Weekly market recap

Your weekly global financial market newsletter

Positive data from the US labour market helped the US dollar to rise to two-year highs, but the stock markets did not take the news very positively. Natural gas is once again attacking the $4/MMBtu level after a year.

Indices

U.S. stocks lost ground last week, which was shortened by the Thursday holiday. Optimism about Donald Trump’s potential softer stance on tariff implementation was short-lived, and by the end of the week, stocks were declining, primarily due to positive labor market news that reduces the likelihood of a significant rate cut by the central bank. Small caps and technology stocks, in particular, underperformed.

In Europe, by contrast, fears of an extended rate cut by the ECB are not immediate, and equity markets ended the week in positive territory.The pan-European STOXX Europe 600 ended 0.65% higher, Germany’s DAX gained 1.55%, and France’s CAC 40 Index added 2.04% and the UK’s FTSE 100 Index climbed 0.30%.

US30

-1.86%

US100

-2.24%

US500

-1.94%

GER30

+1.55%

Commodities

Colder weather, the shutdown of Russian gas flowing through Ukraine, and a new round of significant U.S. sanctions against Russia are contributing to increased uncertainty about potential supply constraints. This uncertainty is also driving a rise in oil prices and a rapid increase in the price of U.S. natural gas. Additionally, weather forecasts are supporting growing demand for U.S. natural gas. However, further price increases may be limited by profit-taking by speculative traders and increased production, which remains unaffected by the extreme cold.

Gold also experienced a strong week of growth, bolstered by its status as a safe-haven asset that investors turn to during times of uncertainty. Although the U.S. economy is showing relatively strong growth, as evidenced by labor market data, concerns persist about the potential impact of significant tariffs introduced by the new U.S. President. These tariffs may affect the U.S. economy and inflation, which is expected to rise substantially, potentially providing further support for gold prices.

Gold

+1.79%

Silver

+2.59%

BRENT

+4.25%

NATGAS

+18.93%

Forex

The U.S. dollar reached a two-year high late this week after a stronger-than-expected U.S. jobs report prompted markets to scale back expectations for further Federal Reserve interest rate cuts this year. As a result, no rate cuts are anticipated in January or March, and markets are now pricing in only one quarter-percentage point cut by the end of the year. Michelle Bowman, a member of the Federal Reserve Board of Governors, stated during the week that the central bank should not cut rates further, as it considers the current monetary policy stance to be neutral, neither supporting nor restricting economic growth.

The euro, meanwhile, fell to a two-year low. While increased inflationary pressures in the euro area may have contributed, markets are still pricing in a deposit rate cut from the current 3% to 2% later this year. Adding to the euro’s weakness against the dollar are concerns about U.S. trade policy, as Donald Trump is reportedly considering declaring a national economic emergency to justify sweeping tariffs on allies and adversaries under the International Economic Emergency Powers Act.

EUR/USD

-0.65%

USD/JPY

+0.31%

GBP/USD

-1.74%

USD/CAD

-0.17%

Macro

Friday’s monthly nonfarm payrolls report for December 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.

The number of JOLTS job openings unexpectedly increased to 8.1 million in November (up from 7.8 million in October). Similarly, the December ISM Services PMI showed improvement, rising to 54.1 points from 52.1 in November.

Investors also closely monitored the minutes of the latest Fed meeting. The minutes confirmed the central bankers’ cautious approach to adjusting the key interest rate further, reducing the likelihood of additional monetary easing.

In Europe, the most anticipated data was eurozone inflation for December, which accelerated from 2.2% to 2.4% year-over-year, in line with market expectations. Core inflation remained steady at 2.7% year-over-year. On a month-on-month basis, prices rose by 0.4% (compared to -0.3% in November). Meanwhile, the unemployment rate held steady in December at 6.3%.

What to watch out for this week

On Tuesday, investors will focus on producer price data from the United States and the German ZEW index, which tracks economic sentiment.
Wednesday will bring GDP statistics from Germany, November industrial production data from the eurozone, and several key reports from the U.S., including inflation data, results from a survey of manufacturing firms in New York State, and the Fed's Beige Book, which provides a regular overview of the U.S. economy.
On Thursday, Germany's inflation rate will be released, Eurostat will publish the eurozone foreign trade results, and the U.S. will release retail sales figures along with weekly labor market data.
Finally, on Friday, the eurozone will release final consumer inflation data, while the U.S. will report industrial production figures, among other developments.

Disclaimer

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