Please see this week’s market overview from eToro’s world analyst group, which incorporates the newest market information and the home funding view.
Most markets rose steadily in anticipation of Donald Trump’s presidency
Final week provided one thing for each kind of investor. Bond and small-cap traders discovered some reduction in softer-than-expected inflation information, which induced the US 10-year yield to fall from 4.76% to 4.62%. Worth traders had been happy with stable US financial institution earnings, all of which exceeded expectations. Progress 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 unit within the US.
In the meantime, cryptocurrency fans had 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 induced 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 in search of to keep away from larger tariffs beneath Trump’s presidency.
Main fairness indices closed the week in optimistic territory. The S&P 500 and Nasdaq 100 had 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 Hold 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 give attention to the UK’s unemployment and wage development information, following final week’s lower-than-expected inflation, retail gross sales, and GDP figures. Markets are factoring in vital charge cuts by the Financial institution of England in 2025, aiming to facilitate a smooth touchdown for the economic system.
Consideration will even flip to Germany’s financial sentiment index, as traders search indicators of bettering sentiment, notably in gentle of latest GDP information displaying 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 beneath 2019 ranges by means of 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 shedding floor towards the greenback for months, with the dollar buoyed by a powerful US economic system and the “Trump Commerce,” pushed by proposed tax cuts and looming tariffs.
Final week introduced some reduction: 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 charge hike this Friday, following key inflation information due earlier that day.
Nonetheless, Japan’s choices stay restricted. Years of sluggish development and excessive public debt hold the economic system reliant on low rates of interest. Whereas the BoJ would possibly stabilise the yen, a significant rally appears unlikely. A weaker US greenback might show extra impactful than any BoJ coverage shift.
The yen’s destiny could in the end relaxation with Trump. His inauguration on Monday might form markets, with a powerful greenback nonetheless the baseline beneath his “America First” agenda. Nonetheless, softer tariffs or fiscal insurance policies might weaken the greenback and provides the yen some respite.
Earnings season: large names reporting
The earnings season is getting into its essential second week, with seven of the world’s prime 100 largest firms reporting their 2024 This fall earnings (see beneath). Traders 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, might change federal insurance policies from the beginning and trigger surprising market actions.
Macro and earnings information releases
Macro
UK unemployment, Germany ZEW (22/1), Japan CPI, BoJ charge resolution, International 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 Specific, Verizon, NextEra Power
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