Stock Markets

All major stock indexes ended in positive territory this week, rebounding from the sharp sell-off last week and erasing the losses of the prior week. The 30-stock Dow Jones Industrial Average (DJIA) surged by 3.69%, slightly better than the Total Stock Market weekly gain of 3.12%. The broad S&P 500 climbed by 2.91% while the technology-heavy Nasdaq Stock Market Composite went up by 2.45%. The NYSE Composite gained 3.40%. The investor risk perception indicator, the CBOE Volatility Index (VIX) dropped by 18.27%.

The Russell 1000 shares indicate that value stocks outperformed growth shares by the widest weekly margin since September. This was partly driven by outperformance in the energy sector amid higher oil prices. There was also some profit-taking in large-cap technology stocks. The financial sector also posted strong weekly gains after the banking giants reported strong rises in profits during the fourth quarter.

U.S. Economy

The week’s economic high point came on Wednesday with the release of the Labor Department’s December inflation report. The headline inflation signaled an acceleration from November. However, core inflation – which excludes food and energy – rose by 0.2% in December, a tick lower than the prior month and the smallest increase since July. The year-over-year core inflation figure likewise slowed from 3.3% in November to 3.2% in December.

On Thursday, the jobless claims data for the week ending January 11 was released. New applications for unemployment rose from 203,000 in the prior week to 217,000 during the current week, exceeding consensus estimates. The four-week average of claims, however, dropped modestly. Continuing claims also dropped from 1.88 million in the previous week to 1.86 million in the current week.

Metals and Mining

The spot market for precious metals remains in breakout mode. Gold holds above the former critical resistance, now support, level of $2,700 and ended this week at $2,703.25 per troy ounce, 0.50% above last week’s close at $2,689.76. Silver settled this week at $30.37 per troy ounce, 0.13% lower than last week’s close at $30.41. Platinum corrected to end the week at $944.40 per troy ounce, 2.22% lower than last week’s closing price of $965.80. Palladium ended the week at $951.50 per troy ounce, higher by 0.03% from last week’s close at $951.17. The three-month LME prices of industrial metals were mostly up. Copper came from its previous weekly close at $9,091.50 and ended the week at $9,190.00 per metric ton for a rise of 1.08%. Aluminum, which ended last week at $2,571.50, closed this week at $2,684.50 per metric ton for a 4.39% gain.  Zinc ended at $2,942.00 per metric ton this week, 2.58% higher than last week’s close at $2,868.00. Tin closed at $29,775.00 per metric ton, 0.37% lower than last week’s close at $29,886.00.

The gold market previously struggled since the November 5 election under President-elect Donald Trump’s push toward a world trade war. It appears, however, that this conjecture is likely to dissipate as the effects of the America First policies become clearer. Gold has broken out of the $2,700 resistance level and continues to remain above it, despite the solid momentum of the US dollar. The currency is trading at or near its highest level in more than two years. Analysts warned that a global trade war may keep consumer prices high and arrest global growth. Geopolitical worries also were expected to weigh on the economic environment even as the government debt levels weighed on bond markets. The anticipated challenges, however, have failed to hold back investor sentiment. Gold remains the singular global asset that has a low correlation to risk assets, no third-party or geopolitical risks, relatively low volatility, and a deep and liquid market. Gold may continue to test higher critical resistance levels.

Energy and Oil

Backwardation continues to expand in both Brent and Dubai futures despite the relentless oil price rally that pushed Brent to break the $82-per-barrel resistance level. Lower prices from next week onwards could be brought about by a potential de-escalation of hostilities between Israel and Hamas, leading to the Houthis ending their maritime warfare in the Red Sea. This week, however, remains firmly in bullish territory. In other stories, the head of Libya’s National Oil Corporation Farhat Bengdara has resigned his post after three years at the helm of the state oil firm. His stewardship was marred by repeated shutdowns, militia interference, and haggling over revenue allocation.

Natural Gas

For the week beginning Wednesday, January 8, and ending Wednesday, January 15, 2025, the Henry Hub spot price rose by $0.67 from $3.76 per million British thermal units (MMBtu) to $4.083/MMBtu. Regarding the Henry Hub futures, the price of the February 2025 NYMEX contract increased by $0.43, from $3.651/MMBtu to $4.083/MMBtu throughout the report week. The last time the front-month contract settled above $4.00/MMBtu was on January 4, 2023, when it settled at $4.172/MMBtu. The price of the 12-month strip averaging February 2025 through January 2026 futures contracts climbed by $0.29 to $3.967/MMBtu. Natural gas spot prices rose at most locations this report week. Price changes ranged from a decrease of $5.00 at Transco Zone 6 NY to an increase of $1.14 at PG&E Citygate.

