🚨 Market Report.
📉 Asian stocks slumped as U.S. bond yields jumped to the highest levels since July, unnerving investors ahead of key U.S. inflation data. Treasury yields have surged since Donald Trump’s election victory, as his proposed policies of lower taxes and higher tariffs are seen fueling inflation and increasing government borrowing. Commodities like copper and crude oil came under pressure amid concerns about the economic outlook, especially in China, which could be impacted by Trump’s trade policies.
💵 The dollar, for these same reasons, is strengthening strongly against the euro and the yen.
💻 Bitcoin paused after reaching a new all-time high, as markets bet on Trump ushering in a more crypto-friendly regulatory environment.
🇩🇪 The next German federal election will be held on Feb. 23. Chancellor Olaf Scholz and his Social Democrats (SPD) are facing an uphill battle, with polls showing voters overwhelmingly want a change in leadership. A CDU/CSU-led “grand coalition” with the SPD and possibly the Greens as a junior partner looks like the likeliest outcome, though coalition negotiations could take several months. The main campaign issues will be reviving Germany’s struggling economy, navigating relations with the incoming U.S. President Donald Trump, and safeguarding Germany’s important manufacturing sector. The snap election appears to be Scholz’s last chance to salvage his chancellorship, as voters seem poised to hand power to the conservative opposition led by Merz.
📊 Japan’s producer prices increased by 3.4% year-over-year in October 2024, higher than the 3.1% growth in the previous month and above market forecasts of 3.0%. This marks the 44th straight month of producer inflation in Japan, rising at the fastest pace in 14 months. On a monthly basis, producer prices rose 0.2%, beating consensus expectations of a flat reading.
🇫🇷 According to the Bank of France’s monthly outlook French economic growth is expected to flatline in Q4 2024 as activity moderates after the boost from the Paris Olympic Games in Q3. A pullback in growth was widely anticipated after the 0.4% expansion in Q3, which was driven by an influx of tourists for the Olympics. Business activity is expected to remain slightly positive in Q4, but order books remain below long-term levels in most industrial sectors, except aviation.
🚀 President-elect Donald Trump has named Elon Musk and Vivek Ramaswamy to lead a newly created Department of Government Efficiency: The department’s goal is to “dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies.” The work is set to conclude by July 4, 2026, the 250th anniversary of the Declaration of Independence. The new department, with the acronym DOGE, is intended to be highly transparent, with all actions posted online. Musk has promised to create a “leaderboard for most insanely dumb spending of your tax dollars.”
🛡️ President-elect Donald Trump has nominated Pete Hegseth, a Fox News commentator and veteran, as his Secretary of Defense: Hegseth is known for his disdain of the “woke” policies pursued by current Pentagon leadership, including the Joint Chiefs of Staff Chairman General C.Q. Brown. Hegseth has criticized NATO allies as “self-righteous and impotent” for not spending enough on defense, and has expressed concerns about China’s military ambitions. There are concerns that Hegseth, as Defense Secretary, could push to root out military officers and civil servants perceived as disloyal to Trump. Hegseth’s appointment also raises questions about the future of U.S. support for Ukraine under a Trump administration, as he has been critical of deeper American intervention in the Russia-Ukraine conflict.
📉 Market View:
📉 US futures retreat after the post-election euphoria. Mini S&P 500 futures are trading below 6,000 points, but are holding right at that border. The Nasdaq 100 is down to 21,125 points at the moment.
💪 The strength of the dollar, on the other hand, does not stop. The dollar index has climbed above 106 points, continuing its tremendous bullish rally. EUR/USD is now closer to the 1.06 area and USD/JPY is back to highs not seen in recent months, returning to areas such as 155. US bond yields continue to rise ahead of today’s Fed speeches; the 10-year bond is trading near 4.45%.
📉 In Europe, markets open negative and the DAX 40 is currently struggling to hold 19,000 points. As we warned in previous reports, the loss of this level could trigger a severe correction. The EuroStoxx 50 also falls below 4,750 points.
🛢️ Crude oil is down almost 6% since last Thursday, with Brent crude currently trading at 71.95 dollars a barrel. Gold has also fallen more than 5.50% since Trump’s victory; it is currently trading at $2,610 per ounce and the chart structure shows that it could continue to fall.
💰 Lastly, Bitcoin is retreating from the 90,000 level, but has not lost its bullish structure and remains close to the 87,000 dollar area.
🌍 Geopolitics:
📞 Elon Musk was present during Serbian President Aleksandar Vucic’s phone conversation with US President-elect Donald Trump on Sunday, highlighting the billionaire’s influence in the next government. Musk also overheard a conversation between Trump and Volodymyr Zelenskiy, the president of Ukraine, last week.
🏦 The ECB is set to formally elevate the importance of potential impacts from political events, including wars, in its annual list of banking supervisory priorities. The ECB is concerned about economic shocks caused by conflicts like the war in Ukraine, as well as potential trade conflicts stemming from policies under U.S. President-elect Donald Trump. The ECB’s increased focus on geopolitical risks will create significant additional work for banks.
🔒 Goodbye to Swiss banking secrecy. The United States is pursuing an inquiry into Russian clients that UBS took on when it acquired Credit Suisse. UBS is seeking to contain any potential fallout by cordoning off suspect money and decommissioning the accounts to avoid the threat of U.S. penalties. Regulators in Switzerland are also scrutinizing how UBS is handling Credit Suisse’s clients and its anti-money laundering policies. The U.S. has criticized Switzerland’s lack of laws requiring disclosure of real asset ownership, which could enable the movement of illicit Russian finance.
🇬🇪 European bureaucrats went to Georgia to incite the population to reject the election results by participating in a public opposition event. Simultaneously, the EU claims that election interference in Georgia is coming from Russia. However, Germany and France have an increasingly disgruntled population.
