📈 Market Report.
🇩🇪 German annual inflation rose more than expected in December, reaching 2.9% compared to the forecast of 2.6%. Spain is also adding to the upturn in inflation. From 1.5% in September to the current 2.8% in December. The inflation problem has not been solved, and inflation is likely to remain similarly high in January due to higher prices for CO2 emissions and insurance services. The latest inflation data has brought back “the spectre of stagflation” for the European Central Bank (ECB). The ECB expects inflation to settle at its 2% target this year, but We believe the target will be missed by a wide margin.
⚡️ Energy prices in Europe are at 14-month highs, with Russia’s supply to Europe via Ukraine ending after decades of business. This poses a challenge for the ECB, as Germany experienced faster-than-forecast inflation in December. Britain also faces inflation pressures due to wage growth, with bond yields reaching their highest level since 1998.
🛢️ Russia’s gas exports to Europe have come to an end, with Ukraine’s TurkStream pipeline remaining in operation for Hungary. This marks the end of Moscow’s dominance over Europe’s energy markets, with Ukraine losing up to $1 billion a year in transit fees and imposing higher gas transmission tariffs. The EU faces a significant increase in energy costs and a loss of competitive advantage.
📉 Eric Lombard, France’s new finance minister, proposed a slower rate of deficit reduction than the previous administration, with a target of 5% to 5.5% cut.
🚗 Germany’s EV market has shifted to the UK, with a 21% growth following an EV sales mandate. Germany’s 25% decrease in registrations last year was due to the elimination of purchasing incentives and increased competition from China, while the UK’s 21% growth follows EV sales mandates.
🏦 Market View:
📊 Equity markets continue to behave sideways since the third week of December, with characteristic ups and downs. Mini S&P 500 futures last peaked on 17 December. Today they are trading lower at 6,015 points, down from 6,068 points in yesterday’s session. Meanwhile, the Nasdaq 100 approached the 22,000 point level yesterday, falling less than 200 points short of that level, currently trading at 21,725 points.
💵 Meanwhile, the dollar has retreated since the beginning of the year, when the DXY index rose above 109.50 points. The charts show interesting supports near 107.75 and 107 points. In parallel, the EUR/USD opened 2025 with a drop below 1.0225, although it has recovered in the last hours towards 1.0415. US bond yields continue their upward trend, with the 10-year bond already above 4.6% return.
📈 No matter how many political and economic crises Europe is facing; as we have detailed in the report, the DAX 40 continues its cycle of fictitious wealth, currently reaching 20,285 points. During yesterday’s session, it practically touched the 20,400 point level, falling just short of its highs reached in late 2024. On the other hand, the Eurostoxx 50 is more cautious, remaining in a prolonged sideways movement that has failed to break above 5,000 points in a convincing manner in recent months, currently trading at 4,990 points.
🛢️ Crude oil is rebounding in the face of falling temperatures in Europe, reaching almost 77.50 dollars per barrel yesterday, falling back to 76 dollars at the moment. Gold remains stuck in the $2,650 area, a level to which it was relegated after the dollar’s significant rise. Finally, Bitcoin accelerated during yesterday’s session and is back above $100,000, currently trading at $101,720.
🌐 Geopolitics:
🇨🇦 Canadian Prime Minister Justin Trudeau has announced his resignation after nine years in power, following pressure from lawmakers over his Liberal Party’s poor pre-election poll performance. Trudeau will remain as Prime Minister and Liberal leader until a new leader is chosen, as the country deserves a “real choice” in the next election. Parliament will be suspended until March 24, making an election unlikely before May at the earliest. The Conservatives, led by Pierre Poilievre, rose to prominence in 2022 when he supported truck drivers’ protest against COVID-19 vaccine mandates. Former US President Donald Trump reacted to Trudeau’s announcement by repeating comments about Canada’s trade surplus with the US.
🌎 This week, Donald Trump Jr. will make a surprise trip to Greenland, an Arctic territory, weeks after his father revived the idea of purchasing the island from Denmark.
🇫🇷 French President Macron accuses Musk of electoral interference. Likewise, in Germany, Green leader Robert Habeck, who has lost the support of the German people, called on Musk to keep his ‘hands out of our democracy’. Musk’s response has been no less forceful, accusing the German politician of being a traitor to the German people, and additionally calling European politicians hypocritical, recalling that they seemed to have no problem when election interference came from billionaires who have spent billions promoting certain policies in Europe, such as Soros or Bill Gates.
🇬🇧 Elon Musk also launches a crusade against the British government: ‘Starmer is complicit in these Crimes’. Musk has shared the news that the current Prime Minister, Keir Starmer, when he was head of the Crown Prosecution Service, decided that NOT all child sex offenders should go to prison. This came after attending 21 meetings of the Sentencing Council, which has generated a lot of controversy and criticism from Musk towards the government.
🇦🇹 The far right phenomenon is gaining popularity across Europe, with Austrians rebelling against EU policies after failed coalition negotiations between centre-right and social democratic parties. The president has called on the leader of the far-right Freedom Party, Herbert Kickl, to form a government, marking the first time a far-right leader has taken power in Austria since 1945, following the political elite’s failure to resolve differences.