International natural gas futures prices decreased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.15 to a weekly average of $14.15/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.55 to a weekly average of $14.00/MMBtu. In the week last year corresponding to this report week (the week beginning January 10 and ending January 17, 2024), the prices were $10.51/MMBtu in East Asia and $9.62/MMBtu at the TTF.

World Markets

European equity trended higher this week. The pan-European STOXX Europe 600 Index settled 2.37% higher than last week as investor sentiments rose on slower-than-expected inflation on both sides of the Atlantic. Market participants’ hopes climbed that central banks could continue to cut interest rates this year. Major stock indexes jumped sharply. Italy’s FTSE MIB climbed by 3.36%, Germany’s DAX added 3.41%, and France’s CAC 40 Index gained 3.75%. The UK’s FTSE 100 Index surged by 3.11%. The European Central Bank (ECB) released the minutes of its December meeting. The ECB acknowledged that they need to lower interest rates cautiously and gradually as they reduced interest rates for the third time in a row. By the end of January, the market seems to expect another quarter-point reduction in the deposit rate to 2.75%.  Various ECG officials emphasized the outlook’s exceptional uncertainty due to geopolitical tensions, potential global trade frictions, and fiscal policy concerns in the region.

Japan’s stock markets declined during the week. The Nikkei 225 Index fell by 1.9% and the broader TOPIX Index gave up 1.3%. There were heightened expectations that the Bank of Japan (BoJ) could raise interest rates at its January 23-24 monetary policy meeting, based on hawkish comments from the central bank officials. This speculation provided support to the yen, which strengthened to around JPY 155.6 against the U.S. dollar, from around JPY 157.6 at the end of the week before. The profit outlook of Japan’s export-heavy industries was weighed down by the strength of the yen. The yield on the 10-year Japanese government bond climbed near its highest level during the week to as high as 1.25%, although it eventually settled at the 1.20% level. While the BoJ stressed that rates will be raised if economic and price conditions keep improving, recent concerns emerged around U.S. economic policies regarding tariffs and fiscal policy. Some investors believe that an increase in the policy rate will be delayed until March or April.

Despite persistent deflationary pressures, Chinese equities rose as the economy improved. The Shanghai Composite Index added 2.31% while the blue-chip CSI 300 gained by 2.14%. The Hong Kong benchmark Hang Seng Index rose by 2.73%. China’s GDP expanded by a better-than-expected 5.4% year-on-year in the fourth quarter. The economy grew by a quarterly 1.6%, up from a revised 1.3% gain in the preceding quarter. The GDP for the year reached 5%, attaining Beijing’s target for the year. Other data supported China’s recovery. Industrial production rose by 6.2% exceeding forecasts, up from the 5.4% increase in November. This is attributed partly to higher auto, computer, and solar cell sales. In December, retail sales grew by 3.7% from a year earlier, up from November’s 3% increase. In the January to December period, fixed asset investment was 3.2% from a year ago, slightly down from a 3.3% rise in the month preceding. Property investment declines deepened to 10.6% year-on-year. The unemployment rate moved up to 5.1%.

The Week Ahead

The Conference Board’s leading economic index and S&P Global PMI data are among the important economic releases scheduled for the coming week.

Key Topics to Watch

• U.S. leading economic indicators for Dec.
• Initial jobless claims for Jan. 18
• Existing home sales for Dec.
• Consumer sentiment (final) for Jan.
• S&P flash U.S. services PMI for Jan.
• S&P flash U.S. manufacturing PMI for Jan.

Markets Index Wrap-Up

 

Stock Markets

Major U.S. indexes are down for the shortened trading week due to market closure on Thursday in honor of the recently deceased former US President Jimmy Carter. The 30-stock Dow Jones Industrial Average (DJIA) dropped by 1.07% although the Total Stock Market Index dipped by only 0.72%. The broad S&P 500 Index fared a bit worse than the total stock market, declining by 0.71%. The technology-tracking Nasdaq Stock Market Composite lost by 0.62%, and the NYSE Composite Index gave up 0.69%. Investor risk perception, as indicated by the CBOE Volatility Index (VIX), rose by 8.98% over last week.

The week began on a positive note, as most indexes were up on Monday on reports that the incoming Trump administration will pursue a softer stance on tariffs than previously indicated. The initial optimism faded during the week after the president-elect refuted those reports and some economic data were released that resurrected concerns about stubborn inflation. The markets could remain choppy over the coming weeks as investors receive upcoming corporate earnings releases, Federal Reserve outlook updates, and the policy proposals of the incoming administration.

U.S. Economy

In the first US jobs report in 2025, the nonfarm payrolls for December amounted to 256,000 which is well above the 165,000 expected level. The unemployment rate dropped from 4.2% to 4.1%. Signaling some modest potential easing in services inflation as well, the average hourly wage growth rose 3.9% year-over-year which is slightly below the forecasted 4.0% wage growth. Other economic data releases on Tuesday noted that the Institute for Supply Management (ISM) Services Purchasing Managers’ Index (PMI) came in at 54.1 for December, two percentage points higher than its November level. The ISM-PMI is a measure of economic activity in the services sector, and readings above 50 indicate expansion while those lower than 50 denote contraction.

