InvestMacro

At the end of Thursday, the Dow Jones Index (US30) was down 0.28%. The S&P 500 Index (US500) was up 0.36%. The Nasdaq Technology Index (US100) added 0.51%. Initial jobless claims came in slightly above projections but remained in line with recent months, while labor costs and productivity rose less than expected. The long-awaited Non-Farm report will be released today. Economists estimate that the US added 154,000 jobs last month, up from an impressive 256,000 in December. The unemployment rate will come in at 4.1%, the same as last month. Average hourly earnings growth will be 0.3%, also in line with December. Trump’s tariff policy and a strong labor market will support the US dollar, which will put pressure on risk assets such as EUR, GBP and especially CAD and MXN. Gold and silver may also come under pressure amid rising government bond yields. The dollar will be under pressure if the labor market data comes out unexpectedly worse than expected. In this case, risk sentiment may be reevaluated. In such a scenario, stock indices will continue to grow steadily, and gold will continue to renew its historical highs.

The Bank of Mexico cut its benchmark interest rate by 50 bps to 9.50%. This is in line with the global downward trend in inflation, although inflation persists in major economies, especially in services. Domestically, economic activity contracted in Q4 2024 and is expected to weaken in 2025, with employment growth slowing and downside risks persisting. Core inflation fell to 3.69% in mid-January 2025 and core inflation was 3.72%. While core inflation continues to decline, persistent service sector inflation has led Banxico to maintain its inflation prognoses, expecting core inflation to converge to the 3% target by Q3 2026. The bank said further rate cuts may be appropriate depending on the pace of disinflation and the economic outlook.

The Canadian dollar traded above 1.43 per dollar, pausing a rally that led to a seven-week high of 1.431 hit on January 5, as recent economic data shifted focus to the Bank of Canada’s increasingly soft outlook. Canada’s key economic indicator showed a sharp contraction in buying activity, with Ivey’s January 2025 PMI falling to 47.1 from 54.7 in December, well below market expectations of 53.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 1.47% to set a new record high. France’s CAC 40 (FR40) closed 1.47% higher, Spain’s IBEX 35 (ES35) gained 1.55%, and the UK’s FTSE 100 (UK100) closed 1.21% higher. The growth of indices was supported by good corporate reports. Despite mixed results from Dutch giant ING, growth was led by banks, with BBVA, Santander and UniCredit shares up 3-6%. Traders put aside fears of a trade war and the impact of tariffs, focusing on a new round of corporate earnings and the next moves by central banks. Rumors of a peace plan for Ukraine due next week also helped improve market sentiment.

The US natural gas (XNG/USD) prices rose above $3.35/MMBtu, helped by a larger-than-expected drawdown in storage inventories. The EIA reported a withdrawal of 174 billion cubic feet (bcf) from storage for the week ended January 31, slightly above analysts’ expectations of 168 bcf. The volume also exceeded last year’s 110 bcf decline and was in line with the five-year average. Colder-than-normal conditions February 10-14 are expected to boost heating demand.

Asian markets are predominantly steady yesterday. Japan’s Nikkei 225 (JP225) rose by 0.61%, China’s FTSE China A50 (CHA50) gained 0.99%, Hong Kong’s Hang Seng (HK50) jumped 1.43%, and Australia’s ASX 200 (AU200) gained 1.23%.

The Reserve Bank of India (RBI) cut its key repo rate by 25bps to 6.25%, marking the first-rate cut since May 2020 during its February meeting. The move came amid slowing economic growth and global trade uncertainty, as expected. The Central Bank expects GDP growth of 6.7% in FY 2025-26, maintaining its inflation estimates at 4.2%, with estimates of 4.5% in Q1, 4.0% in Q2 and 3.8% in Q3.

At the end of Wednesday, the Dow Jones Index (US30) rose by 0.71%. The S&P 500 Index (US500) was up 0.39%. The Nasdaq Technology Index (US100) was up 0.42%. The US stock indices rebounded from early losses on Wednesday, helped by a sharp decline in long-dated Treasury yields as markets priced in a series of mixed earnings releases and economic data. Shares of Broadcom and Nvidia soared 6% and 4.5%, respectively, setting a strong pace for chip makers. Defensive stocks also performed well, with banks, healthcare and consumer staples rising after a weaker-than-expected ISM Services PMI strengthened bets on multiple Fed rate cuts this year. On the other hand, the ADP report showed that the private sector added more jobs than expected, underscoring the resilience of the labor market. For its part, Alphabet shares fell by 7.5% after the company missed cloud revenue expectations and announced higher-than-expected spending plans for AI. In addition, AMD fell more than 10% due to lower data center revenue and Uber fell 7% after weak first-quarter guidance.

