InvestMacro

On the last day of 2024, the Dow Jones Index (US30) was down 0.07% (for 2024 +12.80%). The S&P 500 Index (US500) fell by 0.43% (for 2024 +24.01%). The Nasdaq Technology Index (US100) decreased by 0.87% (for 2024 +27.01%). In the US, markets are awaiting Friday’s US Manufacturing Activity Index data for December to determine the market’s direction and assess the health of the US manufacturing sector. The December manufacturing sector business activity index is expected to decline by 0.2 to 48.2.

The Mexican peso faced negative factors related to the strength of the US dollar, which was supported by rising yields and demand for the safe-haven currency. In addition, low liquidity during the holidays further exacerbated losses, leaving the peso among the worst-performing emerging market currencies in 2024, with a year-to-date decline of nearly 19%.

European markets were not trading on Tuesday. Germany’s DAX (DE40) gained +18.72% over 2024, France’s CAC 40 (FR40) closed down 1.99% for the year, Spain’s IBEX 35 (ES35) gained 13.88% for the year, and the UK’s FTSE 100 (UK100) added 5.85% over the past year.

WTI crude oil prices rose above $72 a barrel on Thursday, in the first session after the New Year’s break, following the release of a report on a decline in US crude inventories. The API data showed a 1.4 million barrel decline in US crude inventories for the week ended December 27. If the official data is confirmed today, it would mark the third consecutive weekly decline.

Asian markets were mostly up on Tuesday, December 31. Japan’s Nikkei 225 (JP225) was not trading (+19.85% for 2024), China’s FTSE China A50 (CHA50) was down 1.03% (+19.50% for the year), Hong Kong’s Hang Seng (HK50) added 0.09% (up +19.49% for the year), and Australia’s ASX 200 (AU200) was also not trading on December 31 (up +7.18% for 2024).

China’s central bank (PBoC) injected 1.7 trillion yuan ($233 billion) into the economy and financial markets in December, boosting liquidity at the end of the year. This followed 800 billion and 500 billion yuan injections in the past two months, with a new instrument introduced in October. The cash injections underscore the PBOC’s accommodative stance after the country’s top leaders pledged to provide additional “moderately loose” policy support for an economy facing the threat of escalating trade tensions.

The Australian dollar (AUD) climbed above US$0.62 on Thursday, recovering from two-year lows as higher commodity prices lent support, favoring Australia’s position as a net exporter of basic resources.

The New Zealand dollar (NZD) strengthened slightly as traders anticipated a recovery in China, New Zealand’s main trading partner, following President Xi Jinping’s pledge last Tuesday to implement more active policies to stimulate growth. However, private data showed an unexpected slowdown in factory activity growth, coinciding with a growth slowdown indicated by official data released earlier this week. The currency remained near two-year lows under pressure from dovish expectations from the Reserve Bank of New Zealand.

Indonesia’s annual inflation rate for December 2024 was 1.57%, little changed from November’s three-year low of 1.55%. The latest result was slightly below market expectations of 1.6% but remained within the central bank’s target range of 1.5% to 3.5%. Core inflation, excluding managed and volatile food prices, held steady at 2.26%, remaining at a 16-month high but slightly short of the expected 2.28%.

Singapore’s GDP grew at an annualized rate of 4.3% in the fourth quarter of 2024, slowing from the 5.4% growth in the third quarter but beating market expectations of 3.8%. For the full year, the economy grew by 4%, exceeding the 1.1% growth seen in 2023 and beating forecasts of 3.5%.

As of Friday, the Dow Jones (US30) decreased by 0.77% (for the week +1.65%). The S&P500 Index (US500) was down 1.11% (for the week +2.21%). The Nasdaq Technology Index (US100) fell by 1.36% (for the week +2.55%). The major Wall Street indices fell sharply in afternoon trading, led by a technological stock sell-off. Nevertheless, all 3 major indices remained positive at the end of the week.

The US trade deficit widened to $102.9 bln in November from $98.3 bln in October, more than expectations of $101.2 bln. This is negative for Q4 GDP and bearish for stocks.

