📆 Friday, January 20
► European futures were steady, with investors awaiting Trump’s inauguration and the Davos Economic Forum, where Trump is set to speak virtually next week. We see reduced volatility due to US markets remaining closed today. The Stoxx 600 is flat. Last week’s UK retail sales disappointed (-0.3% vs. +0.4% expected), raising concerns about consumer spending weakness in the UK. The FTSE 100 remains near record highs, led by gains in energy, miners and financial stocks. Germany’s producer price index rose 0.8% YoY, below expectations of 1.1%, showing slower inflationary pressures in manufacturing – possibly also due to slowing demand. Meanwhile, the ECB continues to signal a cautious approach to rate cuts, with policymakers focused on wage growth and energy prices.
► US stock futures are trading slightly higher, with S&P 500 futures (+0.1%) and Nasdaq 100 futures (+0.15%) ahead of Trump's inauguration and as the markets awaits more details about Trump's policy agenda. Wall Street ended last week higher, fueled by a tech rally and Fed friendly inflation data, keeping rate-cut expectations alive. US bond markets remain volatile, with some traders now pricing in a 10-year Treasury yield rising to 6%, countering the broader market expectation of Fed rate cuts in 2025. Analysts see potential for higher yields if Trump implements aggressive pro-growth and protectionist policies. US Markets remain closed today on President Trump’s inauguration (but due to Martin Luther King Jr. Day).We also see caution as Trump prepares a flurry of executive orders on trade, energy, and immigration, which could introduce policy volatility.
► Asian stocks rallied, fueled by an apparent positive phone call between Trump and Xi Jinping, which raised hopes for easing US-China tensions. Trump described the conversation as “very good”, boosting market confidence across Japan, China, and Australia. Japan’s Nikkei 225 (+1.16%) was supported by strong machinery orders data (+3.4% MoM), which beat expectations and signaled a recovery in business investment. The JPY strengthened past 156/USD, as traders positioned for a possible BOJ rate hike later this week. China’s Shanghai Composite (+0.13%) and Hong Kong’s Hang Seng (+1.78%) extended their gains. The offshore CNY strengthened to 7.32/USD, reaching a three-week high, after the People’s Bank of China (PBOC) left key lending rates unchanged, as expected. The stability in China’s policy backdrop helped maintain investor confidence.
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