SVET Markets Weekly Update (January 20–24, 2025)

24 Jan 2025 by rate3

On Week 4, equities closed in the green, with the S&P reaching a new ATH. Meanwhile, joblessness climbed, and the decline in manufacturing was accompanied by a slowing service sector. The dollar fluctuated depending on Trump’s comments, finishing at a month low after his Davos call for a lower rate. Consequently, gold jumped to ATH. The People’s Bank of China kept its key lending rates unchanged while Bank of Japan hiked it to 17-year high. BTC and other major coins fluctuated during the week before following gold’s upward movement. The rise of the crypto market was bolstered by Trump signing an executive order to establish a national digital asset stockpile and his ban on CBDCs.

On Monday, with markets closed for the holiday, the dollar weakened and gold held steady following Trump’s inauguration speech. BTC reached a new ATH in a sudden overnight run driven by sporadic momentum in anticipation of Trump’s pro-crypto policies and his inauguration speech mentioning BTC. ETH remained where it was. Trump’s official meme token briefly entered the top 8 tokens/coins, with a market cap of $50B reached within 3 days after its launch on Solana, nearly overshadowing Doge.

World Markets

Euro Area construction output surged by 1.4% YoY in November, ending eight consecutive months of contraction. Growth was driven by increases in building and specialized construction activities. While construction increased in some major economies, it contracted in others. 1Y trend: “Down” (EU)
PBoC kept its key lending rates unchanged. Both the one-year and five-year LPR rates remained at record lows. While China’s Q4 2024 GDP grew at its fastest pace in 18 months, the PBoC maintained a cautious stance due to renewed pressure on the yuan. 1Y trend: “Down”
Currencies

The dollar index fell nearly 1% to below 108.5 after inauguration. The dollar had declined earlier as reports indicated no immediate tariffs would be imposed. Despite Trump’s executive orders, he avoided concrete changes to trade policy. This limited the dollar’s decline. 1Y trend: “Up”
Commodities

Gold prices remained above $2,700. While Trump’s energy policy could ease inflationary pressures, his economic agenda, including trade policy shifts and renewed focus on fossil fuels, creates uncertainty and supports safe-haven demand. A weaker dollar and expectations of limited Fed rate hikes also bolster gold prices. 1Y trend: “Up”
WTI crude declined, following the announcement of plans to expand domestic crude production. The delay in imposing tariffs on certain countries also provided some market relief. However, uncertainty remains regarding potential adjustments to sanctions on Russian oil. Easing geopolitical tensions in the Middle East further contributed to downward pressure on prices. 1Y trend: “Side”
On Tuesday, equities rallied as worries over Trump’s tariffs appeared exaggerated. Apple shares declined due to the worsening outlook for China market. The euro held at a 3-year low amid a slowing economy and anticipated trade restrictions. BTC increased while ETH continued to stall, and SOL remained in recovery mode after a post-Trump-coin-hike crash.

World Markets

The ZEW Indicator of Economic Sentiment for the Euro Area rose in January, exceeding expectations. However, concerns remain regarding Germany’s economic growth, rising inflation, and political instability. The indicator of current economic situation improved, while inflation expectations surged. 1Y trend: “Down”(DE)
Gold production in South Africa declined by 11.5% YpY in November 2024, the steepest decline in six months. This contributed to a decline in overall mining production. 1Y trend: “Side”(ZA)
Currencies

The dollar index rose, following Trump’s announcement of potential tariffs on Canada and Mexico. Concerns over trade tensions and potential inflationary pressures boosted the dollar. While signs of cooling inflation have increased expectations for Fed rate cuts, the potential for trade-related inflationary pressures is supporting the dollar. The Canadian dollar and Mexican peso declined significantly. 1Y trend: “Up”
The euro traded near $1.03, close to its late 2022 lows, as dollar strength persisted following Trump’s inauguration. Trump’s announcement of potential tariffs on Mexico and Canada renewed concerns about trade tensions. While Eurozone inflation rose, the ECB is likely to maintain its easing trajectory. Markets anticipate a 25 basis point rate cut at the ECB’s upcoming meeting. 1Y trend: “Down, Depreciating”
On Wednesday, equities extended gains, with the S&P reaching a new ATH. Netflix surged on strong results. Oracle soared following its AI investment partnership. Nvidia and Microsoft also rallied. Gold jumped to a 3-month high amid concerns over Trump’s tariff threats on China, while the yuan depreciated. Natural gas prices increased due to cold temperatures, which set a 5-year record. BTC rose following Ulbricht’s pardon and the Doge ETF filing, while ETH remained unchanged. SOL surged with record volumes on its DEX.