Fears that progress on reducing inflation has stalled and that interest rates could remain “higher for longer” were stoked when the component of the index that measures prices paid by service organizations for materials and services increased by 6.2 percentage points to 64.4. Further fueling these fears was Fed Governor Michelle Bowman’s observation that inflation has held “uncomfortably above” the Fed’s 2% long-term target and that there remained upside risks to inflation even though the Fed made significant progress since 2023 to control inflation. While the data capped off a resilient year for the economy, the labor market in particular still faces several headwinds and appears to provide the Fed with another data point that favors moderating the pace of rate cuts.

Metals and Mining

For 2024, gold closed the year with a 26% gain, however, it ended December disappointing investors as a Santa Claus rally failed to materialize in the gold market for the first time in seven years. The new year brings fresh hope, nevertheless, as new opportunities push gold to test its critical resistance level near $2,700, and likewise defy critical headwinds from rising bond yields and the surging bullishness of the U.S. dollar. Analysts note that the delinking of gold from its traditional relationship with currency and bond yields may be due to investors paying less attention to the higher opportunity costs of holding gold while they hedge against growing inflation risks, geopolitical turmoil, and economic uncertainty.

The spot prices of precious metals registered gains for the week. Gold climbed from $2,640.22 last week to $2,689.76 per troy ounce this week for a gain of 1.88%. Silver came from last week’s close of $29.62 to this week’s close of $30.41 per troy ounce for an appreciation of 2.67%. Platinum closed last week at $939.51 and this week at $965.80 per troy ounce for a gain of 2.80%. Palladium ended last week at $925.64 and this week at $951.17 per troy ounce to register a gain of 2.76%. The three-month LME prices of industrial minerals, on the other hand, ended mixed. Copper closed this week at $9,091.50 per metric ton, 3.28% higher than last week’s close at $8,802.50. Aluminum closed this week at 1.68% higher than last week’s closing price of $2,529.00, ending this week at $2,571.50 per metric ton. Zinc lost 2.02% from the last weekly close of $2,927.00 to settle this week at $2,868.00 per metric ton. Tin gained 4.65% above last week’s closing price of $28,557.00 to end this week at $29,886.00 per metric ton.

Energy and Oil

Oil prices began the year noticeably bullish, as Brent broke $80 per barrel for the first time since October 7, 2024. The rally’s momentum may be traced to several reasons, including the eleventh-hour sanctions the Biden Administration imposed on Russia, continued concerns that inflation may once more rise, cold temperatures across the Atlantic Basin, and widening backwardation in all crude futures. The bullishness in the oil market has once more been felt for the first time in months. In other news, Chinese consumers have nominated 43.5 million barrels of Saudi crude next month shortly after Saudi Aramco hiked formula prices for Asian term buyers by $0.50 to $0.60 for February. This is down by 2.5 million barrels from January.

Natural Gas

For the report week beginning Wednesday, January 1, and ending Wednesday, January 8, 2025, the Henry Hub spot price rose by $0.37 from $3.39 per million British thermal units (MMBtu) to $3.76/MMBtu. Regarding Henry Hub futures, the January 2025 contract expired on Friday, December 27, at $3.514/MMBtu. The price of the February 2025 NYMEX contract decreased by $0.009 for the report week, from $3.660/MMBtu to $3.651/MMBtu. The price of the 12-month strip averaging February 2025 through January 2026 futures contracts increased by $0.03 to $3.678/MMBtu. Natural gas spot prices increased at all major pricing locations this report week. Price increases ranged from $0.29 at Eastern Gas South to $11.69 at Algonquin Citygate.

International natural gas futures prices increased this report week. Weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.14 to a weekly average of $14.30/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands increased by $0.06 to a weekly average of $14.55/MMBtu. In the week last year corresponding to this report week (from January 3 to January 10, 2024), the prices were $11.44/MMBtu in East Asia and $10.35/MMBtu at the TTF.

