Please see this week’s market overview from eToro’s world analyst workforce, which incorporates the newest market knowledge and the home funding view.
Most markets rose steadily in anticipation of Donald Trump’s presidency
Final week supplied one thing for each sort of investor. Bond and small-cap traders discovered some aid in softer-than-expected inflation knowledge, which brought on the US 10-year yield to fall from 4.76% to 4.62%. Worth traders have been happy with strong US financial institution earnings, all of which exceeded expectations. Development and AI traders welcomed TSMC’s announcement of a deliberate enhance in capital expenditures for 2025 to roughly $40 billion, sparking hypothesis about which portion will fund a brand new state-of-the-art manufacturing facility within the US.
In the meantime, cryptocurrency lovers have been astonished by the launch of a Trump memecoin, which skyrocketed to billions in market worth. This surge additionally lifted Bitcoin by 11% (to a brand new alltime excessive of $108,900), though it brought on a decline in lots of altcoins. China’s GDP development within the fourth quarter of 2024 rose to five.4%, arguably pushed by front-loaded exports searching for to keep away from larger tariffs below Trump’s presidency.
Main fairness indices closed the week in constructive territory. The S&P 500 and Nasdaq 100 have been up by 3%, whereas the Dow Jones and Russell 2000 gained 3.7% and 4.0%, respectively. The European STOXX 600 and the China-focused Grasp Seng additionally posted positive aspects of two.4% and a couple of.7%, respectively. The UK FTSE 100 Index reached a brand new all-time excessive above 8,500 factors on Friday (see chart).
Macro Outlook for the week
This week in macro, traders will concentrate on the UK’s unemployment and wage development knowledge, following final week’s lower-than-expected inflation, retail gross sales, and GDP figures. Markets are factoring in important price cuts by the Financial institution of England in 2025, aiming to facilitate a mushy touchdown for the economic system.
Consideration may even flip to Germany’s financial sentiment index, as traders search indicators of enhancing sentiment, significantly in mild of latest GDP knowledge exhibiting the economic system contracted for a second consecutive 12 months. Notably, Germany stays the one main industrialized nation the place GDP per capita is projected to remain under 2019 ranges via 2025.
FTSE 100 Index reached a brand new all-time excessive above 8,500 factors on Friday
Who decides the destiny of the yen, the Financial institution of Japan or Donald Trump?
The yen and the euro have been dropping floor towards the greenback for months, with the dollar buoyed by a robust US economic system and the “Trump Commerce,” pushed by proposed tax cuts and looming tariffs.
Final week introduced some aid: EUR/USD climbed above 1.027, whereas USD/JPY fell 1% to 156.2. Yen merchants responded to Financial institution of Japan (BoJ) Governor Kazuo Ueda’s hints of a possible price hike this Friday, following key inflation knowledge due earlier that day.
Nevertheless, Japan’s choices stay restricted. Years of sluggish development and excessive public debt preserve the economic system reliant on low rates of interest. Whereas the BoJ may stabilise the yen, a serious rally appears unlikely. A weaker US greenback may show extra impactful than any BoJ coverage shift.
The yen’s destiny could finally relaxation with Trump. His inauguration on Monday may form markets, with a robust greenback nonetheless the baseline below his “America First” agenda. Nevertheless, softer tariffs or fiscal insurance policies may weaken the greenback and provides the yen some respite.
Earnings season: large names reporting
The earnings season is coming into its essential second week, with seven of the world’s high 100 largest firms reporting their 2024 This fall earnings (see under). Buyers ought to recognise that some inventory costs could have been influenced by the upcoming presidential transition. In his closing days, Joe Biden allotted $26 billion to wash vitality initiatives. In the meantime, Donald Trump has repeatedly said his intention to impose a 20% tariff on all items bought to the US, and a 60% tariff particularly on items from China. Execution orders, signed by Trump in his first week, may change federal insurance policies from the beginning and trigger sudden market actions.
Macro and earnings knowledge releases
Macro
UK unemployment, Germany ZEW (22/1), Japan CPI, BoJ price choice, World PMI (24/1)
Earnings
21 Jan. Netflix, Charles Schwab, 3M, United Airways
22 Jan. Procter & Gamble, Johnson & Johnson, GE Vernova, Amphenol
23 Jan. GE Aerospace, Texas Devices, American Airways
24 Jan. American Categorical, Verizon, NextEra Vitality
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