Another week starts with some interesting macroeconomic data, as well as rate decisions and central bankers’ speeches.
– US: On Friday, Wall Street closed the market with new record highs in SP500. Something surprising because, the last comments we heard earlier in the week, from Fed members such as Bostic, was that the rate cut would not happen in March, but rather in the May meeting. This two-month delay in the easing of liquidity, reproducing selling desires, seemed to be interpreted as a confirmation of the long-awaited rate cuts. However, something does not quite add up in the equation, as the dollar, which should have responded accordingly downwards, did not fall. With an expensive dollar, equity rallies are unlikely, so I invite the reader to follow the relationship closely.
– Europe: This afternoon we will have a speech by European Central Bank President Christine Lagarde. Therefore, keep an eye on the movement of the EURUSD, which continues to show significant weakness, since the strengthening of the dollar last week, and is trading in the intraday session below its 200 and 55, with a correspondingly bad bearish crossover of moving averages.
– China: Reuters published this morning a very interesting revision on China’s growth in 2024. The estimate given is a growth rate of 5%. However, the official target growth rate will not be known until the parliamentary meeting in March. Some of the people interviewed by Reuters point out that achieving 5% growth will be a huge effort for China, especially considering some of the signs of a slowdown in 2023. According to Reuters polls, the most reasonable growth rate that could be expected for 2024 in China is 4.6%. We will see how the year ends, there is still a lot of rain to come.
– International: last night we learned in the United States that the second best performing candidate of the Republican party, DeSantis, current governor of Florida, withdrew his candidacy for the presidency of the United States in favour of Donald Trump, for whom he asked his voters for support. Trump remains the candidate with the highest voter intention, according to polls conducted so far.
In this regard, Lagarde, the ECB president, when asked at the Davos Economic Forum about the possibility of a second Trump term, said: “the best defence, if that is the way we want to look at it, is attack, and to attack properly, you need to be strong. being strong means having a strong deep single market”. Admitting, therefore, the possibility that this was a threat to Europe’s trade interests, the shadows of Trump’s trade war return.
– Geopolitics: On Sunday, Russian energy corporation Novatek announced that a fire caused by what Ukrainian media claimed was a drone attack had forced it to halt part of its operations at a huge gasoline export facility in the Baltic Sea.
The Interfax-Ukraine news agency, citing unnamed sources, said the fire was the result of a special operation carried out by Ukraine’s security services using drones. “The Ust-Luga oil terminal (…) is an important facility for the enemy. Fuel is refined there, which, among other things, is also supplied to Russian troops,” a source was quoted as saying.
In 2023, Russia overtook Saudi Arabia as the main supplier of oil to China.
Russia shipped a record 107.02 million metric tons of crude to China last year, equivalent to 2.14 million barrels per day (bpd), according to Chinese customs data, far more than other major oil exporters such as Saudi Arabia and Iraq.
New disagreements emerge within NATO and the European Union over the war in Ukraine.
On Saturday, 20 January, Slovak Prime Minister Robert Fico claimed that neighbouring Ukraine is not a sovereign nation, but under the absolute control of the United States. “Ukraine is not an independent and sovereign country,” Fico told public broadcaster RTVS. “Ukraine is under the full influence and control of the United States”.
Regarding the meeting he will have with his Ukrainian counterpart, he said, “I will tell him that I am against Ukraine’s NATO membership and that I will veto it (…) It would simply be a pretext for World War III, nothing else”.
In relation with middle-east crisis, According to a review of vessel delays released this week by maritime advice firm Sea-Intelligence, supply chain disruptions caused by the Houthi attacks in the Red Sea have already caused more harm than the first COVID-19 pandemic.
The energy markets and product tanker rates are starting to be significantly impacted by the Red Sea diversions.