World Markets

European stock markets rose this week as the pan-European 600 Index closed 0.65% higher in local currency terms. Despite an uptick in the inflation rate, investors continue to expect the European Central Bank to cut interest rates in January. Germany’s DAX climbed by 1.55%, France’s CAC 40 Index ascended by 2.04%, and Italy’s FTSE MIB added 2.82%. The UK’s FTSE 100 Index gained by 0.30%. Various data painted a varying picture of the eurozone economy. Driven by higher energy prices and service costs, December’s year-over-year inflation speeded up to 2.4% from November’s 2.2%. The core rate (excluding energy, food, alcohol, and tobacco prices) remained unchanged at 2.7%. After falling in October, retail sales barely grew in November. In the meantime, the jobless rate stayed at a record low of 6.3% in November. In its latest Economic Bulletin, the European Central Bank (ECB) said that the disinflation process was well on track and that most indicators underlying inflation suggested that inflation will sustainably settle at the bank’s 2% medium-term target. The Italian newspaper, Corriere della Sera, quoted policymaker Piero Cipollone as saying that the ECB “shouldn’t try to guard excessively against possible future inflation shocks” and that “running the economy below potential weakens it and reduces the scope to react to shocks when they occur.” This and other individual comments by other policymakers encourage investors to believe that future monetary policy would contribute to a stronger economic outlook.

Over the week, Japanese equities lost ground, as the Nikkei 225 Index slid by 1.8% and the broader TOPIX Index dropped by 2.5%. The timing of Bank of Japan’s (BoJ’s) next interest rate hike remained the most speculated topic among market observers. Japan’s currency weakened over the week from around JPY 157.3 per USD at the end of last week, to about JPY 158.1 at the end of this week. The yen’s weakness was due to the uncertainty of the pace of further monetary policy normalization by the BoJ, as well as the pressure from a recent widening of the U.S.-Japan interest rate differential. The authorities have expressed their readiness to take appropriate action against excessively speculative, one-sided moves in the currency market. In the past, Japan’s monetary authorities have intervened in the foreign exchange markets to prop up the yen, most recently in July 2024. The central bank maintained its tightening bias, and its Governor Kazuo Ueda reiterated that if economic and price conditions keep improving, rates will be raised. Investors believe that it is unlikely that the BoJ will raise rates soon, and instead expect the policy rate hike will be delayed until March or April. Japan’s real (inflation-adjusted) wage growth, a closely watched indicator of consumers’ purchasing power, fell by 0.3% year-on-year in November. This is the fourth consecutive month of negative real wage growth. The BoJ’s case is that if the economy, prices, and wage growth develop in line with its projections, interest rates will rise.

Chinese stock markets receded after data released showed that the economy remained in deflation territory. The Shanghai Composite Index lost 1.34%, and the blue-chip CSI 300 slid by 1.13%. The Hong Kong benchmark Hang Seng Index plunged by 3.52%. On Thursday, inflation data released indicated that China is still struggling with deflationary pressures. The consumer price index (CPI) rose by 0.1% in December from one year ago. This is in line with estimates and down by 0,2% in November due to lower food and fuel prices. Excluding volatile food and energy costs, core inflation ticked up to 0.4% from November’s 0.3% growth. The producer price index (PPI) fell by 2.3% year-on-year, slowing from the 2.5% decline of the previous month and extending the deflation in factory gate prices for the 27th straight month. In other developments, the private Caixin S&P Global survey of services activity climbed to 52.2 in December, a better-than-expected result and the highest level since May. This matches the official data released in the previous week indicating that nonmanufacturing activity rose to 52.2 in December, the highest level in six months after Beijing introduced a broad stimulus package in late September. Furthermore, the People’s Bank of China (PBOC) announced after its quarterly policy meeting that to support economic growth, it will implement a moderately loose monetary policy this year. The PBOC vowed to increase financial support directed at the technology, emissions, pensions, and digital sectors. It likewise declared that, when appropriate, it would reduce the reserve requirement ratio and interest rates in order to boost consumption.

The Week Ahead

The CPI and PPI inflation for December, retail sales data, and industrial production data are among the macroeconomic reports scheduled for release in the coming week.

Key Topics to Watch

• Monthly U.S. federal budget for Dec.
• NFIB optimism index for Dec.
• Producer price index for Dec.
• Core PPI for Dec.
• PPI year over year
• Core PPI year over year
• Kansas City Fed President Jeffrey Schmid speaks (Jan. 14)
• Fed Beige Book
• New York Fed President Williams delivers opening remarks (Jan. 14)
• Consumer price index for Dec.
• CPI year over year
• Core CPI for Dec.
• Core CPI year over year
• Empire State manufacturing survey for Jan.
• Richmond Fed President Barkin speaks (Jan. 15)
• New York Fed President Williams speaks (Jan. 15)
• Chicago Fed President Goolsbee speaks (Jan. 15)
• Initial jobless claims for Jan. 11
• U.S. retail sales for Dec.
• Retail sales minus autos for Dec.
• Import price index for Dec.
• Import price index minus fuel for Dec.
• Philadelphia Fed manufacturing survey for Jan.
• Business inventories for Nov.
• Home builder confidence index for Jan.
• Housing starts for Dec.
• Building permits for Dec.
• Industrial production for Dec.
• Capacity utilization for Dec.