Crypto

Osprey Funds and Rex Shares have filed with the SEC to launch several cryptocurrency ETFs, including those focused on Doge, TRUMP, and Bonk. They also plan to launch ETFs for SOL, and XRP. (source)
Currencies

The yuan fell (7.28), reflecting concerns over Trump’s trade policies. Trump announced a 10% tariff on Chinese imports starting February 1, citing China’s role in supplying fentanyl. It’s lower than a previously threatened 60%. It followed a call with Xi Jinping. Trump also proposed a 25% tariff on imports from Mexico and Canada. 1Y trend: “Up, Depreciating”
Commodities

Gold prices rose ($2,760), reaching a 3-month high. This increase was driven by a weaker dollar and safe-haven demand amid escalating trade tensions following Trump’s tariff threats. 1Y trend: “Up”
Silver prices climbed towards $31 per ounce, driven by safe-haven demand amid Trump’s tariff threats. Also, expectations of Fed rate cuts, supply concerns, and strong industrial demand continue to support silver prices. 1Y trend: “Up”.
Natural gas rose sharply as frigid temperatures drove demand to record highs (coldest in 5 years). Heating needs surged, leading to significant gas withdrawals from storage. While demand is expected to ease with milder weather, a power issue at a major LNG export plant temporarily reduced demand. 1Y trend: “Up”.
On Thursday, equities rose, continuing this week’s rally as investors evaluated how Trump’s policy changes could affect corporate profits. Higher jobless claims also contributed to the bullish sentiment. Oil slipped following Trump’s speech at Davos. BTC fluctuated below its ATH after Trump signed the national digital asset stockpile order. SOL and ETH mostly stalled.

Details

The Kansas City Fed’s Manufacturing Production Index fell to -9 in January — lowest level since September 2024, marking the third consecutive month of decline. Declining materials and finished goods inventories contributed to the contraction. New orders continued to decline, while employment remained steady. Elevated raw material costs led to higher manufacturing charges. 1Y trend: “Down” (KFed)
Initial jobless claims rose to 223K in the week ending January 18th, slightly exceeding expectations. The increase marked the sharpest rise in six weeks. 1Y trend: “Up”. (DOL)
Crypto

Trump has reportedly signed an executive order to establish a national digital asset stockpile, emphasizing the importance of cryptocurrencies in global finance. (source)
Commodities

Crude oil prices slipped following Trump’s Davos speech announcing plans to ask OPEC to lower oil prices. This was coupled with MIddle-East seas-fire and an increase in US fuel stockpiles, contributed to the price decline. 1Y trend: “Side”
On Friday, equities closed lower, with semiconductor stocks weighing on tech indices. This decline was compounded by the PMI registering its weakest expansion in 9 months as consumer sentiment eased. Despite the declines, all indices posted weekly gains. Gold jumped to ATH after Trump called for a lower Fed rate. EU business procurement activity ticked up slightly in services, although manufacturing remained down. Japan’s central bank raised its rate to a 17-year high due to spiked inflation, despite slowing manufacturing activity in the country. BTC rose to near ATH on a weaker dollar, which dropped to a month low. ETH and SOL also saw increases following Trump’s prohibition of CBDCs.

Details

The S&P Global Flash US Composite PMI eased to 52.4 in January, signaling the weakest expansion in 9 months. Manufacturing sector growth resumed, while service sector growth slowed. Hiring accelerated, and business optimism remained high. However, inflationary pressures intensified. 1Y trend: “Up”. (PMI)
The University of Michigan consumer sentiment index was revised lower in January. Both expectations and current conditions gauges declined. Inflation expectations for the year remained unchanged, while the 5-year outlook declined slightly. 1Y trend: “Down”. (Umich)
Crypto

Trump’s executive order prohibits Central Bank Digital Currencies (CBDCs), potentially impacting global CBDC initiatives. While some celebrate this move in the crypto market, 134 countries are still exploring or testing digital currency projects, including G20 nations. (source)
World Markets

The HCOB Eurozone Composite PMI rose to 50.2 in January, marking the first expansion in private sector activity since August 2024. Services sector growth offset a contraction in manufacturing. New orders contracted, but at a slower pace. Employment fell, while input and output costs increased. 1Y trend: “Down”. (PMI)
The Bank of Japan raised its key interest rate by 25 basis points to 0.5% — the highest in 17 years, citing rising inflation and wage growth. This marks the third rate hike since March 2024. The BoJ raised its inflation forecast and slightly lowered its GDP growth outlook. 1Y trend: “Up”.(BOJ)
Japan’s manufacturing PMI unexpectedly contracted sharply in January, driven by falling output and new orders. However, employment increased, and business sentiment remained positive. 1Y trend: “Up”. (SP)
Japan’s annual inflation rate surged to 3.6% from 2.9% in December 2024, driven by higher food, energy, and housing costs. Core inflation also reached a 16-month high of 3.0%. Monthly inflation increased by 0.6%, the highest in 14 months. 1Y trend: “Up”.
The HSBC India Composite PMI declined in January, with service sector growth slowing. Factory activity strengthened, but new orders eased. Employment hit a record high, while input and output costs rose. Business sentiment improved. 1Y trend: “Down”. (PMI)
Currencies

The DXY fell to a one-month low, as the dollar weakened against major currencies. Trump reiterated plans to boost energy output and deregulate businesses, but softened his stance on tariffs. Rising unemployment claims and lower manufacturing further pressured the dollar. 1Y trend: “Up”.
Commodities

Gold prices rose to a 4-month high, driven by a weaker dollar and safe-haven demand. Trump called for lower interest rates in his Davos speech, further supporting gold prices. Concerns over trade policies and uncertainty surrounding global central bank decisions also contributed to the gold rally. 1Y trend: “Up”.
On Week 12, investors will focus on Fed and other central banks rate decisions. Powell is expected to hold rates steady at January 29 (Wed), while the ECB and BoC are likely to cut rates. Key economic data releases include GDP figures for major economies and PCE data. China will be closed for the Lunar New Year. Several tech megacaps, including Microsoft, Meta, Tesla, and Apple, are scheduled to report earnings.