Tesla (TSLA) fell more than 3% amid reports that car rental company Hertz is so desperate to get rid of its inventory of Tesla vehicles that it is aggressively sending out cheap buyback options to customers. Broadcom (AVGO) is down more than 2% on signs of insider selling after the CFO sold $2.89 million shares last Friday.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) rose by 0.68% (for the week -1.43%), France’s CAC 40 (FR40) closed 1.00% higher (for the week +0.91%), Spain’s IBEX 35 (ES35) gained 0.50% (for the week +0.60%), and the UK’s FTSE 100 (UK100) closed up 0.16% (for the week -0.60%) on Friday.

WTI crude oil prices rose 1.4% to $70.6/bbl on Friday amid another decline in US crude inventories. Increasingly pessimistic economic signals from China supported bets that fuel demand from the world’s main oil importer will slow. In turn, rising supply from Canada, the US, and Brazil may offset prolonged production cuts by OPEC+ members. Nevertheless, uncertainty remains as US President-elect Trump may support domestic production and tighten sanctions on energy exports from Iran.

The US natural gas prices rose to $3.36/MMBtu after the EIA reported a smaller-than-expected 93 billion cubic feet decline in storage inventories for the week ended Dec. 20, which was below forecasts for a 99 bcf decline, bringing inventories to 3,529 bcf.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) rose by 3.18%, China’s FTSE China A50 (CHA50) gained 2.03%, Hong Kong’s Hang Seng (HK50) added 2.45%, and Australia’s ASX 200 (AU200) was negative 0.57% for the week.

On Friday, Bank of Japan (BoJ) Governor Kazuo Ueda reiterated the need to monitor economic risks but refrained from giving clear guidance on future rate hikes. As for the data, Japan’s retail sales rose the most in three months in November, while industrial production fell less than expected.

The Australian dollar rose to around $0.62 but remained near two-year lows, reflecting its continued troubles amid subdued holiday trade. Earlier in December, the Reserve Bank of Australia (RBA) adopted a dovish tone, introducing an explicit easing bias. Weaker-than-expected trends in consumer spending, wage growth, and housing-related inflation drove the shift. As a result, markets have come to view the probability of a rate cut as early as February as 50/50.

At Thursday’s close, the Dow Jones Index (US30) was up 0.07%. The S&P 500 Index (US500) was down 0.04%. The Nasdaq Technology Index (US100) lost 0.13%. The three major indices closed subdued on the day after the Christmas holiday. Markets remained subdued as they assessed the potential impact of the Federal Reserve’s interest rate hike on corporate earnings next year. New labor market data showed a slight decline in jobless claims, down 1k to 219k instead of the expected increase of 4k.

Equity markets in Europe have not traded for the last 2 days due to the Christmas holidays.

CEBR projections that Britain will narrow the gap with the more lagging German economy over the next 15 years. Europe’s largest economy is expected to be 20% larger than the UK’s in 2039, up from 31% now. Similarly, the UK will overtake France and be 25% larger in terms of output by 2039.

WTI crude oil prices are holding near the $70 per barrel mark, supported by stimulus measures in China and a US industry report of lower crude inventories. In China, local authorities have been given more leeway to use funds from government bonds to stimulate growth. In the United States, the American Petroleum Institute reported a 3.2 million barrel drop in commercial crude inventories, which would be the fifth consecutive decline if confirmed by official data. Usually, the US inventories fall in December and then rise in the early months.

Asian markets rose steadily yesterday. Japan’s Nikkei 225 (JP225) rose by 1.12%, China’s FTSE China A50 (CHA50) jumped 1.27%, Hong Kong’s Hang Seng (HK50) gained 1.08%, and Australia’s ASX 200 (AU200) was not trading due to the Christmas holiday. Japanese stocks rose on Thursday thanks to comments from Bank of Japan (BoJ) Governor Kazuo Ueda, who stopped short of signaling an interest rate hike next month, emphasizing the need to monitor economic risks. In addition, the report said the country is planning a record $735 billion budget for fiscal 2025, driven by higher spending on social security and debt service.

The World Bank raised China’s economic growth projection for 2024 and 2025, but warned that low Household and Business Confidence and unfavorable factors in the real estate sector will continue to weigh on the economy next year. An expected increase in US tariffs on its goods when US President-elect Donald Trump takes office in January could also weigh on growth. Beijing has set its growth target for this year at “around 5%” and said it is confident it will meet that target.

