Market Report.
📉 U.S. job growth slowed more than expected in January, with nonfarm payrolls increasing by 143,000 jobs, below the expected 170,000. However, the 4.0% unemployment rate will likely give the Federal Reserve cover to hold off on cutting interest rates at least until June. Wage growth was strong, with average hourly earnings surging by the most in five months, which should keep consumer spending supported. The labor market resilience has given the Fed room to pause its rate cuts as it assesses the impact of Trump’s policies.
📈 US Consumer inflation expectations surged to the highest level since 2023, which could worry Fed officials as they try to bring down elevated inflation. Fed Chair Powell may provide more commentary on the economic outlook and rate path when he testifies before Congress on Wednesday.
💰 President Trump said his administration is examining U.S. Treasury debt payments for possible fraud and suggested the country’s $36 trillion debt load may not be as high as reported. Trump stated that administration officials combing through payment records have turned their attention to Treasury debt payments, saying “there could be a problem” and that some of the debt “could be very fraudulent.” The U.S. currently has $36.2 trillion in public debt, over 120% of GDP. Trump’s proposed tax cuts would add trillions more to the debt, as it would drastically reduce public revenues. However, public spending has also been cut disproportionately, easing the burden on public spending.
🚨 In any case, the main fear is that at some point it may suggest that they will default on a portion of US debt. A default on the US bond considered ‘risk-free’ would have global repercussions on financial markets.
🔨 Trump also announced he will introduce new 25% tariffs on all steel and aluminum imports into the U.S., on top of existing metals duties. Trump said he will also announce reciprocal tariffs on Tuesday or Wednesday, to take effect almost immediately, applying them to all countries and matching the tariff rates levied by each country. The largest sources of U.S. steel imports are Canada, Brazil, and Mexico, while Canada is the largest supplier of primary aluminum to the U.S. Canada criticized the move, saying Canadian steel and aluminum support key U.S. industries and that Canada will continue to stand up for its workers and industries. Separately, Trump said Canada’s and Mexico’s actions to secure the U.S. border are insufficient, threatening new tariffs if they don’t take stronger actions by March 1.
🏆 Gold prices firmed on Monday and hovered near a record high hit in the previous session, as investors sought refuge in the safe-haven asset after President Trump’s fresh tariff plans. Gold is considered a safe investment during economic and financial turmoil, but higher interest rates reduce the non-yielding asset’s appeal. The potential for gold to get caught up in the tit-for-tat tariffs is causing disruptions in the physical market. Federal Reserve officials said the U.S. job market is solid but noted uncertainty over how Trump’s policies will affect economic growth and inflation, underscoring their no-rush approach to rate cuts.
🇨🇳 In addition, China will allow insurance funds to buy gold for medium- and long-term asset allocations as part of a pilot project, the country’s financial regulator said on Friday. China’s decision to allow this increased exposure to gold could have implications for capital flows and prices of the precious metal globally.
🇩🇪 German Chancellor Olaf Scholz said the EU is prepared to respond “within an hour” if the U.S. levies tariffs against the European Union. In a pre-election debate, Scholz’s conservative challenger Friedrich Merz portrayed Scholz as a ditherer who had led Germany into economic crisis, while Scholz presented himself as an experienced leader. Merz expressed reluctance to raise taxes or borrow to reach NATO’s defense spending target of 2% of GDP, far short of the 5% Trump is demanding. Scholz warned that Merz could not be trusted not to govern with the far-right Alternative for Germany (AfD) party, which Merz blamed on Scholz’s “left-wing” policies. The debate was overshadowed by Trump and Elon Musk, who has endorsed the AfD party in Germany.
📊 Market View:
📉 US futures started the day below Friday’s levels, but managed to regain ground. Friday’s US jobs report sowed uncertainty in the markets as it reduced the need for interest rate cuts. Mini S&P 500 futures fell by more than 1 % during the last session of last week, but are now recovering some of the losses and are trading at 6065 points. A similar situation can be observed in the Nasdaq 100, which has also started a recovery and is now close to 21 700 points.
💵 The dollar, meanwhile, resists losing ground. The dollar index (DXY) has resumed its upward trend and is back above 108 points, reaching 108.40 in early trading on Monday. Therefore, the EUR/USD continues its downward trajectory. Last week we warned that this pair could repeat a downward move similar to the one at the end of January. Currently, the pair is at 1.032.
🇩🇪 However, none of this seems to have a significant impact on the German stock market, even though the country is going through a change of government that could influence Europe as a whole. DAX 40 futures reached a new high above 22 000 points on Friday, but are now retreating towards 21 880 points.
🛢 Meanwhile, crude oil prices continue to fall. Last week, Brent crude oil traded as low as $74 a barrel, but in the last few hours it has rebounded slightly to $75 a barrel, without abandoning its general downward trend.
🥇 Gold, on the other hand, has maintained its upward momentum and is already above $2900, currently trading at $2910. We have explained the fundamentals behind this move in our report.
🪙 Finally, bitcoin seems to be showing signs of weakening, moving closer and closer to its support zone around $92,000.
🌍 Geopolitics:
🛡 Last week, questions were raised over whether Article 5, NATO’s mutual defense clause, could be invoked if the US invaded Greenland, a fellow NATO member. NATO countries have discussed deploying troops to Greenland in response to Donald Trump threatening to use the US military to seize the Danish island. Greenland is strategically important due to its rare earth deposits, position for missile defense, and to counter China’s growing influence in the Arctic. NATO is considering invoking Article 4, which allows emergency consultations if a member’s “territorial integrity, political independence or security” is threatened, as a response to Trump’s overtures.
🗳 Olaf Scholz’s reelection campaign is in danger due to a debate with conservative opponent Friedrich Merz. Scholz and his SPD party are running out of time to close the 14 percentage point deficit with the conservatives, which would nearly double their current support.
⚡️ Lithuania, Latvia, and Estonia have successfully disconnected from Russia’s electricity grid and connected to the continental European grid, securing energy independence from Moscow. This move was the result of a five-year effort, supported by €1.6 billion in EU funding, to overhaul the region’s Soviet-era energy infrastructure.
