The major U.S. stock index futures are indicating a positive opening for Friday, as markets likely rebound following a subdued and mostly negative session yesterday.
Early enthusiasm is anticipated due to a continued decline in treasury yields. The yield on the benchmark ten-year note is falling for the fourth consecutive day, reversing its previous peak closing level in over a year observed on Monday.
This yield retreat is largely fueled by the recent U.S. inflation data, which has bolstered optimism regarding the future trajectory of interest rates. Echoing this sentiment, Federal Reserve Governor Christopher Waller shared with CNBC that multiple interest rate cuts are possible this year, contingent on inflation easing as anticipated.
"As long as the data concerning inflation remains favorable or stays on its current path, I foresee rate cuts occurring sooner than what the markets currently price in," Waller remarked during an interview with Sara Eisen on CNBC's "Squawk on the Street" on Thursday. Waller emphasized the Fed's rate-cutting decisions would hinge on forthcoming data, potentially leading to three or four cuts if inflation shows substantial progress, or fewer if it proves resilient.
Further boosting market sentiment is the anticipated positive impact of President-elect Donald Trump's policies, who is set for his second inauguration on Monday. Stocks initially surged following Trump's election last November, driven by expectations of pro-business policies, although some concerns persist about the effects of proposed tariffs.
Despite Wednesday's significant rally, trading on Thursday was relatively lackluster. Major indices showed fluctuations before closing in the red. The tech-centric Nasdaq dropped 172.94 points or 0.9 percent to 19,338.29, partly due to a decline in Apple (AAPL) shares. The Dow declined 68.42 points or 0.2 percent to 43,153.13, while the S&P 500 decreased by 12.57 points or 0.2 percent to 5,937.34.
The market's mixed performance reflected a momentary pause as traders assessed the short-term market outlook following Wednesday's strong gains, the largest daily percentage increases in over two months. Traders also considered various U.S. economic data, including weekly jobless claims, retail sales, and import prices.
The Labor Department reported a rise in initial jobless claims to 217,000 for the week ending January 11th, a climb of 14,000 from the adjusted 203,000 of the previous week. Economists had anticipated a rise to 210,000. This was a larger increase than expected after jobless claims had previously hit a low of 200,000 in the week ending February 17, 2024.
The Commerce Department noted that retail sales in December increased by less than projected. Sales grew by 0.4 percent compared to an upwardly revised increase of 0.8 percent in November, while a 0.6 percent rise had been expected.
Notwithstanding, core retail sales—which exclude automobiles, gasoline, building materials, and food services—saw a December increase of 0.7 percent, following a rise of 0.4 percent in November. "December's retail sales were buoyed by higher gasoline station sales, yet underlying broad-based growth was robust," commented Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics.
Following an important consumer price inflation report on Thursday, the Labor Department also disclosed that U.S. import prices edged up by 0.1 percent in December, aligning with increases in November and October as well as market expectations.
"December's modest import price increase concludes an optimistic week of inflation data and supports the Fed's path towards rate cuts in the first half of this year," stated Matthew Martin, Senior U.S. Economist at Oxford Economics. He further indicated that while rising global oil prices might cause some fluctuation in fuel import prices, the Fed is likely to disregard such temporary inflation sources.
Overall, the broader markets exhibited muted activity, with most major sectors ending the day either slightly up or slightly down.The utilities and commercial real estate sectors, both sensitive to interest rate changes, demonstrated significant resilience, as evidenced by the Dow Jones Utility Index and the Dow Jones U.S. Real Estate Index, which rose by 2.3% and 2.2%, respectively. Meanwhile, brokerage stocks further bolstered their impressive gains from the previous day. This upward momentum propelled the NYSE Arca Broker/Dealer Index to ascend by 1.7%, marking its highest closing position in over a month.
On the same day, natural gas and pharmaceutical stocks exhibited commendable strength, although there were some pockets of weakness, particularly in the computer hardware and gold sectors.
**Commodities and Currency Markets**
Crude oil futures have declined by $0.42 to $78.26 per barrel, following a previous drop of $1.36 to $78.68 per barrel. Gold futures, after a surge of $33.10 reaching $2,750.90 per ounce in the prior session, are now retreating by $13.80 to settle at $2,737.10 per ounce.
In the currency markets, the U.S. dollar is currently trading at 155.59 yen, up from 155.16 yen at the closing of New York's trading on Thursday. In relation to the euro, the dollar stands at $1.0294, slightly down from the prior day’s $1.0301.
