Market Report.
🗓️ We close a week that has been spectacular in terms of global agenda. But let’s focus first on yesterday’s macroeconomic data.
📉 The PCE inflation data came in entirely neutral: not only did it meet expectations, but it was identical to the previous reading, showing no change whatsoever. At the same time, the third‑quarter GDP revision was upgraded to 4.4%, directly contradicting earlier predictions that protectionist measures would severely damage the economy.
👷 In addition, the labour market continues to show resilience. Initial jobless claims came in below expectations at 200k, compared with 209k expected and 199k previously, while broader macroeconomic volatility remains notably absent. Taken together, these figures allow for a more constructive reading of the current state of the US economy.
🇯🇵 Japan’s headline inflation rate cooled sharply in December to 2.1%, the lowest level since March 2022, down from 2.9% in November. Core inflation, excluding fresh food prices, also eased to 2.4%, its lowest point since October 2024.
🍚 Japan’s headline inflation has cooled, the persistence of high rice prices and broader goods inflation pressures could force the BOJ’s hand on interest rates.
🏦 Inflation in Japan is likely to remain elevated, keeping overall inflation above the BOJ’s 2% target for longer. This could prompt the central bank to raise interest rates as soon as April, despite the moderation in headline inflation.
🗳️ The inflation data comes as Prime Minister Sanae Takaichi has dissolved the Lower House and called a snap election for February 8th. Takaichi has made tackling the high cost of living a priority, pledging to suspend the 8% food tax for 2 years to provide relief to households.
📄 In yesterday’s report, we highlighted that the so‑called Greenland agreement appeared to be little more than a unilateral declaration — effectively a monologue — in which one of the parties does not seem to have obtained anything in return.
⚠️ An agreement reached under such circumstances lacks structural solidity, as one party has nothing to lose by walking away, having apparently gained nothing new in the first place.
🔍 Furthermore, the absence of concrete details and the repeated reference to the issue as being “complex” may be indicative that there is, in fact, no binding agreement at all, but rather an imposition or, at best, a preliminary framework for a potential future deal.
🧊 Well, Greenland’s Prime Minister Jens-Frederik Nielsen stated yesterday that he does not know what is actually in the agreement that President Trump announced. This reflects a broader sense of confusion and uncertainty around the specifics of the proposed “deal” regarding Greenland.
🗣️ Trump claimed he struck a Greenland-related deal with NATO Secretary General Mark Rutte, saying he had not asked Denmark or Greenland directly. He suggested NATO’s role was decisive, remarking about Rutte, “I’ll be discussing it with this man right here. He’s frankly more important than the Danish foreign minister.”
🛡️ Denmark has been a member of NATO since 1949 and has since paid insurance premiums to protect its national interests and territorial integrity. At least, German Chancellor Merz says he would save Denmark and Greenland from Russia: We will protect Greenland, Denmark, and the north from the threat of Russia”.
🇺🇸 The U.S. is seeking to rewrite its longstanding defense pact with Denmark in order to lift restrictions on its military activities in Greenland, a key demand from President Trump.
📜 The U.S. is pushing to rewrite its 1951 defense agreement with Denmark to remove any limits on the U.S. military presence in Greenland.
📢 The current agreement requires the U.S. to “consult with and inform” Denmark and Greenland before making “any significant changes” to U.S. military operations or facilities in Greenland.
🤝 Greenland’s Prime Minister Jens-Frederik Nielsen said he is open to boosting defenses, including a permanent NATO presence, but stressed that Greenland must be involved in decisions about its future.
📉 The “sell US” trend has decreased, but it does not disappear.
💼 Large North European investors, including pension funds in Finland, Sweden, and Denmark, are growing increasingly wary of the risks of holding U.S. assets amid geopolitical tensions. The risk premium attached to U.S. assets has gone up, partly due to concerns over the U.S. government’s finances and the uncertainty surrounding U.S. foreign policy under the Trump administration.
📊 Since Monday we have been talking about the volatility caused on the US bond of the events on Greenland.
📰 According to Reuters, two Nordic pension funds, Alecta and AkademikerPension, have recently sold or are in the process of selling their U.S. Treasury holdings, citing increased risks. Investment advisors like Russell Investments say about 50% of their Northern European clients are considering reducing exposure to U.S. assets.
