🌍 Market Report.
💪 Federal Reserve Chair Jerome Powell vouched for the strength of the U.S. economy, even as he deferred on questions about tariffs, Elon Musk’s role in government, and other unsettled issues. During his testimony before the Senate Banking Committee, Powell said the economy is in a “pretty good place” with a 4% unemployment rate and inflation nearing the Fed’s 2% target.
🕒 Given the current economic conditions, Powell said the Fed does not need to “be in a hurry to adjust our policy stance” as reducing policy restraint too quickly could hinder progress on inflation. The Fed is likely to hold interest rates steady, possibly into the summer, after cutting the benchmark rate by a full percentage point in late 2024.
📉 Powell acknowledged it is not the Fed’s role to make or comment on trade policy, such as the tariffs imposed by the Trump administration, but said the central bank will try to react to such policies in a “thoughtful, sensible way.”
📊 JP Morgan forecasts what the effect on the SP500 could be with several possible scenarios ahead of the US CPI report. If the monthly CPI exceeds 0.2% there will be falls in the stock markets. If it goes above 0.4% the SP500 could lose between 1.5% and 2%. CPI data will be released at 13.30 UK time.
📈 The National Institute of Economic and Social Research (NIESR) has predicted that the British economy will grow by 1.5% in 2025, double the Bank of England’s recent forecast and above the average of economists’ predictions. The think tank expects inflation to peak at 3.2% in January and average 2.4% this year, before reaching the 2% target in 2026 – a much more benign path than the BoE’s projections. However, NIESR says the Bank of England has little scope to cut interest rates further, with only room for a quarter-point cut this year and one more in 2026, lowering them to 4%.
🇫🇷 The Bank of France reported that the euro zone’s second-largest economy is projected to experience growth of 0.1-0.2% in the first quarter, following a 0.1% decline in activity during the previous three months.
🛠️ Japan has requested the US to exempt it from steel and aluminium tariffs, following a 25% increase by President Trump. The move aims to support struggling US industries but also risks a multi-front trade war. Trump also expressed consideration for Australia’s request for exemption due to its trade deficit with the US.
📉 Tesla shares declined by 6.3% on Tuesday on the announcement from Chinese EV manufacturer BYD that it will incorporate DeepSeek into its autonomous driving technology and provide it in nearly all its vehicles. Also, Elon Musk’s recent excessive prominence in all sorts of agendas is starting to worry investors. He can’t have time for everything.
🚗 According to Bloomberg, Tesla’s sales have fallen by 8% in the last year in the UK, while BYD’s sales have risen by 550%.
⚠️ Citadel CEO Ken Griffin issued a warning against the steep tariffs that President-elect Donald Trump vowed to implement, saying it could lead to crony capitalism. Griffin said the halls of Washington would be “filled with the special interest groups and the lobbyists” as companies look for continued higher tariffs to keep away foreign competition. However, this is exactly what has happened with previous green policies, which benefited certain business groups regardless of the profitability of their operations, by diverting public funds to their projects or exempting them from taxes. In this case, they called it ‘inclusive’ capitalism.
🛢️ The Biden administration allowed India to buy Russian oil despite sanctions, Minister of Petroleum and Natural Gas Hardeep Singh Puri told during an interview. Puri stated that he had a conversation with representatives from the previous American administration, during which they expressed, “Feel free to purchase as much as you wish, provided that it remains within the established price cap.” He confirmed that this is precisely what they proceeded to do.
📉 Market View:
📈 US futures manage to stay afloat ahead of today’s inflation data. The S&P 500 manages to hold up and remains around 6,085 points. The Nasdaq 100 follows a similar trajectory and is near 21,800 points. JP Morgan has issued a forecast on how today’s inflation rate could affect US equities, as detailed in our report.
💵 The dollar has retreated slightly, with the dollar index (DXY) approaching 108 points, having reached almost 108.50 yesterday. The EUR/USD manages to catch some air and breaks above the 1.03 level, currently at 1.0365. However, the 1.04 barrier remains a key resistance level.
🇩🇪 In Europe, the German stock market reaches another all-time high. The DAX 40 index continues its upward trend ‘on autopilot’, without paying attention to fundamentals, and is currently at 22,175 points. The EuroStoxx 50 also sets a new all-time high, reaching 5,415 points.
🥇 In the crude oil market, prices have continued to strengthen in recent hours, although Brent crude has failed to break through the $77 barrier, as projected in the last report. At the moment, Brent is slightly down at 76.75 dollars.
📉 Gold, whose futures approached $3,000 on Monday, has retreated and is currently trading at $2,920.
🪙 Finally, Bitcoin continues to show weakness, with falling highs reflecting a loss of buying strength. Its price is inching closer and closer to the key support level of $92,000, a level of great importance.
🌍 Geopolitics:
🏝️ President Trump stated that the United States intends to acquire and maintain control over Gaza, emphasizing that there is no need for purchases as there is nothing available for sale. He expressed optimism about Gaza’s potential to transform into a “diamond” in the Middle East, highlighting the prospects for significant economic growth and job creation. “It has a coastline along the sea,” he noted.
🚫 Hamas rejects all plans of displacing the people of Gaza. Netanyahu threatens to resume the war in Gaza if Hamas does not release all hostages by Saturday.
🛸 U.S. House Oversight Committee announces “Task Force on the Declassification of Federal Secrets” in relation to UFOs, 9/11, Epstein, JFK, the origins of COVID-19 and more.
⚡ Elon Musk: “The people voted for major government reform, and that is what the people are going to get.”