**Asian Markets**
In Asia, stock performance on Friday was mixed. Concerns over potential tariffs imposed by Trump counterbalanced optimistic Chinese data and comments by Federal Reserve Governor Christopher Waller, suggesting interest rate cuts may occur in early 2025 if favorable inflation trends persist.
The U.S. dollar experienced a weakening in Asian markets, while oil and gold are poised for weekly growth. China's Shanghai Composite Index managed to reverse early losses, closing 0.2% higher at 3,241.82, as fourth-quarter GDP figures surpassed expectations, registering a 5.4% year-on-year increase, up from 4.6% in the previous quarter. For the entire year of 2024, the Chinese economy expanded by 5.0%, aligning with official growth targets. Additionally, industrial production increased by 6.2% in December, surpassing the anticipated 5.4% growth. Retail sales saw a 3.7% year-on-year rise, outperforming forecasts of 3.5%. Fixed asset investment in 2024 rose by 3.2% year-on-year, slightly below the 3.3% expectation, while property investment declined by 10.6% compared to the previous year. The unemployment rate edged up to 5.1% in December from 5.0% in November.
Hong Kong’s Hang Seng Index advanced by 0.3% to 19,584.06. However, shares of China Vanke plummeted by 3.6% following state media reports of the detention of CEO Zhu Jiusheng.
In Japan, markets experienced minor declines as the yen appreciated amid speculation of a Bank of Japan rate hike in the upcoming week. BoJ Governor Kazuo Ueda recently indicated that such a hike could be feasible if economic and pricing conditions continue to improve. The Nikkei 225 Index fell by 0.3% to 38,451.46, with the broader Topix Index also down by 0.3% at 2,679.42. Nintendo, a major player in the video game industry, saw its shares decline by 4.3% as anticipation for their new console failed to meet expectations.
South Korean stocks closed slightly lower following the Bank of Korea’s unexpected decision to maintain its policy interest rate at 3.0%, contrary to the widely anticipated 25-basis-point cut. Consequently, the Kospi fell by 0.2% to 2,523.55. However, SK Hynix benefitted, climbing 2.1% after Taiwan Semiconductor Manufacturing exceeded analyst expectations for the fourth quarter, bolstered by strong sales of AI chips.
Australian markets ended on a down note amid cautious sentiment leading up to a holiday weekend in the U.S. and the impending inauguration of President-elect Donald Trump. The S&P/ASX 200 Index dipped by 0.2% to 8,310.40, primarily dragged down by banks, while the All Ordinaries Index edged slightly lower by 0.1% to 8,557.40. Rio Tinto shares decreased by 0.7% following reports of previous merger discussions with Glencore.
In New Zealand, the S&P/NZX-50 Index rallied by 1% to 13,130.43, driven by the robust performance of Fisher and Paykel Healthcare.
**European Markets**
European stock markets continued their ascent on Friday, extending gains from the previous session when they reached a one-month high. This uptrend was largely fueled by strong earnings from Cartier owner Richemont and renewed optimism regarding potential rate cuts. The FTSE 100 Index in the U.K. rose by 1.4%, while both France's CAC 40 Index and Germany's DAX Index increased by 1.1%.
Federal Reserve Governor Christopher Waller mentioned in an interview with CNBC that the U.S. central bank may implement multiple interest rate cuts this year if inflation trends persist favorably. He indicated the possibility of three or four quarter-point rate reductions, contingent on continued supportive data. Should the data not cooperate, adjustments could potentially be limited to one or two rate cuts.In a recent address, ECB Governing Council member Yannis Stournaras indicated that the European Central Bank should continue its current strategy by implementing a series of interest rate reductions in upcoming meetings. This statement aligns with market predictions, which anticipate a total reduction of 100 basis points in ECB rates this year.
The British pound saw a decrease in its value against major currencies, following unexpected data revealing a decline in British retail sales for December. This drop was primarily attributed to reduced sales in food stores. Retail sales volume fell by 0.3% in December on a monthly basis, opposing the revised 0.1% increase recorded in November and contradicting the predicted rise of 0.4%. Annually, retail sales increased by 3.6%, falling short of the expected 4.2% growth. This data strengthens the likelihood of a Bank of England interest rate cut in the near future.
In corporate developments, Glencore and Rio Tinto shares surged following reports that the two companies engaged in discussions last year regarding a potential merger of parts or all of their operations. Additionally, AstraZeneca experienced gains as the pharmaceutical company announced that its drug, Calquence (acalabrutinib), received FDA approval for the treatment of previously untreated mantle cell lymphoma (MCL) in adults ineligible for stem cell transplants.
