🌍 ATFX Connect-Market Report:
📊 Yesterday we had a number of interesting data from a macroeconomic perspective.
📈 To start with, the UK presented a better than expected GDP growth figure. In December, the economy grew by 0.4% against 0.1% expected, bringing the annual growth rate to 1.4% against 1.1% expected. The data provided optimism, allaying fears that the new UK government will increase spending and taxes, which could have depressed economic activity. As a result, the pound rose by 1% against the dollar.
🇩🇪 On the other hand, Germany’s inflation rate came in line with expectations at an annualised 2.3%. This represents a decline of 0.3% from the previous period’s reading, but a significant increase from October 2024, when we had lows of 1.6%.
🇺🇸 In the US, labour market data again showed strength. Initial Jobless Claims were lower than expected. In addition, Producer Price Indices (PPI) beat expectations, with growth in January of 0.4% versus 0.3% expected, which could indicate higher future inflation. Both data discourage the Federal Reserve from cutting interest rates further, which, a priori, would be negative for stock markets.
📉 Germany’s economy has flatlined since 2019, while the rest of the euro area and the U.S. have seen significant growth. Germany is the only G7 economy with debt well under 100% of GDP.
🎭 However, in the last few hours the stock markets have seen further rises, and the catalyst may not be in these macro data, but on the political side, Trump is a constant show.
⏳ CNBC’s Washington correspondent reported that the new tariffs announced by President Trump will not take effect immediately. According to their sources, there will be a delay of several months, with a possible start date scheduled for 1 April. This decision could give a temporary respite to affected sectors as they prepare for the impact. This could have boosted stock market rises.
🇪🇺 There is a growing notion that the only solution for the EU to move forward is for Germany to abandon its fiscal discipline rules, unleashing its debt like other highly indebted economies in Europe and the US. The problem is that this is literally illegitimate in Germany, and they have already taken the German government to court for not respecting budgetary controls in recent years.
⚖️ The risk of no debt brake reform at all is real if the far-right AfD and the Free Democrats gain enough seats to block a constitutional change required for reform. A debt brake reform could raise German growth by around 0.2 percentage points annually, but may not be enough to halt the underperformance of European stocks relative to the U.S.
📈 The Russian ruble and stocks surged on Thursday after a phone call between U.S. President Donald Trump and Russian President Vladimir Putin, in which they discussed ways to end the Ukraine war. The ruble closed up 3.7% against the dollar, reaching its highest level since September 2024. Some foreign exchange booths in Moscow even had to close down as they couldn’t keep up with the sharp dollar decline. The Moscow Exchange (MOEX) index surged 5.8% on Wednesday and another 5.9% on Thursday, with sanctioned Russian corporations like Gazprom, Sberbank, and Novatek leading the market rally. Shares in Russian aluminum maker Rusal, one of the few Russian stocks still available for international investors, jumped almost 25% in Hong Kong.
📉 Russian MICEX contracts already experienced a strong contango in December with the roll-over after Trump’s victory. This has been brewing for some time.
📊 Market View:
📈 US futures are rising strongly despite macroeconomic data and Jerome Powell’s stance. At the moment, Mini S&P 500 futures are close to 6,145 points. Nasdaq 100 futures have broken above 22,000 points and are approaching 22,145 points.
💵 The dollar index DXY falls sharply, losing support at 108 points. In fact, it is currently below 107 points, although it is expected to find support today. EUR/USD is rallying strongly, breaking above the 1.0470 level at the moment. As for the USD/JPY, it has experienced a strong downward movement, losing all the ground gained during the week to the 152.50 level.
🇪🇺 In Europe, the DAX 40 Futures reached a new high, having touched 22,700 yesterday. Meanwhile, the EuroStoxx 50 has surpassed 5,500 points.
🥇 Gold soars, taking advantage of the dollar’s weakness, surpassing $2,950 per ounce and approaching the $3,000 target.
🛢️ Crude oil also rallies after the spectacular correction since Tuesday, with Brent crude currently up to $75.30 a barrel.
🪙 However, beware: Bitcoin has not reacted and continues to show weakness, trading below $97,000. During yesterday’s session, it tested a low of $95,250, and if it does not start to show an uptrend soon, there is a risk of a correction to levels below $92,000.
🌍 Geopolitics:
💬 President Trump stated bluntly: ‘BRICS is dead. BRICS died the moment I mentioned that, if they mess with the dollar, they will face 100% tariffs. BRICS is dead. This statement reflects his firm stance against any challenge to the dollar’s dominance in the global economy.
🇹🇼 Trump also targeted Taiwan, stating: “Taiwan took the chip business away from us, and we want that business back”. This statement underscores his focus on repatriating key industries to strengthen the US economy.
🇫🇷 French President Emmanuel Macron said only Ukrainian President Volodymyr Zelenskyy can negotiate with Russia to end the war, warning a “peace that is a capitulation” would be “bad news for everyone”. U.S. President Donald Trump separately discussed the war with Russian President Vladimir Putin and Zelenskyy, and told U.S. officials to begin talks on ending the conflict. Macron described Trump’s return as an “electroshock” that should force Europe to secure its own future as well as Ukraine’s, and reiterated the need for Europe to build its defense capabilities.
💰 Donald Trump claimed at a press conference that the United States has given $300 billion to Ukraine, in contrast to the $100 billion that Europe has provided, which he said has been in the form of loans. Trump stressed that this comparison is unacceptable, as he believes that it is Europe, not the United States, that is most at risk. Furthermore, he pointed out that the US granted this amount without any conditions or loans, and suggested that it should receive something in return, given that Ukraine possesses valuable natural resources.
📋 Trump’s recent actions have caused authorities in Europe and Ukraine to worry that Washington is planning to make a deal with Russia right in front of them. That prepares the ground for today’s tense Munich Security Conference, when pressure will be on the US to make clear its new position on the conflict in Ukraine.
🚨 US Secretary of Defense Pete Hegseth urged European countries to take more responsibility for their own security, noting that US strategic priorities are focused on deterring a war with China in the Indo-Pacific. Hegseth made clear that the US will reduce its military presence in Europe and will not tolerate an unbalanced relationship that fosters dependency, emphasising that Europe must lead from the front.
📱 US Vice President James D. Vance openly criticised the European political establishment’s approach to social media censorship under the EU Digital Act. He said that while it is important to ensure safety on the internet, there is a big difference between protecting children from predators and limiting adult access to opinions that governments label as ‘disinformation’.
