Hello everyone. I Hope you all enjoyed the holiday season and gearing up to a new trading year. We have a lot of moving parts going on as we head into 2025 and I review key areas of focus as another year is kicked off. Enjoy this week’s Market Round-Up.
Market Sound Bites:
Markets finished the week lower, with NASDAQ falling 2.34%, its biggest weekly drop since mid-November.
On Tuesday, the Institute for Supply Management (ISM) reported its PMI—a measure of economic activity in the services sector coming in at 54.1 for the month of December, two percentage points higher than November’s reading (readings above 50 indicate expansion). It also showed that prices paid by services organizations for materials and services increased by 6.2% to 64.4%, stoking fears that progress on bringing down inflation has stalled and that interest rates could remain “higher for longer. Adding to these fears, Fed Governor Bowman noted that inflation has held “uncomfortably above” the Fed’s 2% long-term target and that while the Fed made significant progress in 2023, there are still upside risks to inflation. Minutes from the Fed’s December policy meeting, released Wednesday, echoed this same sentiment. And finally, the economic calendar wrapped up Friday morning with the Labor Department’s closely watched monthly nonfarm payrolls report for December. The report indicated that the U.S. economy added 256,000 jobs during the month, well ahead of consensus expectations for 155,000. The unemployment rate was little changed at 4.1%, and wages grew 3.9% year over year. Stocks turned sharply lower on Friday following the data release, solidifying the major indexes’ losses for the week.
U.S. Treasury yields were higher heading into Friday and jumped following the blowout jobs report, with the benchmark 10-year U.S. Treasury note yield touching its highest intraday level since November 2023 on Friday morning after the Jobs Numbers.
In the UK, the Treasury tried to calm markets and reaffirmed its commitment to fiscal rules after a sell-off in the pound sterling and UK government bonds, which propelled the 10-year gilt yield to 4.8%, the highest level since August 2008. IN the UK there are concerns over Trump’s policies and a more hawkish outlook for U.S. interest rates. And in Europe, the ECB said in its latest Economic Bulletin that the disinflation process was well on track and highlighted that most measures of underlying inflation suggested inflation would settle at the ECB’s 2% medium-term target on a sustained basis.
In Japan, the yen weakened to around JPY 158.1 against the U.S. dollar, from about 157.3 at the end of the prior week. The weakness of the Japanese currency was attributable to both uncertainty about the pace of further monetary policy normalization by the BoJ and pressure from a recent widening of the U.S.-Japan interest rate differential. Meanwhile, the BoJ and its governor, Kazuo Ueda, maintained their tightening bias. Ueda reiterated that rates will be raised if economic and price conditions keep improving. Japan’s real (inflation-adjusted) wage growth, a key indicator of consumers’ purchasing power that is closely watched by the BoJ, fell 0.3% year on year in November. This marked the fourth consecutive month of negative real wage growth.
And in China, inflation data showed they are still grappling with deflationary pressures. In a statement following its quarterly policy meeting, The People’s Bank of China said that it will implement a moderately loose monetary policy this year to support economic growth.
Enjoy this week’s market round-up!
Don’t Be A Rat Brain Trader – Be the Red Stipe Zebra !!
Trade Smart !
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