**U.S. Economic Update**
A report from the Commerce Department revealed a significant increase in new residential construction in the U.S. for December, exceeding expectations. Housing starts escalated by 15.8%, reaching an annual rate of 1.499 million, after a decline of 3.7% in November to a revised rate of 1.294 million. Economists had projected a smaller increase of 2.4%, reaching an annual rate of 1.320 million from the previously reported 1.289 million.
However, the report also indicated a decrease in building permits, which fell by 0.7% to an annual rate of 1.483 million in December, following a 5.2% rise to a revised rate of 1.493 million in November. Building permits, a precursor to future housing demand, were anticipated to drop by 3.0%, resulting in an annual rate of 1.460 million from the initially reported 1.505 million.
Later at 9:15 am ET, the Federal Reserve is set to release its December industrial production report. Expectations are that industrial production will increase by 0.3%, following a slight 0.1% decrease in November.
The material has been provided by InstaForex Company - www.instaforex.com
Early enthusiasm is anticipated due to a continued decline in treasury yields. The yield on the benchmark ten-year note is falling for the fourth consecutive day, reversing its previous peak closing level in over a year observed on Monday.
This yield retreat is largely fueled by the recent U.S. inflation data, which has bolstered optimism regarding the future trajectory of interest rates. Echoing this sentiment, Federal Reserve Governor Christopher Waller shared with CNBC that multiple interest rate cuts are possible this year, contingent on inflation easing as anticipated.
"As long as the data concerning inflation remains favorable or stays on its current path, I foresee rate cuts occurring sooner than what the markets currently price in," Waller remarked during an interview with Sara Eisen on CNBC's "Squawk on the Street" on Thursday. Waller emphasized the Fed's rate-cutting decisions would hinge on forthcoming data, potentially leading to three or four cuts if inflation shows substantial progress, or fewer if it proves resilient.
Further boosting market sentiment is the anticipated positive impact of President-elect Donald Trump's policies, who is set for his second inauguration on Monday. Stocks initially surged following Trump's election last November, driven by expectations of pro-business policies, although some concerns persist about the effects of proposed tariffs.
Despite Wednesday's significant rally, trading on Thursday was relatively lackluster. Major indices showed fluctuations before closing in the red. The tech-centric Nasdaq dropped 172.94 points or 0.9 percent to 19,338.29, partly due to a decline in Apple (AAPL) shares. The Dow declined 68.42 points or 0.2 percent to 43,153.13, while the S&P 500 decreased by 12.57 points or 0.2 percent to 5,937.34.
The market's mixed performance reflected a momentary pause as traders assessed the short-term market outlook following Wednesday's strong gains, the largest daily percentage increases in over two months. Traders also considered various U.S. economic data, including weekly jobless claims, retail sales, and import prices.
The Labor Department reported a rise in initial jobless claims to 217,000 for the week ending January 11th, a climb of 14,000 from the adjusted 203,000 of the previous week. Economists had anticipated a rise to 210,000. This was a larger increase than expected after jobless claims had previously hit a low of 200,000 in the week ending February 17, 2024.
The Commerce Department noted that retail sales in December increased by less than projected. Sales grew by 0.4 percent compared to an upwardly revised increase of 0.8 percent in November, while a 0.6 percent rise had been expected.
Notwithstanding, core retail sales—which exclude automobiles, gasoline, building materials, and food services—saw a December increase of 0.7 percent, following a rise of 0.4 percent in November. "December's retail sales were buoyed by higher gasoline station sales, yet underlying broad-based growth was robust," commented Michael Pearce, Deputy Chief U.S. Economist at Oxford Economics.
Following an important consumer price inflation report on Thursday, the Labor Department also disclosed that U.S. import prices edged up by 0.1 percent in December, aligning with increases in November and October as well as market expectations.
"December's modest import price increase concludes an optimistic week of inflation data and supports the Fed's path towards rate cuts in the first half of this year," stated Matthew Martin, Senior U.S. Economist at Oxford Economics. He further indicated that while rising global oil prices might cause some fluctuation in fuel import prices, the Fed is likely to disregard such temporary inflation sources.
Overall, the broader markets exhibited muted activity, with most major sectors ending the day either slightly up or slightly down.The utilities and commercial real estate sectors, both sensitive to interest rate changes, demonstrated significant resilience, as evidenced by the Dow Jones Utility Index and the Dow Jones U.S. Real Estate Index, which rose by 2.3% and 2.2%, respectively. Meanwhile, brokerage stocks further bolstered their impressive gains from the previous day. This upward momentum propelled the NYSE Arca Broker/Dealer Index to ascend by 1.7%, marking its highest closing position in over a month.