The Mexican peso weakened to 20.58 per US dollar amid lingering concerns over US tariffs and heightened expectations of a dovish Banxico stance in response to disappointing data on the country’s economy. Meanwhile, Mexico’s manufacturing PMI fell to 49.1 in January, the steepest decline in factory activity in three months, with low Business Confidence indicating a slowdown in the economy. Weak data continues to weigh on the peso, while downward revisions to growth and inflation expectations reinforce expectations of a rate cut by the Bank of Mexico, putting further pressure on the currency.

The Canadian dollar strengthened to 1.43 per US dollar in February, hitting a seven-week high, as investors welcomed signs of economic growth and easing trade tensions with the US. Despite a second consecutive month of contraction, the PMI Index improved to 49.5 in January from 49, with services continuing to contract and manufacturing rising for a fourth month.

Equity markets in Europe were mostly up yesterday. Germany’s DAX (DE40) rose by 0.37%, France’s CAC 40 (FR40) closed down 0.19%, Spain’s IBEX 35 (ES35) added 1.35%, and the UK’s FTSE 100 (UK100) closed positive 0.61%. European markets recovered losses and closed higher on Wednesday thanks to strong earnings performance across sectors.

WTI crude oil prices fell to $71.20 per barrel on Wednesday following the release of an EIA report that showed a larger-than-expected increase in US crude inventories. Inventories rose by 8.664 million barrels last week, the biggest increase in almost a year, exceeding market projections for a 2.6 million barrel rise and a 5.025 million barrel increase reported by API.

Asian markets traded mostly flat yesterday. Japan’s Nikkei 225 (JP225) was up 0.08%, China’s FTSE China A50 (CHA50) was down 1.31%, Hong Kong’s Hang Seng (HK50) decreased by 0.93%, and Australia’s ASX 200 (AU200) was positive 0.51%.

The Australian dollar held near $0.628 on Thursday after rising for three consecutive sessions, helped by a weaker US dollar. The dollar’s decline was driven by easing fears of a global trade war following cautious tariff measures from the US and China. US President Donald Trump and Chinese President Xi Jinping are expected to discuss developments in trade relations during an upcoming phone call, raising hopes that further escalation will be avoided and tariffs may even be lifted. On the domestic front, data showed Australia’s trade surplus narrowed in December as export growth slowed and import growth accelerated. Market sentiment is increasingly shifting towards expectations that the Reserve Bank of Australia may cut interest rates this month amid weakening inflation and signs of slowing economic activity.

Vietnam’s annual inflation rate rose to 3.63% in January 2025, the highest since July last year, up from 2.94% in December. The main upward pressure came from faster price increases in food and medical services. The annualized core inflation rate, which excludes volatile goods, rose to 3.07%, the highest since November 2023, up from 2.85% in December.

At Tuesday’s close, the Dow Jones Index (US30) was up 0.30%. The S&P 500 Index (US500) added 0.72%. The Nasdaq Technology Index (US100) was up 1.26%. Despite China imposing new tariffs on US coal, liquefied natural gas, crude oil and farm equipment in response to Washington’s 10% duties on Chinese imports, market sentiment remained cautiously optimistic. Hopes for a détente on trade increased after President Trump agreed to delay the imposition of tariffs on Canada and Mexico for at least 30 days. Meanwhile, the JOLTS report showed that there were fewer job openings in the US in December than expected, and manufacturing orders fell sharply. Thus, the market continued to bet on multiple Fed rate cuts this year, supporting the position of rate-sensitive assets.

The Mexican peso held near 20.36 per US dollar, supported by US President Trump’s decision to postpone the imposition of 25% tariffs on Mexican imports, easing fears of economic turmoil and dampening risk sentiment that limited demand for the US dollar.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) rose by 0.36%, France’s CAC 40 (FR40) closed higher by 0.66%, Spain’s IBEX 35 (ES35) gained 1.37%, and the UK’s FTSE 100 (UK100) closed negative 0.15%. The European Union is seeking to defuse a looming conflict with the US over steel and aluminum exports that is set to erupt next month. However, early indications are that EU officials have failed to make good contacts in the emerging US administration, so the Eurozone is preparing for a trade fight.

WTI crude oil prices rose to just below $73 a barrel on Tuesday after hitting a session low of $70.65 amid rising expectations that the US will tighten sanctions against Iran. President Trump intends to restore “maximum pressure” on Iran in a bid to halt oil exports altogether and counter its regional influence. The move will include new sanctions and tougher action against violators.