Markets Index Wrap-Up

Stock Markets

Major U.S. indexes are down for the shortened trading week due to market closure on Thursday in honor of the recently deceased former US President Jimmy Carter. The 30-stock Dow Jones Industrial Average (DJIA) dropped by 1.07% although the Total Stock Market Index dipped by only 0.72%. The broad S&P 500 Index fared a bit worse than the total stock market, declining by 0.71%. The technology-tracking Nasdaq Stock Market Composite lost by 0.62%, and the NYSE Composite Index gave up 0.69%. Investor risk perception, as indicated by the CBOE Volatility Index (VIX), rose by 8.98% over last week.

The week began on a positive note, as most indexes were up on Monday on reports that the incoming Trump administration will pursue a softer stance on tariffs than previously indicated. The initial optimism faded during the week after the president-elect refuted those reports and some economic data were released that resurrected concerns about stubborn inflation. The markets could remain choppy over the coming weeks as investors receive upcoming corporate earnings releases, Federal Reserve outlook updates, and the policy proposals of the incoming administration.

U.S. Economy

In the first US jobs report in 2025, the nonfarm payrolls for December amounted to 256,000 which is well above the 165,000 expected level. The unemployment rate dropped from 4.2% to 4.1%. Signaling some modest potential easing in services inflation as well, the average hourly wage growth rose 3.9% year-over-year which is slightly below the forecasted 4.0% wage growth. Other economic data releases on Tuesday noted that the Institute for Supply Management (ISM) Services Purchasing Managers’ Index (PMI) came in at 54.1 for December, two percentage points higher than its November level. The ISM-PMI is a measure of economic activity in the services sector, and readings above 50 indicate expansion while those lower than 50 denote contraction.

Fears that progress on reducing inflation has stalled and that interest rates could remain “higher for longer” were stoked when the component of the index that measures prices paid by service organizations for materials and services increased by 6.2 percentage points to 64.4. Further fueling these fears was Fed Governor Michelle Bowman’s observation that inflation has held “uncomfortably above” the Fed’s 2% long-term target and that there remained upside risks to inflation even though the Fed made significant progress since 2023 to control inflation. While the data capped off a resilient year for the economy, the labor market in particular still faces several headwinds and appears to provide the Fed with another data point that favors moderating the pace of rate cuts.

Metals and Mining

For 2024, gold closed the year with a 26% gain, however, it ended December disappointing investors as a Santa Claus rally failed to materialize in the gold market for the first time in seven years. The new year brings fresh hope, nevertheless, as new opportunities push gold to test its critical resistance level near $2,700, and likewise defy critical headwinds from rising bond yields and the surging bullishness of the U.S. dollar. Analysts note that the delinking of gold from its traditional relationship with currency and bond yields may be due to investors paying less attention to the higher opportunity costs of holding gold while they hedge against growing inflation risks, geopolitical turmoil, and economic uncertainty.

The spot prices of precious metals registered gains for the week. Gold climbed from $2,640.22 last week to $2,689.76 per troy ounce this week for a gain of 1.88%. Silver came from last week’s close of $29.62 to this week’s close of $30.41 per troy ounce for an appreciation of 2.67%. Platinum closed last week at $939.51 and this week at $965.80 per troy ounce for a gain of 2.80%. Palladium ended last week at $925.64 and this week at $951.17 per troy ounce to register a gain of 2.76%. The three-month LME prices of industrial minerals, on the other hand, ended mixed. Copper closed this week at $9,091.50 per metric ton, 3.28% higher than last week’s close at $8,802.50. Aluminum closed this week at 1.68% higher than last week’s closing price of $2,529.00, ending this week at $2,571.50 per metric ton. Zinc lost 2.02% from the last weekly close of $2,927.00 to settle this week at $2,868.00 per metric ton. Tin gained 4.65% above last week’s closing price of $28,557.00 to end this week at $29,886.00 per metric ton.

Energy and Oil

Oil prices began the year noticeably bullish, as Brent broke $80 per barrel for the first time since October 7, 2024. The rally’s momentum may be traced to several reasons, including the eleventh-hour sanctions the Biden Administration imposed on Russia, continued concerns that inflation may once more rise, cold temperatures across the Atlantic Basin, and widening backwardation in all crude futures. The bullishness in the oil market has once more been felt for the first time in months. In other news, Chinese consumers have nominated 43.5 million barrels of Saudi crude next month shortly after Saudi Aramco hiked formula prices for Asian term buyers by $0.50 to $0.60 for February. This is down by 2.5 million barrels from January.