On Thursday, the New Zealand dollar remained steady at around $0.565 on low trading volumes due to the holiday break. Rising expectations of more aggressive monetary policy easing by the Reserve Bank of New Zealand (RBNZ) continued to weigh on the currency. Data released last week showed that the New Zealand economy contracted by 1% quarter-on-quarter in the third quarter, following a revised 1.1% contraction in the previous period. This was worse than the 0.4% contraction expected by the market, officially putting the country into recession. As a result, investors fully priced in an excessive 50bp rate cut at the next RBNZ meeting in February.

This week, the Reserve Bank of Australia (RBA) released the minutes of its December meeting, emphasizing the need to maintain restrictive monetary policy for the time being. Earlier this month, the RBA kept its key interest rate at 4.35%, which was in line with market expectations. However, taking many by surprise, the RBA suggested the possibility of a rate cut as early as February next year.

At Monday’s close, the Dow Jones Index (US30) was up 0.16%. The S&P 500 Index (US500) added 0.73%. The Nasdaq Technology Index (US100) jumped by 1.01%. Stocks rose on Monday thanks to gains in technology and chip companies’ share prices, with Nvidia up 3% and TSMC, Broadcom, and AMD up nearly 5%, confirming their role as key drivers of market growth in 2024. Congress passed a temporary funding bill and averted a shutdown of the US government, which would have negatively impacted the US economy. Under this bill, the government will be funded until mid-March 2025.

The US durable goods orders report released on Monday was weaker than expected, although capital goods orders were slightly stronger than expected. US Durable Goods Orders for November fell by 1.1% m/m, weaker than expectations of 0.3%, although October’s figure was revised upward to 0.8% from 0.3%. November’s US New Home Sales report came in at 5.9% to 664,000 on Monday, weaker than expected for a rise to 669,000. The Conference Board’s US Consumer Confidence Index for December came in at 8.1 to 104.7, significantly weaker than expectations of an increase to 113.2. Markets are pricing in a 25 bps chance of a rate cut at the January 28–29 FOMC meeting at 9%.

The Canadian dollar weakened to 1.44 per US dollar, nearing its lowest level since March 2020, as investors digested weak GDP data while the US dollar strengthened. Canada’s GDP is estimated to have contracted by 0.1% month-on-month in November, the first decline this year and coinciding with Central Bank warnings and recently lowered growth estimates. The Canadian government revised down its GDP prognoses, cutting economic growth in 2025 to 1.7% from 1.9% and in 2026 to 2.1% from 2.2%. Growing expectations that the Bank of Canada may continue easing rates to support growth could widen the interest rate gap with the US, reducing the attractiveness of the Canadian dollar.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) fell by 0.18%, France’s CAC 40 (FR40) closed down 0.03%, Spain’s IBEX 35 (ES35) lost 0.28%, and the UK’s FTSE 100 (UK100) closed positive 0.22%. European government bond yields rose after ECB President Lagarde said ECB officials remain vigilant on lingering price pressures in the services sector, but remain confident that the Consumer Price Index is approaching the ECB’s target level. Swaps rate the odds of a -25bp ECB rate cut at the January 30 meeting as 100%, while the odds of a 50bp rate cut at that meeting are 9%.

WTI crude oil prices fell by 0.3% to settle at $69.2 a barrel on Monday as concerns about a possible supply glut in 2025 and a strengthening US dollar pressured markets in pre-holiday trading. Analysts noted the likelihood of a growing supply glut next year, while the dollar’s rise to two-year highs put further pressure on prices by increasing spending by foreign buyers. Geopolitical tensions also intensified, with Donald Trump calling on the EU to increase imports of US energy or the EU will face tariffs.

Qatar has warned it will stop exporting gas to the European Union if the bloc’s countries impose sanctions under recently passed environmental review legislation. The EU directive on environmental impact assessments of businesses, which came into force in July, imposes fines of up to 5% of a company’s annual global revenue if management fails to address negative impacts on human rights or the environment. Qatar has become a crucial LNG supplier to Europe as countries reduce their dependence on Russian supplies.

Asian markets rose steadily yesterday. Japan’s Nikkei 225 (JP225) rose by 1.19%, China’s FTSE China A50 (CHA50) jumped 0.91%, Hong Kong’s Hang Seng (HK50) gained 0.82%, and Australia’s ASX 200 (AU200) added 1.67%. Foreign institutions remain optimistic about China’s capital market in 2025 as the economy will gradually stabilize.

The minutes of the December meeting of the Reserve Bank of Australia (RBA) showed that there is a need to maintain restrictive monetary policy for the time being. The Board emphasized that future rate decisions will be data-dependent, noting that while inflation risks have eased, uncertainty remains due to global conditions and elevated service inflation.

