Weekly Overview 13. – 19. Jan 2025

The content of this post does not constitute financial advice. It is intended for information and education purposes only.

MoneyCraft recommends the PiQ Suite (Affiliate Link): MoneyCraft subscribers receive a promo code for 6 months FREE subscription to the PiQ Suite

The Week in Global Markets

Financial markets summary:

– EUROPE: Most major equity indices in Europe advanced this week, despite the negative GDP growth in Germany and the stagnation in Britain. The minutes of the ECB meeting showed that policymakers see a reduction of rates taking place cautiously and gradually, with the market now pricing in another 25bp cut at the end of January. The biggest concerns seem to be related to geopolitical risks, international trade frictions such as new tariffs by the US, and fiscal challenges for some countries in the Eurozone. In the UK, inflation unexpectedly slowed down in December, raising hopes for another rate cut by the Bank of England in February. After the CPI release in the US, yields on long-term government bonds in Europe reversed their course from what was seen over the last several weeks, mirroring their US Treasury counterparts. The euro remained almost unchanged against the US dollar, while the pound continued to depreciate.

– UNITED STATES: After the positive surprise in the inflation release this week and the impressive earnings performance of large US banks, the US stock market rebounded from the declines seen in the past week. Bond yields appeared to reverse course across tenors on the lower CPI print. Supercore CPI declined as well, reaching the lowest level since July 2024. The big question now is whether yields still have room to rise further from here. They do, especially if inflation rebounds in the coming months (for instance, as a result of the shifts in economic and trade policies) or if the Fed’s stance remains tighter for longer. The likelihood for the latter shifted somehow this week, as the market repriced to a June rate cut. Another driver, however, could be the weak central bank demand for US Treasuries. There were some not-so-great macro data this week as well – namely, the slowdown in retail sales growth, which came in below expectations for December. Continuing jobless claims declined, but initial jobless claims rose to 217k vs. 203k the week before. The S&P 500, the Dax and the Nasdaq were all up, with the S&P 500 earnings expected to increase 11% YoY in Q4, which would be the strongest growth in 3 years.

– ASIA-PACIFIC: We observed swap market traders betting on a nearly certain rate hike (99% likelihood) next week by the Bank of Japan (BoJ). Governor Ueda also reinforced market expectations on Wednesday after he said that the central bank will make a decision on hiking rates next week and indicated rising confidence over wage increases. This contributed to the appreciation of the yen against the US dollar to about 155. Analysts pointed out that the final hurdle will be Trump’s policies, but most likely the market will not become extremely volatile as a result of his inaugural address. In China, GDP rose by more than expected (5.4% YoY and 1.6% QoQ) and, according to official data, hit the CCP’s annual target for 2024. Industrial production and retail sales also seem to be recovering, indicating that the economy as a whole might be picking up pace once again – news that also likely supported European equity markets, as well as Chinese equity indices. An indicator of property prices showed that the slump is likely over as development was practically flat in December.

– BITCOIN: The largest cryptocurrency did recover this week, currently fluctuating once again around the $105k mark, most likely driven by hopes related to the Strategic Bitcoin Reserve according to Donald Trump’s plans. However, it is unclear what impact there will be on BTC from the newly released meme-coin $TRUMP, which launched on Friday after a Crypto ball organized for a small circle of family, friends, and business people, close to the president-elect. The new crypto token soared in value immediately and by Sunday it became the second largest meme-coin after $DOGE, with a market cap of over $12.8bn and a 24-hour trading volume of $29bn. Just within two days, it has reached the top 20 cryptos. People who bought in early made millions overnight, with the net worth of Donald Trump himself (his family is reported to own over 80% of the entire supply in their own or affiliated crypto addresses) multiplying overnight, making him the newest crypto billionaire (according to some reports adding $7bn of net worth). The holdings are so concentrated that single buyers/sellers move huge amounts on the market in single transactions. This raises the question of significant conflicts of interest for the incoming president of the United States (generally, politicians are required to divest holdings to avoid such conflicts) and of significant market manipulation (some indicators point to a possible pump-and-dump scam, similar to the Hawk-Tuah coin and other crypto scams from the past), but only time will tell what is behind this move. It opens the gate for significant hidden corruption with anonymous payments for favors to the president even from foreign regimes. Since $TRUMP launched on the Solana blockchain, its token $SOL also received a boost in the wake of the launch. There are big questions now about whether this means that Donald Trump will attempt to create a reserve filled with his own meme-coin or Bitcoin – and people will be looking for answers to this during the inauguration and in the coming months as his crypto strategy is finally revealed.