Morning Brew January 6 2025

Good morning,

Wishing you an interesting, prosperous, and fun 2025 filled with good health and happiness.

After a nervous year-end, we are heading into the first real trading week of the year, and we will need to identify the key market drivers. We have two weeks to go until Team Trump takes over; until then, statements and plans from the transition team will be closely watched and there are a number of global matters to watch.

US and Chinese yields deserve our attention: the US ten-year yield broke the trendline and rose to 4.6%, while the Chinese yield fell to 1.6%. Are we witnessing a real Japanization of the Chinese economy? The Wall Street Journal estimates the loss of wealth due to the collapse of Chinese real estate to be 18 trillion USD.

Most of the large US banks have left the net zero banking alliance since the election of Donald Trump, indicating a shift in sentiment and is a hint that climate conscious financing is less of a consideration. Trump urged the UK to close wind farms and pump more gas and oil from North sea fields.

UBS may be impacted by a report that Credit Suisse withheld documents on financing of German Nazi linked dealings.

Global political uncertainty seems to be on the rise and right-wing populism seems to gain traction.  In Austria coalition talks failed and chancellor Nehammer is stepping down, we may see the first FPÖ chancellor.  Germany is approaching snap elections in February, and Elon Musk is actively supporting the far-right AfD. Reuters reports that Justin Trudeau is considering his resignation.

This week, we are expecting the minutes of the last Fed meeting and the first key data of the new year. The Nonfarm Payroll will provide the first input on the labor side of the Fed's mandate. The second part—inflation—will become clearer once we better understand the measures by the Trump administration. So far, it looks like an attempt to square a circle; introducing tariffs and expelling cheap labor while lowering inflation will not be easy. The Fed's Kugler and Daly stated that the U.S. central bank's job of taming inflation is not yet done, but they also signaled they did not want to risk damaging the labor market.

Markets are at interesting levels. On Friday, equities recovered from the recent selloff, with the usual suspects, Tesla and Nvidia, being the key gainers at 8.2% and 4.5%, respectively. Oil rose to 74 due to colder weather and Chinese stimulus, while gold and silver followed, reaching 2635 and 29.60, respectively. The USD gained to above 109, with EURUSD at 1.03, GBPUSD at 1.24, and USDJPY at 157. USCNH is near the all-time high at 7.36, watch for interventions.

Bitcoin is just below the 100km the GER40 near 20k, the US 500 5950 and the US 30 42715.

Trade safely!

Monday:

• Data: Global PMI, Germany Inflation US Factory Orders
• Lisa Cook speaks

Tuesday:

• Data: UK House Prices, Switzerland CPI, France CPI, EU Inflation & Unemployment , US International Trade & ISM Non-Manufacturing PMI, JOLTS Job Openings , Canada Trade Balance
• Thomas Barkin speaks

Wednesday:

• Data: AU CPI, DE Industrial Orders, EU Consumer Confidence US Initial Jobless Claims
• Fed Minutes release, Waller speaks

Thursday:

• Data: US Market Holiday for Jimmy Carters Memorial Service EU Retail Sales, China CPI PPI, DE Industrial Production,
• Barkin, Schmid, and Bowman speak, Space with Elon Musk and Alice Weidel

Friday:

• Data: Switzerland Unemployment Rate, Norway & Denmark CPI, US Nonfarm Payroll, University of Michigan Sentiment Preliminary