Natural Gas

For the report week beginning Wednesday, January 1, and ending Wednesday, January 8, 2025, the Henry Hub spot price rose by $0.37 from $3.39 per million British thermal units (MMBtu) to $3.76/MMBtu. Regarding Henry Hub futures, the January 2025 contract expired on Friday, December 27, at $3.514/MMBtu. The price of the February 2025 NYMEX contract decreased by $0.009 for the report week, from $3.660/MMBtu to $3.651/MMBtu. The price of the 12-month strip averaging February 2025 through January 2026 futures contracts increased by $0.03 to $3.678/MMBtu. Natural gas spot prices increased at all major pricing locations this report week. Price increases ranged from $0.29 at Eastern Gas South to $11.69 at Algonquin Citygate.

International natural gas futures prices increased this report week. Weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.14 to a weekly average of $14.30/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands increased by $0.06 to a weekly average of $14.55/MMBtu. In the week last year corresponding to this report week (from January 3 to January 10, 2024), the prices were $11.44/MMBtu in East Asia and $10.35/MMBtu at the TTF.

World Markets

European stock markets rose this week as the pan-European 600 Index closed 0.65% higher in local currency terms. Despite an uptick in the inflation rate, investors continue to expect the European Central Bank to cut interest rates in January. Germany’s DAX climbed by 1.55%, France’s CAC 40 Index ascended by 2.04%, and Italy’s FTSE MIB added 2.82%. The UK’s FTSE 100 Index gained by 0.30%. Various data painted a varying picture of the eurozone economy. Driven by higher energy prices and service costs, December’s year-over-year inflation speeded up to 2.4% from November’s 2.2%. The core rate (excluding energy, food, alcohol, and tobacco prices) remained unchanged at 2.7%. After falling in October, retail sales barely grew in November. In the meantime, the jobless rate stayed at a record low of 6.3% in November. In its latest Economic Bulletin, the European Central Bank (ECB) said that the disinflation process was well on track and that most indicators underlying inflation suggested that inflation will sustainably settle at the bank’s 2% medium-term target. The Italian newspaper, Corriere della Sera, quoted policymaker Piero Cipollone as saying that the ECB “shouldn’t try to guard excessively against possible future inflation shocks” and that “running the economy below potential weakens it and reduces the scope to react to shocks when they occur.” This and other individual comments by other policymakers encourage investors to believe that future monetary policy would contribute to a stronger economic outlook.

Over the week, Japanese equities lost ground, as the Nikkei 225 Index slid by 1.8% and the broader TOPIX Index dropped by 2.5%. The timing of Bank of Japan’s (BoJ’s) next interest rate hike remained the most speculated topic among market observers. Japan’s currency weakened over the week from around JPY 157.3 per USD at the end of last week, to about JPY 158.1 at the end of this week. The yen’s weakness was due to the uncertainty of the pace of further monetary policy normalization by the BoJ, as well as the pressure from a recent widening of the U.S.-Japan interest rate differential. The authorities have expressed their readiness to take appropriate action against excessively speculative, one-sided moves in the currency market. In the past, Japan’s monetary authorities have intervened in the foreign exchange markets to prop up the yen, most recently in July 2024. The central bank maintained its tightening bias, and its Governor Kazuo Ueda reiterated that if economic and price conditions keep improving, rates will be raised. Investors believe that it is unlikely that the BoJ will raise rates soon, and instead expect the policy rate hike will be delayed until March or April. Japan’s real (inflation-adjusted) wage growth, a closely watched indicator of consumers’ purchasing power, fell by 0.3% year-on-year in November. This is the fourth consecutive month of negative real wage growth. The BoJ’s case is that if the economy, prices, and wage growth develop in line with its projections, interest rates will rise.

Chinese stock markets receded after data released showed that the economy remained in deflation territory. The Shanghai Composite Index lost 1.34%, and the blue-chip CSI 300 slid by 1.13%. The Hong Kong benchmark Hang Seng Index plunged by 3.52%. On Thursday, inflation data released indicated that China is still struggling with deflationary pressures. The consumer price index (CPI) rose by 0.1% in December from one year ago. This is in line with estimates and down by 0,2% in November due to lower food and fuel prices. Excluding volatile food and energy costs, core inflation ticked up to 0.4% from November’s 0.3% growth. The producer price index (PPI) fell by 2.3% year-on-year, slowing from the 2.5% decline of the previous month and extending the deflation in factory gate prices for the 27th straight month. In other developments, the private Caixin S&P Global survey of services activity climbed to 52.2 in December, a better-than-expected result and the highest level since May. This matches the official data released in the previous week indicating that nonmanufacturing activity rose to 52.2 in December, the highest level in six months after Beijing introduced a broad stimulus package in late September. Furthermore, the People’s Bank of China (PBOC) announced after its quarterly policy meeting that to support economic growth, it will implement a moderately loose monetary policy this year. The PBOC vowed to increase financial support directed at the technology, emissions, pensions, and digital sectors. It likewise declared that, when appropriate, it would reduce the reserve requirement ratio and interest rates in order to boost consumption.

