📊 Market Report:

🔮 In our last report, we wrote a scenario that seems to have come true almost like a prophecy. The three factors that we pointed to as indications that labour market data would be strong have been confirmed. The US bond has made a significant advance, taking the yield on the 10 year bond to almost 4.80%. Our forecast indicated that it could move towards 5%, and all indications are that it is on its way to that target.

💵 On the other hand, we mentioned unusual strength in the dollar, and today the markets start the week with the DXY dollar index approaching 110 points, levels not seen since 2022, when the dollar had a historic year against the world’s major currencies.

📉 As a third factor, we note that the logical reaction to this scenario would be a discount in equities. We are also talking about a bearish Shoulder-Head-Shoulder (HCH) figure in the S&P 500, which has already been triggered, which could lead to significant bearish movements in US equities over the next few days.

🇨🇳 China’s exports gained momentum in December, with imports also showing recovery, though the strength was partly fueled by factories rushing inventory overseas before potential trade risks under a Trump presidency. Exports in December rose 10.7% year-on-year, beating forecasts, while imports surprised with 1.0% growth, the strongest performance since July 2024. Signs of stabilization have emerged, with factory activity, services, and construction recovering in December, and South Korea reporting resilient demand for Chinese technology products. However, crude oil imports fell last year, marking the first annual decline in two decades, as tepid economic growth and fuel consumption dampened purchases.

🛢️ Another inflationary crisis is approaching: Chinese and Indian refiners will need to source more oil from the Middle East, Africa, and the Americas, as new U.S. sanctions on Russian producers and ships curb supplies to Moscow’s top customers. The U.S. Treasury has imposed sanctions on Russian oil producers Gazprom Neft and Surgutneftegas, as well as 183 vessels that have shipped Russian oil. The expected disruption in Russian supply has driven global oil prices to their highest in months, with Brent trading above $81 a barrel. China and India, the top buyers of Russian crude, will be forced to seek more supply from alternative sources, leading to a rise in spot prices. The disruption in Russian oil supplies and the shift to alternative sources will lead to higher oil prices and freight costs.

🔥 In addition to this, The world is anticipating a global battle over natural gas supplies in 2025, as Europe faces a potential failure to meet its winter storage targets, leading to a scramble for supplies. Europe will need to import an additional 10 million tons of LNG annually, a 10% increase from 2024, to meet its projected demand. Germany, heavily reliant on Russian gas, is facing higher energy costs, which could impact the upcoming snap election. The competition for LNG shipments is expected to drive prices higher, making it difficult for countries like India, Bangladesh, and Egypt to afford the gas, potentially impacting their economic recovery. Asia and South America nations are also at risk of being priced out of the LNG market. Relief is expected from 2026 as an additional 175 million tons of new LNG supply is slated to start arriving, primarily from the US and Qatar.

💷 Sterling, another currency under pressure, fell to a new 14-month low of $1.2138 as investors worry about the financial stability of the Labour government. Rachel Reeves, the finance minister, had to promise reporters on a visit to China that she would take action to guarantee the government’s budgetary regulations are followed.

📉 Market View:

📊 S&P 500 and Nasdaq 100 futures show declines after the release of Friday’s US jobs data. A stronger than expected economy removes the case for a continuation of the rate cut that Wall Street had anticipated. The S&P 500 appears to be in a bearish Shoulder-Head-Shoulder (HCH) pattern, which could drag the index towards 5700 or even 5650 levels; it is currently trading at 5841.50. The Nasdaq 100 has also retreated to the 20,890 level, an area that could act as support as it coincides with the resistence reached in July of 2024.

💪 The dollar has shown remarkable strength since Friday, with the DXY index moving up towards 110 points, currently trading at 109.90. US 10-year Treasury bonds have reached a yield of close to 4.90%, approaching the 5% expected if strong labour market data continue to be released. As a result, the EUR/USD continues its decline and approaches the 1.02 barrier, currently trading at 1.0211.

📉 In Europe, the DAX 40 declines, affected by the change of direction on Wall Street, after reaching record highs last Wednesday at 20,600 points. It is currently trading at 20,290 points. On the other hand, the Eurostoxx 50, which had managed to surpass 5,000 points, also fell back to 4,970 points.

🛢️ Brent crude oil recorded a significant rise, surpassing 81 dollars per barrel, driven by the fundamental factors we have analysed above.

🥇 Despite the dollar’s strength, gold continues to rise and on Friday surpassed 2700 dollars per ounce, now standing at 2715 dollars.

💰 As for bitcoin, it showed a slight strengthening after the US employment data, but has failed to consolidate above $95,000 and is currently trading at $93,650.

🌍 Geopolitics:

🇷🇴 Thousands of Romanians took to the streets on Sunday in a demonstration against the decision to annul last month’s presidential election.More than 10,000 people marched through the streets of Bucharest against the current ruling coalition, the Constitutional Court and outgoing President Klaus Iohannis. It is the second protest organised by nationalist forces in the last week.

In this regard, former EU Commissioner Thierry Breton admitted on Friday that the EU was responsible for cancelling the elections in Romania. And he suggested they could do the same in Germany if citizens vote for the AfD party. ‘We did it in Romania, and we will do it in Germany if necessary,’ he said.

🇭🇷 Another European country that seems to buck the current trend in Europe is Croatia: Exit polls predicted that President Zoran Milanović, an opponent of NATO expansion and military assistance to Ukraine, would easily win a second term in office.

📱 Meta CEO Mark Zuckerberg acknowledged in an interview with Joe Rogan that the Facebook platform was harassed by Biden administration officials during the presidential election to quash any voices critical of the government’s actions and to omit any testimony about side effects of vaccines promoted by the Biden administration. ‘They shouted down members of our team on the phone,’ Zuckerberg said.

🏫 Eindhoven University of Technology, a top Dutch technical university that is a key talent feeder for chip machine maker ASML Holding NV, has shut down its computer network after a cyber attack. Eindhoven University of Technology has been caught in the crosshairs of the US-China chip war, as Washington seeks to limit Beijing’s ability to produce semiconductors. The cyber attack on the university, a key part of the semiconductor ecosystem, underscores the vulnerability of the industry to disruptions and the importance of cybersecurity measures. This issue could impact the flow of talent and research critical to ASML and the broader semiconductor industry.