Dow +0,80%, S&P 500 +1,26%, Nasdaq +1,77%, Russell +1,65%, SOX +2,83%, Eurostoxx -0,94%, SMI +0,20%.
Like every year, the transition to the new year is an opportunity for the financial press to recall how European stocks are undervalued compared to their American counterparts, that this time is the right one and that the Uncle Sam is going to see what he’s going to see, the old continent is back and John Rambo had better watch out. The first trading session of 2025 sees European stocks advance slightly, while Wall Street shrivels, a trend is launched, which lasts more or less 24 hours. Guess who takes charge on Friday? But yes, this good tech watch, led by the BATMAANs because who says new year says new acronym. Forget the FAANGs or the Magnificent 7, from now on we will say BATMAANs (Broadcom, Apple, Tesla, Meta, Amazon, Alphabet, Netflix). It is mainly Nvidia (NVDA +4.73%) and Tesla (TSLA +8.3%) which are leading the way on Friday, semiconductors are not left out and the SPX podium of the day is made up of discretionary consumption , tech and real estate. Note that the SPX and the NDX put an end to a series of 5 consecutive sessions of declines. Only Apple (AAPL -0.23%) is declining among the ten largest market capitalizations in the United States. In this context, the market cannot decline because the weighting of these behemoths is so significant.
The stock market players seem to be in TINA mode again (There Is No Alternative… but stocks), they also seem to be superbly ignoring the behavior of the bond market, which is behaving like Jiminy Cricket, this good conscience as annoying as possible, which is trying to remind everyone that the Fed is not finished with its fight against inflation, which implies fewer rate cuts than expected/desired by euphoric bulls until recently. The US 10-year yield is trading at 4.62% this morning, a rather high level, its next resistance is at 4.73% (top of April 25). This behavior reflects the expectations of the Fed Funds market which does not predict any rate cut by the Federal Reserve at its next meeting scheduled for January 29, or thereafter. The market is reduced to vaguely hoping for two cuts of 25 basis points each in the second half of this year. We also keep in mind the return of Donald Trump to business, scheduled for January 20, with his inflationary policy, the market must also go through this, while looking closely at what is happening in Washington DC, a government shutdown at the mid-January due to lack of money in the coffers cannot be ruled out, Janet Yellen herself says.
The Fed’s fight against inflation is not over and there is still work to do to reach the 2% target, two policymakers say. Prices remain “uncomfortably above our target,” says Mary Daly, head of the San Francisco Fed, a sentiment shared by Adriana Kugler, former chief economist of the United States Department of Labor.
Let’s look at the clues a little closer. The upward trend of the SPX is intact, however note that its 50 days trail at 5944 points against a Friday close at 5942 pts. The equally weighted S&P500 index (SPW) has broken its upward trend for its part, to be continued, its next resistance is located at 7210 pts against 7145 points Friday evening. On the other hand, technical blue sky for the Nasdaq100 (NDX), what surprise you might say…, which remains firmly anchored in its upward trend, recently rebounded from its 50 days (it is right at 21,000 points) and closed at 21,326 pts Friday without moving into overbought territory. In Europe the Stoxx Europe 600 index (SXXP) is looking gloomy technically, it has been moving in a horizontal range since May, while in Switzerland the SMI is still suffering from its death cross observed on December 12, closing Friday at 11 ‘624 points, next support at 11,430 pts. Finally, note that the volatility of the SPX fell by 10% on Friday, the VIX returned to 16.13 pts, its 200 days moved to 16.12 points.
A word on Friday’s European stock market session, which once again puts France in the spotlight, the CAC40 lost 1.51% against -0.94% at the Eurostoxx50 and +0.2% at the SMI. Paris is once again suffering from the weakness of the luxury sector, the fault of the Reuters agency which speaks of empty stores and sluggish sales in Hainan, the Chinese Duty Free island. A reminder of the dependence of this sector on China, was it necessary? The good news is that it works both ways; the day the Chinese consumer makes a comeback, it will be necessary to be positioned in luxury. But hey…for the moment we are more in “sister Anne” mode.
On the currency front, the dollar remains strong, the EUR/USD pair is trading this morning at 1.0339. Gold is trading at $2,629 per ounce, down slightly. It is complicated for the yellow metal to move upwards when the greenback is in demand and bond yields are rising. Oil is starting the year well, a barrel of WTI Light Crude rises to $73.68, the demand context is favorable in the United States, a cold spell is expected from the Arctic. At the same time, American supply could be impacted, particularly in Texas. The price of natural gas is increasing sharply in Europe, due to the expiration of a contract between Russia and Ukraine to transport Russian gas via Ukraine.
Justin Trudeau is expected to announce his resignation as leader of the Liberal Party of Canada today, according to press reports. Lawmakers are scheduled to hold a meeting of their parliamentary group on Wednesday. This would trigger a party leadership contest, the winner of which would become prime minister. The Canadian dollar benefits from this.
Italy is in talks with Elon Musk’s SpaceX over a 1.5 billion euro deal to provide encrypted telecommunications to the government over a five-year period, according to Bloomberg. Negotiations appeared to be moving forward after Prime Minister Giorgia Meloni met with Donald Trump at Mar-a-Lago.
Lord Elon Vader-Musk abruptly turns against Nigel Farage, saying the party needs a new leader. This about-face comes after Mr Farage distanced himself from Mr Musk’s opinions.
The Caixin PMI services index in China, published last night, is more robust than expected in December and strengthens its expansion. This is a positive point while the manufacturing industry remains in difficulty. At the same time, the Chinese central bank is discussing measures to support technological innovation and consumers.
On today’s macroeconomic menu, the latest services PMI indicators, the first estimate of German inflation for December (2:00 p.m.) and orders for durable goods in the United States (4:00 p.m.).
UBS has appointed an independent ombudsman to investigate Nazi-linked accounts at Credit Suisse. Rheinmetall creates a joint venture in Lithuania for a project to build a munitions factory. Volkswagen and Xpeng are strengthening their collaboration by working together to develop ultra-fast charging networks for electric vehicles in China. Microsoft will have invested $80 billion in AI infrastructure by the end of 2025. General Motors, Ford and Toyota saw their sales increase in the United States in 2024. Nippon Steel plans to sue the veto of the White House on the purchase of United States Steel. Foxconn, Apple’s largest iPhone assembler, reported that its fourth-quarter revenue rose 15.2 percent to a record.
This night and this morning in Asia, the indices fell with the exception of Seoul, which increased by 1.91%. Tokyo lost 1.47% at the bell, Hong Kong lost 0.36%, Shanghai fell 0.14% and the Nifty50 fell 1.41%. The future SPX rose by 14 points and Europe opened up 0.8%.
Today is Epiphany, on this occasion the stock markets will remain closed in Finland, Greece, Sweden and Poland.