At the end of Friday, the Dow Jones Index (US30) was up 1.18% (for the week -2.25%). The S&P 500 Index (US500) gained 1.09% (for the week -2.19%). The Nasdaq Technology Index (US100) increased by 0.85% (for the week -2.75%). Friday’s rally followed lower-than-expected inflation data, with the November PCE Index showing an increase to 2.4% year-over-year, slightly below expectations of 2.5%. That helped ease market anxiety over the Federal Reserve’s prediction of fewer rate cuts in 2025. However, despite Friday’s gains, all three indices closed negative at the end of the week.

Goldman Sachs updated its economic projections to reflect nuanced changes in monetary policy expectations and global growth trends for 2025. The US Federal Reserve’s ultimate policy rate is now expected to be in the 3.5–3.75% range, up from previous estimates of 3.25–3.5%. The broker expects the next 25 basis point rate cut to occur in March, followed by additional cuts in June and September. The US economic performance is projected to continue to outperform developed economies, supported by strong real income growth and excellent productivity gains. The European Central Bank (ECB) is expected to continue to cut rates through mid-2025, eventually reaching the 1.75% level. In China, the outlook remains cautious despite recent policy easing.

The Mexican peso (MXN) strengthened to 20.2 per US dollar, amid a weaker US dollar following the release of softer-than-expected Core PCE data. Last week, the Bank of Mexico cut interest rates by 25 basis points to 10%, matching investor expectations. The rate cut came amid lower inflation in Mexico. The Bank of Mexico anticipates further easing next year amid prognoses for inflation to fall to 4.6% by the end of the year, although it does not expect to reach its 3% target until mid-2026.

Donald Trump said on Saturday that the Panama Canal charges “exorbitant prices and tariffs for passage” for US military and merchant ships. He demanded the fees be lowered or Panama must return the canal to the United States. The US is the canal’s largest customer, with about three-quarters of its cargo passing each year. China is its second-largest customer. Trump has suggested that China should not run the canal. A Chinese company based in Hong Kong controls two of the five ports adjacent to the canal, one on each side. “If the principles, both moral and legal, of this magnanimous gesture of giving are not honored, we will demand that the Panama Canal be returned to us, fully and without question,” Trump said. The US completed the 51-mile (82-kilometer) canal across the Central American isthmus in 1914. However, in 1977, US President at the time Jimmy Carter handed the Panama Canal back to Panama.

Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) fell by 0.43% (for the week -2.34%), France’s CAC 40 (FR40) closed down 0.27% (for the week -1.46%), Spain’s IBEX 35 (ES35) gained 0.24% (for the week -2.25%), and the UK’s FTSE 100 (UK100) lost 0.26% (for the week -2.60%) on Friday. Concerns over the potential impact of a second Trump administration in Europe intensified after Donald Trump threatened to impose tariffs on the European Union if EU countries do not increase their purchases of US oil and gas.

WTI crude oil prices decreased by 0.1% to close at $69.46 per barrel on Friday, recovering some losses but still showing a 3% decline for the week. China’s energy outlook added to market uncertainty, with Sinopec estimating crude imports could peak by 2025 and oil consumption by 2027. OPEC+ lowered its demand growth projection for 2024 for the fifth consecutive time, emphasizing the need for supply discipline. In addition, President-elect Trump has indicated the possibility of imposing tariffs on the EU if it fails to address trade imbalances, particularly with US oil and gas.

Natural gas prices (XNG/USD) rose to $3.7 per mmbtu on Friday, the highest in a month. The reduced likelihood that Europe will continue to receive Russian gas via Ukraine has prompted investors to take long LNG positions as EU countries look for alternative sources of gas. These boosts demand for US LNG at the turn of the US presidential election: President-elect Trump has pledged to issue more LNG export permits, prompting companies to favor more profitable exports over cheaper domestic gas sales due to the abundance of gas available in the United States.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) fell by 0.29%, China’s FTSE China A50 (CHA50) gained 0.19%, Hong Kong’s Hang Seng (HK50) lost 1.14% and Australia’s ASX 200 (AU200) was negative 1.48% for the week.

