institutions led the gains, with AXA, BNP Paribas, Credit Agricole and Societe Generale up 1.6-3.1%.

Silver (XAG/USD) rose to $30.3 an ounce on Wednesday, hitting its highest level in a month, as a drop in US core inflation supported bets on a less tight Fed monetary policy. Still, uncertain demand for silver used in manufacturing has kept prices well below the 12-year high of $35 reached in October. Overcapacity in China’s solar panel industry has forced photovoltaic companies to sign up to the government’s self-discipline program to regulate supply, limiting the outlook for silver demand from the leading industry.

WTI crude oil prices climbed above $80 a barrel on Thursday, developing a 3% gain from the previous session and trading near the highest level since mid-July last year amid rising global supply risks. The IEA expects the oil market to be slightly tighter this year than previously estimated, and noted that new US sanctions against Russia and Iran could put additional pressure on the supply balance. The EIA data also showed an eighth consecutive weekly decline in commercial crude inventories, which hit their lowest level since April 2022. This is the longest streak of declines since 2021 and inventories are now at a six-year seasonal low.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) was down 0.08%, China’s FTSE China A50 (CHA50) decreased by 0.38%, Hong Kong’s Hang Seng (HK50) was up 0.34%, and Australia’s ASX 200 (AU200) was negative 0.22%.

The Australian dollar broke a three-day streak of gains as investors reacted to a mixed employment report. Although Australia’s unemployment rate rose slightly to 4% in December from 3.9% in November, employment growth exceeded expectations. Looking ahead, investors are focused on Australia’s fourth quarter inflation data due out later this month, which will be a key indicator ahead of the Reserve Bank of Australia’s upcoming monetary policy decision in February. Markets are currently pricing in a 70% chance that the RBA will cut its 4.35 percent monetary rate by 25 basis points next month.

At Tuesday’s close, the Dow Jones Index (US30) was up 0.52%. The S&P 500 Index (US500) added 0.11%. The Nasdaq Technology Index (US100) was down 0.13%. Yesterday, the overall market received support from a Bloomberg report that President-elect Trump’s economic team is considering a gradual increase in trade tariffs as part of a strategy to stave off a spike in inflation. Stocks also gained support after US producer prices rose less than expected, easing inflation concerns and boosting expectations for a favorable US Consumer Price Index report on Wednesday. Major US financial institutions including BlackRock, JPMorgan Chase, Citigroup, Goldman Sachs, and Wells Fargo are due to release their fourth-quarter results today.

Rising crude oil prices and Canada’s position as the largest oil exporter to the US, benefiting from new US sanctions on Russian oil, supported the outlook for loonie demand. In addition, reports of the gradual implementation of proposed US tariffs have reduced Canadian exporters’ fears, further boosting loonie demand. In addition, stronger-than-expected Canadian labor market data for December lowered expectations of an imminent interest rate cut by the Bank of Canada (BoC).

Equity markets in Europe were mostly up on Tuesday. Germany’s DAX (DE40) rose by 0.69%, France’s CAC 40 (FR40) closed 0.20% higher, Spain’s IBEX 35 (ES35) gained 0.55%, and the UK’s FTSE 100 (UK100) closed negative 0.28%. The recovery in European indices came amid reports that the Trump administration is considering a more gradual approach to tariffs, potentially increasing them gradually. At the same time, bond yields declined, halting their recent rally. Swaps are discounting the chances at 97% for a -25 bp rate cut by the ECB at its next meeting on January 30.