Palladium (XPDUSD) prices fell to $1,030 an ounce, retreating from a three-month high of $1,063 hit on January 31, as problems in the global auto sector reduced consumption of catalytic converters. Declining car sales in China and the EU, combined with the ongoing shift to electric vehicles, have reduced automakers’ demand for palladium. In addition, trade tensions between the US and China negatively impacted industrial demand, particularly in China, where manufacturing activity remains sluggish amid weak export growth and low domestic consumption.

Asian markets were predominantly falling yesterday. Japan’s Nikkei 225 (JP225) rose by 0.72%, China’s FTSE China A50 (CHA50) gained 1.04%, Hong Kong’s Hang Seng (HK50) added 2.83%, and Australia’s ASX 200 (AU200) was negative 0.06%. The Hang Seng Index retreated from a near two-month high reached a day earlier after China imposed tariffs on various US goods in direct retaliation to new 10% duties on Chinese imports announced by President Donald Trump. Meanwhile, the White House said a meeting between Trump and Chinese leader Xi Jinping has yet to be scheduled, adding to market uncertainty. On the data front, a private survey showed China’s services sector grew at its slowest pace in four months in January, further dampening sentiment.

On Monday’s close, the Dow Jones Index (US30) was down 0.28%. The S&P 500 Index (US500) decreased by 0.76%. The Nasdaq Technology Index (US100) fell by 0.84%. Global stock markets came under pressure on Monday after President Trump on Saturday announced 25% tariffs on Canada and Mexico and 10% tariffs on China, and warned of impending European tariffs. The tariffs were due to take effect on Tuesday and could spark a trade war that threatens economic growth around the world. Goldman Sachs warned there was a risk of a 5% drop in US stocks due to the hit to corporate earnings, while RBC Capital Markets estimated a 5% to 10% drop in stocks. However, stocks recovered more than half of their losses after President Trump agreed late in the day to suspend planned tariffs on Mexico and Canada for a month after successful talks with their leaders.

The Canadian dollar strengthened to 1.45 per US dollar in February, rising from its lowest level in two years, after Prime Minister Trudeau confirmed that the imposition of US tariffs on Canadian goods would be suspended for at least 30 days. The postponement alleviated immediate concerns over potential trade disruptions, which had pressured the loonie due to fears of lower demand for Canadian exports and restricted foreign exchange inflows. Despite this, the CAD remains under pressure as Canadian GDP growth in December was just 0.2%, leaving the annualized growth rate for 2024 at a modest 1.4%.

The Mexican peso (USD/MXN) strengthened to 20.5 per US dollar, recovering after briefly falling to a three-year low after US President Trump delayed the imposition of tariffs against Mexico announced over the weekend. The US president cited talks with Mexican counterpart Sheinbaum and progress on the border issue, supporting bets that the restrictions will be avoided by the new deadline.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 1.40%, France’s CAC 40 (FR40) closed down 1.20%, Spain’s IBEX 35 (ES35) lost 1.32%, and the UK’s FTSE 100 (UK100) closed down 1.04%.

WTI crude oil prices trimmed gains and traded near $73 per barrel after OPEC+ confirmed a gradual increase in production and removed the US Energy Information Administration (EIA) from its list of sources for monitoring production. The decision follows past tensions between OPEC+ and President Trump, who has previously pressured the group to increase supply to offset US sanctions on Iran. Since returning to office, Trump has again urged OPEC to release more oil, arguing that high prices support Russia’s war in Ukraine.

Silver (XAG/USD) topped $31.5 an ounce on Monday, near its highest since early December, amid easing trade war fears and optimism about improving demand for manufactured goods. Meanwhile, strong manufacturing data from ISM pointed to welcome momentum in US factory activity, which supported silver’s prospects as industrial demand, especially in electrification technologies. On the supply side, the Silver Institute recently predicted a fifth consecutive year of significant market shortages of the metal in 2025, driven by strong industrial demand and retail investment.

Asian markets were mostly falling yesterday. Japan’s Nikkei 225 (JP225) was down 2.66%, China’s FTSE China A50 (CHA50) lost 0.37%, Hong Kong’s Hang Seng (HK50) was 0.04% cheaper, and Australia’s ASX 200 (AU200) was negative 1.79%.

US President Donald Trump is set to speak to his Chinese counterpart Xi Jinping as early as this week as the two major economies work towards a deal to avoid wider trade tensions. On Monday, Beijing called on Washington for “frank dialogue and strengthened cooperation,” stressing that the tariffs are counterproductive and harmful to normal trade relations. Beijing also plans to sue the World Trade Organization.