Singapore’s Core Consumer Prices showed 1.9% year-on-year in November 2024, down from 2.1% in the previous month, below market estimates of 2.1%. This was the lowest core inflation rate since November 2021, thanks to lower inflation in food and services. MAS core inflation is expected to remain below 2% until the end of 2024. Core inflation is projected to average 2.5–3.0% in 2024 before falling to 1.5–2.5% in 2025.

At the end of Thursday, the Dow Jones Index (US30) was up 0.04%. The S&P 500 Index (US500) decreased 0.09%. The Nasdaq Technology Index (US100) lost 0.47%. The US economic reports released on Thursday were mostly stronger than expected and pushed bond yields to a 6-month high, which pressured the indices. The US Q3 GDP was unexpectedly revised upward to 3.1% (q/q annualized), stronger than expectations of no change at 2.8%. The US weekly initial jobless claims fell by 22,000 to 220,000, indicating a stronger labor market than expected at 230,000. The US home sales for November rose by 4.8% m/m to an 8-month high of 4.15 million, stronger than expectations of 3.2% to 4.09 million.

On Friday, markets await key inflation data: the PCE Core Price Index for November, the Fed’s preferred inflation gauge, to see if policymakers can continue to cut interest rates. The Core PCE Index for November is expected to rise to 2.9% y/y from 2.8% y/y in October.

The Mexican peso remained above 20.3 per US dollar, near the one-month low of 20.37 seen on December 18, after the Bank of Mexico (Banxico) cut rates to 10% and signaled further easing, possibly with larger cuts, depending on the pace of disinflation and economic conditions.

Equity markets in Europe were mostly down on Thursday. Germany’s DAX (DE40) fell by 1.35%, France’s CAC 40 (FR40) closed down 1.22%, Spain’s IBEX 35 (ES35) lost 1.53%, and the UK’s FTSE 100 (UK100) closed down 1.14%. The GfK Consumer Confidence Index in Germany for January rose by 1.8 to minus 21.3, beating expectations of minus 22.5. The Bank of England (BOE) left the benchmark rate unchanged at 4.75%. Bank of England Governor Bailey stated that a “gradual approach” to future rate cuts remains the right approach, and we cannot determine when and by how much to cut interest rates in 2025.

Norway’s Norges Bank kept its key rate unchanged at 4.5% at its December 2024 meeting, in line with market expectations, but said rates will likely be cut in March 2025. Policymakers have kept the interest rate at a sixteen-year high of 4.5% since December 2023, helping to cool the Norwegian economy and lower inflation. Sweden’s Riksbank cut its key rate by 25 bps to 2.50% at its December meeting, confirming market expectations. This is the fifth rate cut this year, for a total of 150 bps, in response to the continued decline in inflation and stabilization of inflationary pressures. This was reflected in November core inflation, which came in at 1.6%, the lowest level since July 2021, remaining below the central bank’s 2% target for the fourth consecutive month.

The US natural gas (XNG/USD) prices rose to $3.5 per MMBtu on Thursday, the highest in more than a year, as bets on higher global LNG demand boosted domestic consumption. EIA data showed utilities withdrew more than 100 billion cubic feet of natural gas from storage for the second straight week, extending the expected withdrawal season. In addition, uncertainty over whether Europe will continue to receive Russian gas via Ukraine prompted investors to take long LNG positions as EU countries seek alternative gas sources.

Palladium prices slipped below $900 an ounce (XPD/USD), near their lowest level in four months, foreshadowing a fall of more than 18% for the full year amid slowing industrial demand, hawkish Fed monetary policy, and supply growth projections.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) was down 0.69%, China’s FTSE China A50 (CHA50) was down 0.41%, Hong Kong’s Hang Seng (HK50) lost 0.56%, and Australia’s ASX 200 (AU200) was negative 1.70%. Chinese stocks rose on Friday. The rally followed the latest policy decision by the People’s Bank of China (PBoC), which left one-year and five-year lending rates unchanged at 3.1% and 3.6% respectively, matching market expectations. Earlier this month, senior Chinese officials pledged to adopt “more active” fiscal measures and “moderate” monetary policy easing next year to boost economic growth, signaling a shift away from the more cautious approach of the past decade.

Malaysia’s annual inflation rate eased to 1.8% in November 2024 from 1.9% in the previous month, below the market estimates of 2.1%. Core Consumer Prices, excluding volatile fresh food and administrative expenses, rose 1.8% y/y, holding steady for the third month and remaining at the slowest pace in six months.