WTI crude oil prices fell to around $78.3 a barrel on Tuesday amid profit taking after three days of gains. Crude prices hit a five-month high on Monday as tougher US sanctions on Russia’s energy industry jeopardized global supplies. The restrictions have affected major producers and hundreds of ships and tankers, forcing key buyers such as India and China to seek alternative sources. The first signs of disruption are already evident, with a senior Indian official saying ships hit by the sanctions will be banned from unloading, while China has secured oil supplies from the UAE and Oman.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) fell by 1.83%, China’s FTSE China A50 (CHA50) gained 2.08%, Hong Kong’s Hang Seng (HK50) rose by 1.83%, and Australia’s ASX 200 (AU200) was positive 0.48%. Mainland stocks rose sharply on Tuesday after Chinese authorities stepped up policy support to stem the market’s slide. The China Securities Regulatory Commission pledged to prioritize market stability in 2025, while the People’s Bank of China (PBoC) promised to prevent risks from currency fluctuations.

The Australian dollar dipped below $0.62 on Wednesday as caution prevails in the market ahead of crucial US inflation data that could limit the potential for the Federal Reserve to cut interest rates this year. Domestically, traders’ attention is focused on Thursday’s release of Australian employment data looking for clues on the potential trajectory of rate cuts by the Reserve Bank of Australia (RBA). In addition, Australia’s fourth quarter inflation data due for release later this month will be under scrutiny as one of the last major indicators before the RBA’s monetary policy decision next month. Markets are currently pricing in a 70 percent chance that the RBA will cut its 4.35 percent monetary rate by 25 basis points in February.

At the end of Monday, the Dow Jones Index (US30) was up 0.86%. The S&P 500 Index (US500) added 0.16%. The Nasdaq Technology Index (US100) fell by 0.30%. Investor sentiment worsened as Treasury yields rose, driven by expectations of a Fed rate cut this year and concerns about potential inflationary pressures from the incoming Trump administration’s policies. The technology and communication services sectors were the worst performers, while energy excelled thanks to higher oil prices following the imposition of new US sanctions against Russia.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) fell by 0.41%, France’s CAC 40 (FR40) closed down 0.30%, Spain’s IBEX 35 (ES35) lost 0.28%, and the UK’s FTSE 100 (UK100) closed negative 0.29%. Rising natural gas prices in the Eurozone have renewed fears of rising inflation in the bloc, while hawkish Fed rates continue to be supported by high inflation and a strong labor market.

UK 10-year Gilts yields continue to rise as investors lowered expectations for a Bank of England (BOE) rate cut in 2025 due to lingering concerns over inflation and economic uncertainty. Traders lowered their prognoses for a rate cut to 43 basis points by December 2025, down from the 50 basis points expected on Friday. The change came ahead of the release of UK inflation data, which is expected to show the annual inflation rate unchanged at 2.6%, while the core rate fell slightly to 3.4%

WTI crude prices fell to $78.4 a barrel on Tuesday but remained near four-month highs as tougher US sanctions on Russia’s energy industry threatened to cut global supplies. The restrictions have affected major producers and hundreds of ships and tankers, forcing key buyers such as India and China to seek alternative sources. There are already early signs of disruption, with a senior Indian official saying ships hit by the sanctions will be barred from unloading and Chinese buyers rushing to secure quick oil supplies from the UAE and Oman. On Monday, six European countries urged the EU to lower a $60-a-barrel price cap on Russian offshore crude and refined products to curb Russia’s military action in Ukraine. However, weakening demand from China could offset the effect of supply cuts.

Asian markets were declining yesterday. Japan’s Nikkei 225 (JP225) fell by 1.05%, China’s FTSE China A50 (CHA50) declined 0.29%, Hong Kong’s Hang Seng (HK50) lost 1.00% and Australia’s ASX 200 (AU200) was negative 0.23%.

The Australian dollar strengthened towards $0.62 on Tuesday, building on the previous session’s gains as the rally in the US dollar and Treasury yields paused. The Aussie was also supported by strong trade data from China, Beijing’s efforts to stabilize the yuan, and rising commodity prices. However, other data showed that consumer confidence in Australia declined for the second consecutive month in January, likely in response to the weakening of the Australian dollar against the US dollar. Markets are now pricing in a 67% probability that the Reserve Bank of Australia (RBA) will cut its 4.35% monetary rate by 25 basis points in February, and are fully factoring in the possibility of a rate change in April.

