Please see this week’s market overview from eToro’s world analyst crew, which incorporates the most recent market knowledge and the home funding view.
Most markets rose steadily in anticipation of Donald Trump’s presidency
Final week provided one thing for each sort of investor. Bond and small-cap traders discovered some reduction in softer-than-expected inflation knowledge, which prompted the US 10-year yield to fall from 4.76% to 4.62%. Worth traders have been happy with stable US financial institution earnings, all of which exceeded expectations. Progress and AI traders welcomed TSMC’s announcement of a deliberate improve in capital expenditures for 2025 to roughly $40 billion, sparking hypothesis about which portion will fund a brand new state-of-the-art manufacturing facility within the US.
In the meantime, cryptocurrency fans have been astonished by the launch of a Trump memecoin, which skyrocketed to billions in market worth. This surge additionally lifted Bitcoin by 11%, though it prompted a decline in lots of altcoins. China’s GDP progress within the fourth quarter of 2024 rose to five.4%, arguably pushed by front-loaded exports in search of to keep away from increased tariffs below Trump’s presidency.
Main fairness indices closed the week in optimistic territory. The S&P 500 and Nasdaq 100 have been up by 3%, whereas the Dow Jones and Russell 2000 gained 3.7% and 4.0%, respectively. The European STOXX 600 and the China-focused Cling Seng additionally posted features of two.4% and a pair of.7%, respectively. The UK FTSE 100 Index reached a brand new all-time excessive above 8,500 factors on Friday (see chart).
Macro Outlook for the week
All of the above happened within the wake of Donald Trump’s inauguration on Monday, 20 January, a day when US markets have been closed in observance of Martin Luther King Day. This week in macro, traders will deal with the UK’s unemployment and wage progress knowledge, following final week’s lower-than-expected inflation, retail gross sales, and GDP figures. Markets are factoring in vital fee cuts by the Financial institution of England in 2025, aiming to facilitate a smooth touchdown for the economic system.
Consideration can even flip to Germany’s financial sentiment index, as traders search indicators of enhancing sentiment, notably in gentle of current GDP knowledge displaying the economic system contracted for a second consecutive 12 months. Notably, Germany stays the one main industrialized nation the place GDP per capita is projected to remain under 2019 ranges by 2025.
FTSE 100 Index reached a brand new all-time excessive above 8,500 factors on Friday
Who decides the destiny of the yen, the Financial institution of Japan or Donald Trump?
The yen and the euro have been dropping floor in opposition to the greenback for months, with the dollar buoyed by a powerful US economic system and the “Trump Commerce,” pushed by proposed tax cuts and looming tariffs.
Final week introduced some reduction: EUR/USD climbed above 1.027, whereas USD/JPY fell 1% to 156.2. Yen merchants responded to Financial institution of Japan (BoJ) Governor Kazuo Ueda’s hints of a possible fee hike this Friday, following key inflation knowledge due earlier that day.
Nonetheless, Japan’s choices stay restricted. Years of sluggish progress and excessive public debt maintain the economic system reliant on low rates of interest. Whereas the BoJ may stabilise the yen, a significant rally appears unlikely. A weaker US greenback might show extra impactful than any BoJ coverage shift.
The yen’s destiny could finally relaxation with Trump. His inauguration on Monday might form markets, with a powerful greenback nonetheless the baseline below his “America First” agenda. Nonetheless, softer tariffs or fiscal insurance policies might weaken the greenback and provides the yen some respite.
Earnings season: huge names reporting
The earnings season is getting into its essential second week, with seven of the world’s high 100 largest corporations reporting their 2024 This fall earnings (see under). Traders ought to recognise that some inventory costs could have been influenced by the upcoming presidential transition. In his closing days, Joe Biden allotted $26 billion to wash power initiatives. In the meantime, Donald Trump has repeatedly said his intention to impose a 20% tariff on all items offered to the US, and a 60% tariff particularly on items from China. Execution orders, signed by Trump in his first week, might change federal insurance policies from the beginning and trigger sudden market actions.
Macro and earnings knowledge releases
Macro
UK unemployment, Germany ZEW (22/1), Japan CPI, BoJ fee determination, International PMI (24/1)
Earnings
21 Jan. Netflix, Charles Schwab, 3M, United Airways
22 Jan. Procter & Gamble, Johnson & Johnson, GE Vernova, Amphenol
23 Jan. GE Aerospace, Texas Devices, American Airways
24 Jan. American Categorical, Verizon, NextEra Power
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