Please see this week’s market overview from eToro’s international analyst workforce, which incorporates the newest market information and the home funding view.
Most markets rose steadily in anticipation of Donald Trump’s presidency
Final week provided one thing for each kind of investor. Bond and small-cap buyers discovered some reduction in softer-than-expected inflation information, which triggered the US 10-year yield to fall from 4.76% to 4.62%. Worth buyers have been happy with strong US financial institution earnings, all of which exceeded expectations. Progress and AI buyers welcomed TSMC’s announcement of a deliberate enhance in capital expenditures for 2025 to roughly $40 billion, sparking hypothesis about which portion will fund a brand new state-of-the-art manufacturing unit within the US.
In the meantime, cryptocurrency lovers have been astonished by the launch of a Trump memecoin, which skyrocketed to billions in market worth. This surge additionally lifted Bitcoin by 11% (to a brand new alltime excessive of $108,900), though it triggered a decline in lots of altcoins. China’s GDP development within the fourth quarter of 2024 rose to five.4%, arguably pushed by front-loaded exports looking for to keep away from larger tariffs beneath 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 Grasp Seng additionally posted good points 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
This week in macro, buyers will give attention to the UK’s unemployment and wage development information, following final week’s lower-than-expected inflation, retail gross sales, and GDP figures. Markets are factoring in vital price cuts by the Financial institution of England in 2025, aiming to facilitate a mushy touchdown for the economic system.
Consideration may even flip to Germany’s financial sentiment index, as buyers search indicators of bettering sentiment, notably in mild of latest GDP information displaying the economic system contracted for a second consecutive yr. Notably, Germany stays the one main industrialized nation the place GDP per capita is projected to remain beneath 2019 ranges via 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 shedding 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 price hike this Friday, following key inflation information due earlier that day.
Nevertheless, Japan’s choices stay restricted. Years of sluggish development and excessive public debt hold the economic system reliant on low rates of interest. Whereas the BoJ may stabilise the yen, a serious rally appears unlikely. A weaker US greenback may show extra impactful than any BoJ coverage shift.
The yen’s destiny might in the end relaxation with Trump. His inauguration on Monday may form markets, with a powerful greenback nonetheless the baseline beneath his “America First” agenda. Nevertheless, softer tariffs or fiscal insurance policies may weaken the greenback and provides the yen some respite.
Earnings season: large names reporting
The earnings season is coming into its essential second week, with seven of the world’s prime 100 largest corporations reporting their 2024 This fall earnings (see beneath). Buyers ought to recognise that some inventory costs might have been influenced by the upcoming presidential transition. In his remaining days, Joe Biden allotted $26 billion to scrub vitality tasks. In the meantime, Donald Trump has repeatedly said his intention to impose a 20% tariff on all items bought to the US, and a 60% tariff particularly on items from China. Execution orders, signed by Trump in his first week, may change federal insurance policies from the beginning and trigger sudden market actions.
Macro and earnings information releases
Macro
UK unemployment, Germany ZEW (22/1), Japan CPI, BoJ price determination, World 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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