India’s annualized inflation rate for December 2024 eased to 5.22% from 5.38% in the previous month, broadly in line with market expectations of 5.3%, and remains within the RBI’s target of within 2 percentage points of 4%. On a month-on-month basis, retail prices in India fell 0.52%, the sharpest monthly decline in more than a year.

At the end of Friday, the Dow Jones Index (US30) fell by 1.63% (-1.31% for the week). The S&P 500 Index (US500) fell by 1.54% (down -1.09% for the week). The Nasdaq Technology Index (US100) decreased by 1.57% (week-to-date -1.18%). The US stocks fell sharply on Friday following a stronger-than-expected jobs report that dampened expectations of further interest rate cuts by the Federal Reserve in 2025. The December jobs report showed a robust labor market, with 256,000 new jobs and a drop in the unemployment rate to 4.1%, which beat the projections. This raised concerns that the Fed may keep rates elevated for a long time. Meanwhile, the University of Michigan’s Consumer Sentiment Index showed an increase in inflation expectations. Inflation expectations for the year ahead rose to 3.3%, the highest level in eight months, from 2.8% in December, while long-term inflation expectations also rose to 3.3% from 3%.

In Mexico, the latest Banxico meeting minutes hinted at more rate cuts, coinciding with inflation falling to a 46-month low of 4.21% year-on-year in December, fueling expectations for a 50 basis point rate cut in February. Adding to the peso’s woes was that President-elect Donald Trump has proposed declaring a national economic emergency and imposing massive tariffs on imports, adding to concerns about Mexico’s trade prospects.

The Canadian dollar weakened to 1.44 per US dollar as markets digested labor market data signaling a softening. Although December data showed a strong net job gain of 91,000 and a drop in the unemployment rate to 6.7%, the figure remained the second highest since September 2021, reinforcing expectations of a rate cut by the Bank of Canada. However, we should not forget that the Fed’s hawkish stance contrasts sharply with the Bank of Canada’s dovish outlook, emphasizing the divergence of monetary policy towards USD/CAD quotes growth. On the other hand, the Canadian dollar is a commodity currency and is strengthening on the back of rising oil prices.

Equity markets in Europe were mostly declining on Friday. The German DAX (DE40) fell by 0.50% (for the week +1.16%), the French CAC 40 (FR40) closed down by 0.79% (for the week +1.61%), the Spanish IBEX 35 (ES35) decreased by 1.50% (for the week +0.25%), the British FTSE 100 (UK100) closed negative 0.86% (for the week +0.30%).

In the UK, British government bond yields hit a 17-year high, further complicating the ruling Labor Party’s attempts to revive economic growth. Higher rates make financing current operations and debt repayments more costly for the government, increasing the risk that it will have to make spending cuts or raise taxes.

Norway’s inflation rate has fallen to a 4-year low. Norway’s annualized consumer inflation rate fell to 2.2% in December 2024, the lowest since December 2020, down from 2.4% in November. The rate also missed estimates of 2.5% and came close to the Central Bank’s 2% target. For the full year, core inflation averaged 3.1%, the lowest in four years. This increases the likelihood of further rate cuts by Norges Bank.

WTI crude prices rose by 3.6% on Friday, a gain not seen since October, as new US sanctions on the Russian oil sector raised fears of supply disruptions to the global market. The US Treasury Department sanctions target Russian oil producers Gazprom Neft and Surgutneftegaz, as well as more than 180 vessels, oil traders, and energy sector officials, to curb Russian oil trade and heighten geopolitical risks.

