The Market Week Ahead

Author

Andre Borczuk
January 13, 2025

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The Week Ahead

United States

  • Stock Market: The Dow Jones dipped 109 points to 39,054 in afternoon trading on Friday, despite inflation slowing to its lowest annual rate in over three years based on May’s Core PCE readings. The Dow is still set for gains of around 4% for the first half of 2024.

  • Bonds: U.S. Treasuries saw mixed movements 2-year rates down to 4.391%, 10-year rates to 4.776%, and 30-year rates up to 4.965%.

Canada

  • Stock Market: The S&P/TSX Composite Index declined 1.59% to surpass 24,767.73, buoyed by rising commodity prices and the implications of Prime Minister Justin Trudeau’s resignation. Mining stocks rebounded strongly, with Agnico Eagle, Barrick Gold, Wheaton Precious Metals, and Franco-Nevada climbing between 2.2% and 3.4%.

  • Economic Data: Statistics Canada reported a 2.2% increase in merchandise exports and a 1.8% rise in imports for November, narrowing the nation’s trade deficit to CAD 323 million from October’s CAD 544 million.

Asia

  • Taiwan: TSMC, the go-to chipmaker for Nvidia Corp. and Apple Inc., reported a 39% rise in October-December revenue to NT$868.5 billion ($26.3 billion), boosting AI's outlook for 2025.

  • India: The Nifty continued its decline, breaching support levels, with a cautious market outlook.

Europe

The pan-European Stoxx 600 index closed 0.83% lower for the week, with most major bourses and sectors in negative territory. By Friday's close:

  • UK's FTSE 100 fell 0.86% to 8,248.49

  • Germany's DAX declined 0.50% to 20,214.79

  • France's CAC 40 dropped 0.79% to 7,431.04

Economic Data and Inflation Concerns

The Eurozone's December inflation rate rose to 2.4% from 2.2% in November, driven by elevated service costs and climbing energy prices. This uptick in inflation reignited concerns about the European Central Bank's (ECB) monetary policy trajectory.

Germany's industrial orders unexpectedly fell in November, while consumer confidence in both the EU and Germany showed signs of weakness. These data points contributed to a cautious market sentiment.

Commodities and Currencies

  • Grains: Corn prices increased more than 3.5% on the week after USDA showed unexpectedly high plantings this season. Soybean prices shifted higher lower, while wheat incurred moderate losses.

  • Energy: Brent Crude oil was up on the week to $79.68 per barrel

  • Currencies: The U.S. Dollar softened slightly, with the U.S. Dollar Index up 0.44% to 109.64.

  • Metals: Gold prices surged, with the iShares Gold Trust up 1.81% and the Goldman Sachs Physical Gold ETF up 1.82%.

Notable Events this week

1. Inflation Metrics:

  • Consumer Price Index (CPI) and Core CPI: On January 15, the U.S. will release December's CPI and Core CPI data, with forecasts indicating a 0.3% increase for both metrics. This will provide crucial insights into inflation trends and potential impacts on Federal Reserve policy.

  • Producer Price Index (PPI): The December PPI is expected to show a 0.3% increase, suggesting moderate producer-level inflation. This could ease inflation concerns and influence bond markets.

2. Economic Growth Indicators:

  • Retail Sales: The U.S. December retail sales are forecasted to increase by 0.4% month-over-month, driven by holiday season spending. Strong retail sales could boost investor confidence in consumer discretionary and retail stocks.

  • Industrial Production: The U.S. industrial production for December is expected to show a 0.2% increase, indicating modest economic expansion. This could support industrial stocks and the USD.

3. Labor Market Data:

  • Initial Jobless Claims: The U.S. initial jobless claims for the week ending January 11 are forecasted to be around 220,000, in line with recent trends. Stable labor market data could reassure investors about the strength of the U.S. economy.

4. Global Trade and Economic Sentiment:

  • China's Trade Balance: China is expected to report a trade surplus of approximately $85 billion for December, with exports up by 7.1% year-over-year and imports down by 2%. A strong surplus could enhance the Chinese Yuan (CNY) and positively affect global markets.

  • Germany's ZEW Economic Sentiment Index: An improvement in the ZEW index for January could uplift European equities, particularly in Germany, and strengthen the Euro (EUR).

5. Earnings Season:

  • Major Banks' Earnings: Earnings season kicks off with reports from major banks such as JPMorgan Chase (JPM), Bank of America (BAC), and Citigroup (C). These reports will provide critical insights into the financial sector's performance.

6. Federal Reserve's Beige Book:

  • Economic Conditions: The Federal Reserve's Beige Book release on January 15 is expected to describe moderate economic growth with stable inflation. This could influence investor expectations regarding monetary policy and impact financial markets broadly.

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