⚖️ Fox Business reports that President Donald Trump has filed a $5 billion lawsuit against JPMorgan Chase and CEO Jamie Dimon, accusing the bank of debanking him for political reasons. The suit was filed on Thursday, according to the report.
🏦 The lawsuit claims JPMorgan “unilaterally and without warning” terminated several of Trump’s bank accounts in February 2021, cutting off access to funds and disrupting his business operations.
🇪🇺 The European Union is on the “cusp of a historic trade agreement” with India, according to European Commission President Ursula von der Leyen. This could be a much-needed boost for India, which has faced punitive U.S. tariffs.
🌏 However, experts note that an India-EU trade deal, while significant, will not diminish India’s need for a trade pact with the U.S., which is India’s largest export market.
📈 In 2024, India’s goods trade surplus with the U.S. was $45.8 billion, while for the EU it was substantially lower at $25.8 billion. India’s total exports to the top 6 EU markets were $43.8 billion, compared to $65.88 billion for the U.S. alone.
Geopolitics.
🇮🇶 Iraq finds itself torn between the competing influences of Iran and the U.S
⚖️ Iraq is being pulled in two directions – between its powerful neighbor Iran, which has built decades of influence in the country, and the U.S. under President Trump, who wants America to have more sway in OPEC’s second-largest producer.
🛢️ Iran has entrenched its influence in Iraq through economic ties, political alliances, and support for Shia militias, making it a formidable force that Iraq must contend with.
🇺🇸 Meanwhile, the U.S. under Trump is pushing to reassert its influence in Iraq, seeing it as crucial for containing Iran’s regional ambitions and protecting American interests. This has put Iraq in a precarious position, forced to confront a stark choice between aligning more closely with Iran or the U.S.
🚢 Donald Trump announced that the U.S. is sending a large amount of military equipment toward Iran, saying, “We have a lot of ships on the way to Iran, there’s an aircraft carrier on the way there. I don’t want anything to happen, but we’ll have to see what happens.”
🇫🇷 French President Emmanuel Macron announced that France has seized a Russian oil tanker in the Mediterranean. He said the French Navy boarded the vessel because it was subject to international sanctions and suspected of sailing under a false flag, marking another escalation in enforcement against sanctioned Russian energy shipments.
🕊️ The late-night Kremlin talks between President Putin and the U.S. envoys Witkoff and Kushner represent a critical juncture in the efforts to end the war in Ukraine. After months of backchannel discussions, the negotiations appear to have reached a pivotal stage, with the two sides reportedly close to an agreement on around 90% of the proposed peace framework.
🇨🇦 Trump withdrew his invitation for Canada to join his “Board of Peace” after Canadian Prime Minister Mark Carney sharply criticized major powers for using economic integration as a weapon and tariffs as leverage in a high‑profile speech at Davos.
😂 Elon Musk joked at Davos that Trump’s “PEACE” summit is really spelled P‑I‑E‑C‑E, quipping: “A little piece of Greenland, a little piece of Venezuela.”
Market View.
📉 Markets are recovering part of their recent losses towards the end of the week, though without much optimism. S&P 500 futures are starting Friday trading above 6,950 points, but it remains to be seen whether they can return to the 7,030 area reached during the second week of January. Nasdaq 100 futures have moved above 25,650 points. Overall, conditions remain finely balanced.
💱 The US Dollar Index (DXY), which moved close to the 99 level yesterday, has weakened again and is now attempting to recover the 98.50 area. This has generated renewed volatility in currency markets. EUR/USD has climbed back above 1.17, currently trading around 1.1730. USD/JPY has seen particularly aggressive moves following yesterday’s Japanese inflation data, which shifted expectations sharply, driving a move of over 1% in a single day. The pair is now trading around 158.30.
📉 US Treasury markets have calmed, with yields cooling after this week’s sharp rise. The 10‑year Treasury yield, which had briefly exceeded 4.30%, has eased back to around 4.22%.
🛢️ The oil market remains broadly stable, with spot Brent crude holding near $64.50 per barrel.
🥇 Gold futures have posted yet another all‑time high, trading just $30 shy of the $5,000 mark, and are currently around $4,930 per ounce.
₿ Bitcoin has failed to recover and continues to show technical weakness, currently trading near $89,170.