The US natural gas prices (XNG/USD) jumped more than 6% to above $3.9/MMBtu on Friday on prognoses of colder weather and increased heating demand over the next two weeks. For the week, natural gas prices are up more than 17%. Meteorologists are estimating below normal temperatures across much of the US through January 25, with the coldest days still to come.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) fell by 1.89%, China’s FTSE China A50 (CHA50) declined 1.90%, Hong Kong’s Hang Seng (HK50) lost 3.95%, and Australia’s ASX 200 (AU200) was positive 0.53%.

The People’s Bank of China (PBOC) and other regulators plan to strengthen foreign exchange market management, combat destructive behavior, and prevent risks of yuan overvaluation. The Central Bank also raised the parameter for cross-border financing to 1.75, which will boost overseas borrowing. The measures are aimed at supporting the yuan amid a weakening economy.

On Monday, the New Zealand dollar traded near US$0.557, at its lowest level in more than two years, pressured by a strong US dollar. The dollar’s rise followed stronger-than-expected US jobs data that underscored the resilience of the US labor market and supported the Federal Reserve’s cautious stance on rate cuts. The kiwi was also weakened by continued expectations that the Reserve Bank of New Zealand will cut its 4.25% monetary rate by 50 bps in February and further to 3% by the end of the year.

The US stock market did not trade yesterday.

Today, important data on the labor market, namely the report on Non-Farm payrolls, will be published in the US. This indicator is taken into account by the Fed when adjusting monetary policy. Economists expect the economy to add 154,000 jobs in December after a strong November report (227,000 jobs). The unemployment rate is expected to remain at 4.2% and average hourly earnings are expected to stay at a 4.0% annualized rate. With investors anticipating two rate cuts by the Federal Reserve this year, the 154,000 data will likely remain in line with a gradually slowing but still robust labor market. For the dollar, this would be a positive factor. However, if the data turns out to be worse than expected (a sharp cooling of the labor market), this scenario puts pressure on the USD Index, which would be positive for risk assets and precious metals in the short term.

The Mexican peso (USD/MXN) weakened to 20.5 per USD. December inflation data, which showed a 0.38% monthly increase and an annualized rate of 4.21%, the lowest in 46 months, reinforced expectations of a 50 basis point rate cut at the February Banxico meeting. The peso’s losses were exacerbated by a stronger dollar amid expectations of a cautious Fed, which will not cut rates in January and is expected to cut rates by only 25 basis points in the first half of 2025. In addition, concerns grew as President-elect Donald Trump proposed declaring a national economic emergency to justify the imposition of massive import tariffs.

Equity markets in Europe were mostly up on Thursday. Germany’s DAX (DE40) was down 0.06%, France’s CAC 40 (FR40) closed 0.51% higher, Spain’s IBEX 35 (ES35) added 0.86%, and the UK’s FTSE 100 (UK100) closed positive 0.83%.

WTI crude oil prices rose to $74 on Thursday as traders balanced supply risks with concerns over China’s slowing economy. The market was supported by a seventh consecutive weekly decline in US crude inventories and colder weather is expected to boost demand for the heating fuel.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) fell by 0.94%, China’s FTSE China A50 (CHA50) declined 0.59%, Hong Kong’s Hang Seng (HK50) lost 0.20%, and Australia’s ASX 200 (AU200) was negative 0.24%.

The People’s Bank of China (PBOC) announced on Friday, January 10 that it has suspended open market purchases of treasury bonds due to a supply shortage. Based on market conditions, the Central Bank said it would resume purchases at an appropriate time. The decision came amid repeated warnings from the PBoC about the risks of a bubble in China’s overheated bond market, where long-term yields have fallen to record lows. The shift is largely due to lingering economic uncertainty associated with a prolonged downturn in the real estate market.

The Australian dollar held just below $0.62 on Friday, near its lowest level in two years, amid dovish monetary policy rates from the Reserve Bank of Australia (RBA). ANZ Group, joining a growing number of banks predicting an earlier rate cut, now expects the RBA to act in February rather than wait until May, citing signs of weakening domestic inflation. Markets now estimate the probability of a rate cut next month at 75%, up significantly from 50% just a few days ago.