As of Friday, the Dow Jones (US30) was down 0.75% (for the week +0.90%). The S&P500 Index (US500) decreased by 0.50% (for the week +1.20%). The Nasdaq Technology Index (US100) is down 0.14% (for the week +2.28%). Stocks gave up an early rally on Friday and declined moderately. The long liquidation in stocks emerged on Friday afternoon when the White House denied a Reuters report that President Trump would delay imposing tariffs against Canada and Mexico until March 1.

Relations between longtime allies the US and Canada, which has the world’s longest land border, have reached a new low. Canadian Prime Minister Trudeau said he was imposing tariffs on 155 billion Canadian dollars ($107 billion) worth of US goods. He said tariffs on 30 billion Canadian dollars will take effect Tuesday, the same day as Trump’s tariffs, and duties on the remaining 125 billion Canadian dollars 21 days later. Trudeau’s announcement came just hours after Trump imposed 25 percent tariffs on Canadian and Mexican imports and 10 percent on goods from China, creating the risk of a trade war that economists say could slow global growth and stoke inflation.

The tariffs pose a significant threat to the commodity-linked CAD, as they could reduce currency demand and limit foreign exchange inflows. These tariff risks also add to pessimism about Mexico’s economic outlook, especially after its GDP contracted by 0.6% in Q4 2024. Meanwhile, diverging monetary policies between the hawkish US Federal Reserve and Mexico’s central bank, expected to cut rates further to stimulate economic recovery, have narrowed the yield differential, adding pressure on MXN.

Equity markets in Europe were mostly up on Friday. Germany’s DAX (DE40) rose by 0.02% (for the week +2.50%), France’s CAC 40 (FR40) closed up 0.11% (for the week +0.97%), Spain’s IBEX 35 (ES35) index fell by 0.41% (for the week +4.00%), and the UK’s FTSE 100 (UK100) closed 0.31% (for the week +2.02%) on Friday. The DAX index closed without significant changes on Friday, setting a new record high. Market participants were assessing key inflation data from Europe and the US and the latest corporate earnings reports. In Germany and France, core inflation came in below forecasts, indicating that price pressures are easing and reinforcing expectations that the ECB will continue to cut rates this year.

WTI crude oil prices rose to around $73.8 a barrel on Monday after US President Donald Trump imposed tariffs against Canada, Mexico, and China, raising concerns about possible supply disruptions. However, crude oil prices could face downward pressure in the near term. Imposing tariffs and subsequent retaliatory measures could trigger a wider trade war, hurting global economic growth and reducing energy demand.

Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) fell by 2.59%, China’s FTSE China A50 (CHA50) gained 0.44%, Hong Kong’s Hang Seng (HK50) rose by 0.91%, and Australia’s ASX 200 (AU200) posted a positive 1.21% for the week. Hong Kong stocks fell 1.3% in early trading at the start of the new month, reversing gains from the previous three sessions when trading resumed after the New Year holiday amid widespread sector losses. Over the weekend, investors reacted as Donald Trump imposed sweeping tariffs against several countries, including China. Meanwhile, Beijing announced plans to challenge Trump’s decision at the WTO and take other countermeasures, adding to fears of a trade dispute between the two countries.

The Australian dollar fell about 2% to below $0.61, hitting its lowest since April 2020. New US tariffs heightened fears about a global trade war, triggering a sell-off in risk assets. While Australia has not been directly impacted by the new US tariffs, its economy, which relies heavily on exports and free trade, remains vulnerable to disruptions in global trade. Meanwhile, data showed a 0.1% decline in Australian retail sales for December, the first drop in nine months. The slowdown has further supported expectations of a dovish stance by the Reserve Bank of Australia, with many analysts predicting rate cuts could begin as early as this month.

On Monday, the New Zealand dollar fell by 2% to US$0.553, its lowest level since March 2020, as the threat of a global trade war weighed on risk sentiment. In addition, the Kiwi weakened further after China’s manufacturing PMI fell below expectations as China is New Zealand’s key trading partner. The prospect of further rate cuts by the Reserve Bank of New Zealand also weighed on the currency. The market is pricing in a 50 bps rate cut to 3.75% at the February 19 meeting and forecasts a rate cut to 3% over the next 12 months.

Indonesia’s annualized inflation rate for January 2025 fell to 0.76% from December’s 1.57%, the lowest since March 2000. Core inflation, which excludes managed and volatile food prices, accelerated to an 18-month high of 2.36%, beating growth estimates of 2.30%.