The Week Ahead

The CPI and PPI inflation for December, retail sales data, and industrial production data are among the macroeconomic reports scheduled for release in the coming week.

Key Topics to Watch

• Monthly U.S. federal budget for Dec.
• NFIB optimism index for Dec.
• Producer price index for Dec.
• Core PPI for Dec.
• PPI year over year
• Core PPI year over year
• Kansas City Fed President Jeffrey Schmid speaks (Jan. 14)
• Fed Beige Book
• New York Fed President Williams delivers opening remarks (Jan. 14)
• Consumer price index for Dec.
• CPI year over year
• Core CPI for Dec.
• Core CPI year over year
• Empire State manufacturing survey for Jan.
• Richmond Fed President Barkin speaks (Jan. 15)
• New York Fed President Williams speaks (Jan. 15)
• Chicago Fed President Goolsbee speaks (Jan. 15)
• Initial jobless claims for Jan. 11
• U.S. retail sales for Dec.
• Retail sales minus autos for Dec.
• Import price index for Dec.
• Import price index minus fuel for Dec.
• Philadelphia Fed manufacturing survey for Jan.
• Business inventories for Nov.
• Home builder confidence index for Jan.
• Housing starts for Dec.
• Building permits for Dec.
• Industrial production for Dec.
• Capacity utilization for Dec.

Markets Index Wrap-Up

Stock Markets                                                    

The shortened New Year’s trading week provided little incentive for market activity, and most indexes were slightly down. The Dow Jones Industrial Average (DJIA) dropped 0.60% while the Total Stock Market came down by 0.30%. The S&P 500 Index gave up 0.48% and the Nasdaq Stock Market Composite lost by 0.51%. The NYSE Composite bucked the trend and ended up by 0.08%. Investor risk perception, as measured by the CBOE Volatility Index (VIX), rose slightly by 1.13% this week.

Although stocks ended the week mixed, they nevertheless closed the year strong. Broad gains on Friday helped the indexes to finish above their worst levels. The underperformance at the beginning of the week was partially due to some profit-taking that is only to be expected as the year’s end draws near. Tuesday was the fourth consecutive day of declines for the S&P Index. However, despite the year-end slump, 2024 still marked the second straight annual gain of over 20% for the S&P 500 Index. It also capped off the best two-year stretch in 25 years. Furthermore, the Nasdaq Composite also finished the year up by 20% for the sixth time in the past eight years.

Other stock headlines weighed on the broader sentiment on Thursday. These include Tesla’s fourth-quarter deliveries report, which failed to meet consensus expectations. Declining iPhone shipments to China likewise led to Apple shares plunging by 2.62% for the day.

U.S. Economy                             

Macroeconomic releases were light during this New Year’s week. The Atlanta Fed revised its fourth-quarter gross domestic product (GDP) forecast downward, from 3.1% to 2.6%. The revision was based on recent data releases from the US Census Bureau that resulted in a reduction in expectations, from 1.3% to 0.7%, for real gross private domestic investment growth. But there was also positive news. For the week ended December 28, the Labor Department reported initial jobless claims of 211,000. This was a reduction from the previous week’s reading of 220,000 and was the lowest level in eight months. There was also a decline in continuing claims for the prior week to a three-month low of 1.84 million.

Metals and Mining

The spot market for precious metals was up for the first week of the new year. Gold gained 0.72% from its last weekly close at $2,621.40 to end this week at $2,640.22 per troy ounce. Silver settled 0.78% above last week’s close of $29.39 to reach $29.62 per troy ounce. Platinum gained 1.51% from last week’s closing price of $925.54 to end at this week’s closing price of $939.51 per troy ounce. Palladium inched up by 1.01% from its close last week at $916.38 to this week’s close at $925.64 per troy ounce. The three-month LME prices of industrial metals were down for this week. Copper came from $8,982.00 last week to $8,802.50 per metric ton this week for a loss of 2.00%. Aluminum closed last week at $2,558.00 and this week at $2,529.00 per metric ton for an attrition of 1.13%. Zinc, which ended last week at $3,031.50, settled this week at $2,927.00 per metric ton, down by 3.45%. Tin ended this week at $28,557.00 per metric ton, 0.88% lower than its close last week at $28,810.00.

Energy and Oil

Tacit optimism marked the gradual return of oil market participants from the New Year’s Eve holidays as US stock draws tightened product availability. Cold snaps are threatening both the US and Europe. As forecasts indicated a series of Arctic cold snaps across the United States, the NYMEX ULSD futures contract climbed to $2.36 per gallon this week and hit a three-month high. The anticipated cold weather is bound to lift diesel and heating oil demand beyond seasonal patterns over January. Further, it is reported that outgoing US President Joe Biden is preparing to issue a decree to permanently ban offshore drilling in US coastal waters. These waters are to be considered biodiversity-sensitive under the 1953 Outer Continental Shelf Lands Act. Meanwhile, the spirits of those who gave up on the more robust policy coming from Beijing have been lifted, even if temporarily, by China’s promises to be more proactive with stimulus measures. These developments pushed the ICE Brent futures closer to $76 per barrel.