At Wednesday’s close, the Dow Jones Industrial Average (US30) added 0.25%, the S&P 500 Index (US500) was up 0.16%. and the Nasdaq Technology Index (US100) rose by 0.04%. Minutes from the Federal Reserve’s December meeting showed that several officials favor a gradual reduction in interest rates throughout 2025. Nearly all Fed officials felt that there were increased upside risks to inflation due to recent stronger-than-expected inflation data and the likely impact of potential changes in trade and immigration policy. Meanwhile, President-elect Donald Trump is considering declaring a national economic emergency to support his proposed tariffs. This has boosted the US Dollar Index but has put pressure on all risk assets.

Ahead of Friday’s jobs report, data showed private-sector hiring and wage growth slowed in December. ADP’s national employment report showed an increase of 122,000 jobs, falling short of the expected 140,000. Weekly initial jobless claims in the US unexpectedly fell by 10,000 to 201,000, indicating a strengthening labor market compared to expectations of a rise to 215,000.

eBay’s (EBAY) stock price rose more than 9% and led the S&P 500 higher after Meta Platforms offered to publish eBay listings on Facebook Marketplace to comply with a European Union antitrust ruling. Moderna’s (MRNA) stock closed down more than 9% after UBS cut its target price on the company’s shares to $96 from $108.

The US stock markets will be closed on January 9 due to a national day of mourning for former President Jimmy Carter.

The Canadian dollar weakened to 1.44 per dollar, nearing January 2016 lows, as investors reacted to increased trade concerns amid political uncertainty following Prime Minister Justin Trudeau’s resignation. Trudeau’s departure amid a crisis that includes a downgrade in his approval rating and looming tariff threats has left Canada without a clear strategy to counter Trump’s proposed tariffs, which could significantly impact Canadian exports.

Equity markets in Europe were mostly down on Wednesday. Germany’s DAX (DE40) fell by 0.05%, France’s CAC 40 (FR40) closed down 0.49%, Spain’s IBEX 35 (ES35) lost 0.12%, and the UK’s FTSE 100 (UK100) closed positive 0.07%. The Eurozone Producer Price Index for November rose by 1.6% m/m, but on an annualized basis the index declined 1.2% y/y, stronger than expectations of positive 1.5% m/m and negative 1.4% y/y.

On Wednesday, US natural gas prices (XNG/USD) rose more than 6% to above $3.6/MMBtu, helped by supply disruptions and strong global demand. The US utilities are drawing natural gas from storage at a faster-than-expected pace as colder-than-normal weather is expected to persist throughout January. Supply constraints have been exacerbated by increased volumes of gas going to LNG export plants due to Europe’s rejection of Russian pipeline supplies. As extreme cold weather is estimated to persist, fears of further supply cuts are pushing prices higher.

Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) was down 0.26%, China’s FTSE China A50 (CHA50) lost 0.17%, Hong Kong’s Hang Seng (HK50) fell by 0.86%, while Australia’s ASX 200 (AU200) was positive 0.77%.

The People’s Bank of China (PBOC) will auction CNY60 billion worth of six-month bills on the Hong Kong market on January 15 to boost overseas demand for the currency, the Hong Kong Monetary Authority (HMA) said in a statement. The issuance will be the largest since the Chinese Central Bank began holding regular bill auctions in the city in 2018. The move is aimed at reducing yuan liquidity in the market, increasing funding costs, and making short positions more expensive for traders. So far, the Central Bank has shown its resolve by stabilizing the yuan through daily fixings and promising not to allow excessive exchange rate fluctuations.

China’s annual inflation rate fell to 0.1% in December 2024 from 0.2% in the previous month, matching market estimates and marking the lowest since March. The latest results underscored the growing risks of deflation in the country despite government stimulus measures and the Central Bank’s supportive monetary policy.