📉 Market Report.
🔕 Asia markets had a muted session, with investors still disappointed by China’s latest policy package that focused on debt swapping rather than direct stimulus. Analysts believe China is holding back on stronger stimulus measures in case President-elect Trump follows through on proposed 60% tariffs against China.
📊 China’s latest inflation data on Saturday showed consumer prices grew just 0.3% in October, the slowest pace in four months, while producer prices dropped 2.9%, indicating continued deflationary pressures. With 70% of Chinese household wealth tied up in the weak real estate sector, consumers are holding onto their money tightly. China’s retail sales and industrial output data this Friday will show if Beijing’s policies are gaining traction.
🏦 The Bank of Japan (BOJ) hopes to maintain its 2% inflation target even if the fallout from government measures to promote the green transition causes long-term shocks to future price developments, according to Governor Kazuo Ueda. Under its green transition strategy, the Japanese government will provide fiscal support worth 20 trillion yen ($131 billion), or 3% of the country’s GDP, to companies investing in environment-friendly technology over the next 10 years. Government subsidies to promote the green transition may create inflationary pressure in the short term, although Japan can “accommodate such inflationary forces for a while” as underlying inflation is currently still below 2%.
📉 Goldman Sachs, as reported by the Financial Times, has cut its 2025 growth forecasts for the EU from 1.1% to 0.8% and for the UK from 1.6% to 1.4%, due to potential tariffs by US President-elect Trump. If general tariffs of 10% are imposed, eurozone growth could drop dramatically from 1% to 0.1%. This highlights European economies’ vulnerability to shifts in trade policies and the need for stable transatlantic economic ties.
⚖️ Germany’s governing coalition collapsed after a dispute between Chancellor Scholz and pro-market minister Lindner over budget policy and the direction of the economy. The German economy has underperformed its euro zone peers since 2018 and faces further challenges, including Volkswagen’s plans to shut factories at home. Germany needs to focus more on its services sector, which is smaller than in comparable European economies but growing faster than manufacturing. Germany has the highest proportion of its workforce employed in regulated professions among EU members, which makes it difficult to find young hires. Unregulated immigration would drive down wages, increase productivity and solve this. The only problem, the local population is already rejecting it, AfD.
📅 German Chancellor Olaf Scholz said he would be willing to call a vote of confidence in parliament before Christmas, earlier than the January date he had previously proposed. This move would pave the way for snap elections following the collapse of Scholz’s three-way governing coalition. Two leading members of the Green party, which is sharing power with Scholz’s Social Democrats in a minority government, called for the confidence vote to be held in December. The collapse of Scholz’s coalition and disagreements over government spending have thrown Europe’s largest economy into disarray.
📈 Market View:
📊 Monday’s session starts on a positive note. Mini S&P 500 futures are trading at new record highs, reaching 6035 points at the moment. The Nasdaq 100 is also trading at record highs, approaching 21300 points at the moment.
💵 The dollar index continues to show strength in the currency and resumes the bullish tone started on Wednesday after the elections. It is now approaching 105.15, causing the EUR/USD to fall, which is struggling to hold 1.07 as support.
📈 In Europe, the DAX 40 starts the week in positive territory, trying to stabilise after a week of high volatility, currently rising to 19380 points. The EuroStoxx also shows timid gains towards 4840 points.
🛢️ Oil is slightly weaker, with Brent crude below 74 dollars. Gold continues to weaken, finally showing a more predictable correlation with the dollar.
💰 Bitcoin hits a new record high and approaches 82000.
🌍 Geopolitics:
🇺🇸 U.S. President-elect Donald Trump spoke with Russian President Vladimir Putin and advised him not to escalate the Ukraine war, according to a source familiar with the conversation. The pace of U.S. aid to Ukraine is almost sure to drop under a Trump presidency, as Republicans are set to take control of the U.S. Senate with a 52-seat majority. Republican Senator Bill Hagerty, a Trump ally, criticized U.S. funding for Ukraine, saying the American people want sovereignty protected in the U.S. before spending resources protecting the sovereignty of another nation.
🤝 Former European Council President Donald Tusk is planning a series of high-level meetings with NATO, France, the UK, Baltic and Nordic states to coordinate on Ukraine’s future and the transatlantic relationship under a second Trump administration. Tusk warned that Trump could seek a deal with Putin to end the war in Ukraine in the coming months, and urged Europe to prepare for Trump’s proposals on Ukraine.
🇬🇧 Farage, a Brexit-campaigner and friend of Trump, has offered to act as an interlocutor between the British government and the incoming Trump administration. Treasury minister Darren Jones said it is “probably unlikely” that the government would accept Farage’s offer, stating that Farage should spend his time with his constituents rather than in the United States. Farage said he has “a great relationship” with Trump and believes it would be in the national interest for him to act as an intermediary for the British government.
