InvestMacro

The Dow Jones (US30) Index fell by 0.16% at the end of Thursday. The S&P500 Index (US500) was down 0.21%. The Nasdaq Technology Index (US100) decreased by 0.69%. Weakness in mega-cap technology stocks on Thursday impacted the broader market. Health insurance stocks also declined, hurting the broader market after UnitedHealth Group fell more than 6% after reporting weaker-than-expected fourth-quarter earnings. Bond yields declined slightly amid dovish comments from Fed Chief Waller, who said that if inflation is falling, rate cuts could be larger than the market expects, with 3-4 rate cuts possible this year if data is favorable.

The Canadian dollar weakened to 1.44 per dollar, approaching the January 2016 low of 1.445, driven by monetary policy divergence, weak domestic data, and geopolitical uncertainty. Aggressive rate cuts by the Bank of Canada (expected to be 25 bps lower this month) contrast with the Federal Reserve’s less lenient stance, contributing to a widening yield gap between US and Canadian government bonds, which draws capital to the US dollar, adding pressure on the loonie.

Equity markets in Europe were mostly up on Thursday. Germany’s DAX (DE40) rose by 0.39%, France’s CAC 40 (FR40) closed 2.14% higher, Spain’s IBEX 35 (ES35) index fell by 0.49%, and the UK’s FTSE 100 (UK100) closed 1.09% yesterday. The FTSE 100 (UK100) Index rose to a three-month high on Thursday, supported by investor optimism over a possible rate cut.

Silver (XAG/USD) slipped to $30.66 per ounce on Friday but maintained its trend for a third straight weekly gain, helped by a decline in US core inflation that reinforced expectations of further interest rate cuts by the Federal Reserve this year. However, despite the bullish momentum, silver prices remain below the 12-year high of $35 reached in October as concerns over uncertain industrial demand persist.

WTI crude oil prices rose above $79 a barrel on Friday, rebounding from the previous session’s losses and heading for a fourth straight weekly gain. The overnight drop was driven by speculation that President-elect Trump may ease sanctions on Russian energy exports as part of diplomatic efforts to resolve tensions between Russia and Ukraine. Reports of a cease-fire in the Middle East also helped lower the geopolitical risk premium.

The US natural gas prices (XNG/USD) eased slightly to $4.055/MMBtu after the EIA reported declining storage inventories in line with expectations. Federal data showed that utilities pulled 258 billion cubic feet of gas from storage in the week ended Jan. 10, well above the 150 Bcf in the same week last year and well above the five-year average of 128 Bcf. Analysts expect the next two January 17 and 24 reports to show further consumption above 200 Bcf amid rising heating demand.

Asian markets were mostly up. Japan’s Nikkei 225 (JP225) was up 0.33%, China’s FTSE China A50 (CHA50) was down 0.21%, Hong Kong’s Hang Seng (HK50) added 1.23% and Australia’s ASX 200 (AU200) was positive 1.38% for yesterday.

China’s economy grew at an annualized rate of 5.4% in the fourth quarter of 2024, accelerating from 4.6% in the third quarter and beating expectations of 5%. Industrial production and retail sales in December exceeded forecasts, while new home prices declined. The latest data did not indicate whether Beijing will take additional stimulus measures in the near term. However, state media reported that China’s central bank may lower the reserve requirement ratio for banks ahead of the Spring Festival later this month.

Malaysia’s economy grew at a 4.8% annualized rate in the fourth quarter of 2024, slowing from a 5.3% expansion in the previous quarter. On a seasonally adjusted basis, GDP grew by 2.5% in Q4, easing from an upwardly revised 4.6% growth in the previous quarter.

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.