World Markets

The pan-European STOXX Europe 600 Index closed 0.20% higher in local currency terms on thin trading volume and light news flow. Most major stock indexes ended modestly lower. Italy’s FTSE MIB was slightly down, Germany’s DAX slid by 0.39%, and France’s CAC 40 Index eased by 0.99%. On the other hand, the UK’s FTSE 100 Index gained by 0.91%. Lending support to the index was a weaker British pound versus the US dollar, providing leverage to many multinational British companies that generate revenue overseas. The year started with a light macroeconomic data calendar, with Spain releasing its first estimate of consumer price inflation for December, at a rate stronger than initially forecasted. Non-seasonally adjusted annual inflation rose to 2.8% from 2.4% in November due to higher fuel prices. Core inflation, however, which excludes energy and food prices, exceeded the forecasted 2.4% to 2.6%. The uptick in Spain’s inflation rate appeared to bolster arguments from more restrictive policies in the European Central Bank (ECB) for a more gradual reduction in borrowing costs. Governing Council member Robert Holzmann suggested that rate-setters could take more time before once more cutting interest rates, in light of the rising energy prices and possible devaluation of the euro if the US introduces trade tariffs. In any case, President Christine Lagarde stated in a video that inflation was on track to achieve the 2% target in 2025, implying that rates remained on a downward trajectory.

In a holiday-shortened weekend, Japan’s stock market ended lower amid signs of profit-taking. On Monday, the last trading day of 2024, the Nikkei 225 Index gave up almost 1% to close at 39,894.54, its record-high year-end closing level. The benchmark index posted a 20% gain over last year due to share buybacks, corporate governance reforms, and a weaker yen that helped boost export-oriented companies and industries that generate their income from foreign markets. The broader TOPIX, on the other hand, dipped by 0.6% from last week, but posted an annual increase of 17.6%. The yen maintained its level at near JPY 157 on Friday in thin trading volumes, hardly changed from last week’s close. Over the year, it depreciated close to 11%, keeping traders on the lookout for signals that the Bank of Japan (BoJ) is intervening to support the currency. Investors continue to monitor the BoJ’s rate outlook after Tokyo’s consumer price inflation accelerated in December. The yield on the bank’s 10-year government bond moved lower to 1.09% on Monday, keeping close to its highest level in 13 and a half years. According to the minutes of the BoJ’s policy meeting, policymakers continue to debate the likelihood of a near-term rate hike. On the economic front, the final release of the au Jibun Bank Manufacturing PMI indicates that factory activity contracted for the sixth consecutive month in December, but the decline in new orders appeared to be stabilizing and backlogs of work were diminishing.

China’s equities markets retreated due to a weaker-than-expected manufacturing data release that impacted investor sentiment negatively. The Shanghai Composite Index dropped by 5.5%, while the blue-chip CSI declined by 5.17%. The Hong Kong benchmark Hang Seng Index dipped by 1.64%. For the third consecutive month, China’s factory activity expanded. According to the statistics bureau, the official manufacturing PMI slowed to 50.1 in December from 50.3 in November. This reading, while still in expansion territory, missed economists’ forecasts. The non-manufacturing PMI, a measure of construction and services activity, advanced to 52.2 in December from November’s 50, registering a better-than-forecasted level. The value of new home sales by the top 100 developers remained unchanged in December from one year ago according to the China Real Estate Information Corporation, compared to November’s 6.9% fall. New home sales increased by 24.2% month-on-month. Sales from the top 100 developers sank for the full year by 28.1% compared to a 16.5% drop in 2023. The data showed further evidence of a possible turnaround in China’s housing market after a rescue package was unveiled by Beijing in September to revive the troubled housing sector.

The Week Ahead

In the coming week, some of the important economic news scheduled for release are the ISM services PMI and the nonfarm payrolls report for December.

Key Topics to Watch

• S&P final U.S. services PMI for Dec.
• Factory orders for Nov.
• Richmond Fed President Tom Barkin speaks (Jan. 7)
• U.S. trade deficit for Nov.
• ISM services for Dec.
• Job openings for Nov.
• ADP employment for Dec.
• Minutes of Fed’s December FOMC meeting
• Consumer credit for Dec.
• Initial jobless claims for Jan. 4
• Wholesale inventories for Nov.
• Consumer sentiment (prelim) for Jan.
• U.S. employment report for Dec.
• U.S. unemployment rate for Dec.
• U.S. hourly wages for Dec.
• Hourly wages year over year

Markets Index Wrap-Up