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Daily Macro markets update 20/01/2025

๐Ÿ“Š Market Report.

๐Ÿ—ฃ While the general opinion is still trying to brand Trump as a scentric madman and tyrant. Yesterday, Donald Trump told a crowd that in a gesture of government transparency, he will release the remaining classified files on the assassination of JFK, his brother Robert Kennedy, and Martin Luther King.

๐Ÿ“ฒ TikTok has been officially restored in the United States. Yesterday TikTok thanked Trump for reversing the ban on its platform, and this message of thanks is being sent to all of its more than 170 million US users every time they open the app.

๐ŸŒ Executives attending Davos are willing to abandon or downplay some of the Davos-celebrated ideas around equality, diversity, and climate change in order to curry favor with Trump and secure favorable policies.The lobbies associated with these groups seem to be preparing for a change of course in business. Green policies, as well as โ€˜equality and diversityโ€™ agendas, move millions in funding to various groups.

๐Ÿ’ผ The same bureaucrat who accuses Musk of being a threat to democracy, and who boasts of having annulled the elections in Romania, makes a deal with private banking and will be the new private banker. The European Commission allows Thierry Breton to take a job at the Bank of America, despite the 2-year waiting rule before lobbying, a perfect example of public officials being rewarded for their performance in the private sector. Trump would represent the opposite example, a man from the private sector, who goes to the administration.

๐Ÿ‡ฏ๐Ÿ‡ต The Bank of Japan (BOJ) is set to raise interest rates on Friday, aiming to lift short-term borrowing costs to levels not seen since the 2008 global financial crisis. The BOJ is expected to raise its short-term policy rate to 0.5%, unless Trump’s inauguration disrupts financial markets. The BOJ is also expected to raise its price forecasts due to the possibility of broadening wage gains helping Japan meet its 2% inflation target. However, the BOJ must be cautious due to potential market destabilization and domestic political uncertainty.

๐Ÿ“ˆ Additionally, Japan’s core machinery orders increased 3.4% in November, beating analysts’ expectations, signaling a recovery in capital expenditure. The reading was stronger than a 0.4% decline estimated in a Reuters poll and marked a second consecutive month of increase. Demand for capital investment in response to labor shortages and digitalisation remains strong.

๐Ÿ‡จ๐Ÿ‡ณ China has left benchmark lending rates unchanged for a third consecutive month due to a weakening yuan, which limits monetary policy easing efforts. The one-year loan prime rate (LPR) remains at 3.1%, while the five-year LPR remains at 3.6%. This decision is due to China’s economy meeting its 5% growth goal last year and banks’ narrowing interest rate margins. The Politburo has announced an “appropriately loose” monetary policy in 2025, the first easing in 14 years, alongside a more proactive fiscal policy to spur economic growth.

๐Ÿ’ฌ Isabel Schnabel, ECB Executive Board member, believes the ECB can continue lowering borrowing costs as inflation approaches the 2% target. However, she warns that the bank must be cautious as it approaches evaluating the extent of rate reductions. Schnabel also warns of a trade conflict if Trump returns as president, potentially impacting European economic activity and prices. Despite these challenges, Schnabel believes the ECB is on track to return to its 2% inflation target this year.

๐Ÿ‡ซ๐Ÿ‡ท The European Union has confirmed that France’s plan for slower deficit reduction next year is still within EU rules, providing a temporary reprieve for Prime Minister Francois Bayrou’s government. France aims to bring its deficit within 3% of economic output by 2029, but with a smaller effort this year. The revised fiscal trajectory, approved by the EU, is a relief for Bayrou’s government as it struggles to control the deficit. However, the Socialists warn they could still censure the government if Bayrou fails to revisit a law raising the minimum retirement age. The governor of the Bank of France has stressed the need for the government to provide precise details on savings and ensure effective implementation to restore credibility in Europe.

๐Ÿ“ˆ Market View:

๐Ÿ“Š Markets seem to be recovering. Mini S&P 500 futures are consolidating above 6,000 points and are currently trading at 6,035 points. Nasdaq 100 futures are following closely behind at around 21,600 points. These rises break the trend of declining highs that had prevailed since mid-December 2024.

๐Ÿ’ต After last week’s slow weakening of the dollar, we start this week with further gains. The dollar index is close to 109.50 points. Surprisingly, EUR/USD remains above 1.03, although it is likely to lose these levels in the coming hours if dollar strength is confirmed. US bonds remain calm after last week’s yield cuts.

๐Ÿ‡ช๐Ÿ‡บ In Europe, DAX futures are already trading above 21,000 points, setting a new all-time high, seemingly oblivious to the political and economic turmoil in Germany and France, key pillars of the euro zone.

๐Ÿ›ข Crude oil started the week lower: Brent crude oil, which has fallen below $81, is now trading at $80.70.

๐Ÿฅ‡ On the other hand, gold remains strong, trading in the area of $2,750 per ounce.

๐Ÿ’ฐ Finally, Bitcoin reaches a new all-time high, trading above $109,000, consolidating its position as a leading asset in today’s markets.

๐ŸŒ Geopolitics:

๐Ÿ‡บ๐Ÿ‡ฆ Zelensky asked to be invited to Donald Trump’s inauguration 3 times, but was turned down, Donald Trump Jr. says.

๐Ÿ‡ฎ๐Ÿ‡น Italian Prime Minister Giorgia Meloni says Rome should be the capital of the European Union to represent its ancient identity.

๐Ÿ‡ฎ๐Ÿ‡ฑ๐Ÿ‡ต๐Ÿ‡ธ The conflict between Israel and Gaza seems to be coming to an end with the delivery of hostages, despite criticism from Netanyahu’s cabinet. The balance after the conflict: In Gaza, 60% of buildings have been destroyed, leaving an unprecedented humanitarian crisis as at least 46,600 people have been killed, with a high number of women and children, while 1.9 million people have been displaced. Donald Trumpโ€™s warning is not only for Hamas, but also for Israel. Trumpโ€™s โ€˜ALL HELL TO PAYโ€™ threat was also directed at Israel, not just Hamas, WSJ reports.

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