On the same day, natural gas and pharmaceutical stocks exhibited commendable strength, although there were some pockets of weakness, particularly in the computer hardware and gold sectors.
**Commodities and Currency Markets**
Crude oil futures have declined by $0.42 to $78.26 per barrel, following a previous drop of $1.36 to $78.68 per barrel. Gold futures, after a surge of $33.10 reaching $2,750.90 per ounce in the prior session, are now retreating by $13.80 to settle at $2,737.10 per ounce.
In the currency markets, the U.S. dollar is currently trading at 155.59 yen, up from 155.16 yen at the closing of New York's trading on Thursday. In relation to the euro, the dollar stands at $1.0294, slightly down from the prior day’s $1.0301.
**Asian Markets**
In Asia, stock performance on Friday was mixed. Concerns over potential tariffs imposed by Trump counterbalanced optimistic Chinese data and comments by Federal Reserve Governor Christopher Waller, suggesting interest rate cuts may occur in early 2025 if favorable inflation trends persist.
The U.S. dollar experienced a weakening in Asian markets, while oil and gold are poised for weekly growth. China's Shanghai Composite Index managed to reverse early losses, closing 0.2% higher at 3,241.82, as fourth-quarter GDP figures surpassed expectations, registering a 5.4% year-on-year increase, up from 4.6% in the previous quarter. For the entire year of 2024, the Chinese economy expanded by 5.0%, aligning with official growth targets. Additionally, industrial production increased by 6.2% in December, surpassing the anticipated 5.4% growth. Retail sales saw a 3.7% year-on-year rise, outperforming forecasts of 3.5%. Fixed asset investment in 2024 rose by 3.2% year-on-year, slightly below the 3.3% expectation, while property investment declined by 10.6% compared to the previous year. The unemployment rate edged up to 5.1% in December from 5.0% in November.
Hong Kong’s Hang Seng Index advanced by 0.3% to 19,584.06. However, shares of China Vanke plummeted by 3.6% following state media reports of the detention of CEO Zhu Jiusheng.
In Japan, markets experienced minor declines as the yen appreciated amid speculation of a Bank of Japan rate hike in the upcoming week. BoJ Governor Kazuo Ueda recently indicated that such a hike could be feasible if economic and pricing conditions continue to improve. The Nikkei 225 Index fell by 0.3% to 38,451.46, with the broader Topix Index also down by 0.3% at 2,679.42. Nintendo, a major player in the video game industry, saw its shares decline by 4.3% as anticipation for their new console failed to meet expectations.
South Korean stocks closed slightly lower following the Bank of Korea’s unexpected decision to maintain its policy interest rate at 3.0%, contrary to the widely anticipated 25-basis-point cut. Consequently, the Kospi fell by 0.2% to 2,523.55. However, SK Hynix benefitted, climbing 2.1% after Taiwan Semiconductor Manufacturing exceeded analyst expectations for the fourth quarter, bolstered by strong sales of AI chips.
Australian markets ended on a down note amid cautious sentiment leading up to a holiday weekend in the U.S. and the impending inauguration of President-elect Donald Trump. The S&P/ASX 200 Index dipped by 0.2% to 8,310.40, primarily dragged down by banks, while the All Ordinaries Index edged slightly lower by 0.1% to 8,557.40. Rio Tinto shares decreased by 0.7% following reports of previous merger discussions with Glencore.
In New Zealand, the S&P/NZX-50 Index rallied by 1% to 13,130.43, driven by the robust performance of Fisher and Paykel Healthcare.
**European Markets**
European stock markets continued their ascent on Friday, extending gains from the previous session when they reached a one-month high. This uptrend was largely fueled by strong earnings from Cartier owner Richemont and renewed optimism regarding potential rate cuts. The FTSE 100 Index in the U.K. rose by 1.4%, while both France's CAC 40 Index and Germany's DAX Index increased by 1.1%.
Federal Reserve Governor Christopher Waller mentioned in an interview with CNBC that the U.S. central bank may implement multiple interest rate cuts this year if inflation trends persist favorably. He indicated the possibility of three or four quarter-point rate reductions, contingent on continued supportive data. Should the data not cooperate, adjustments could potentially be limited to one or two rate cuts.In a recent address, ECB Governing Council member Yannis Stournaras indicated that the European Central Bank should continue its current strategy by implementing a series of interest rate reductions in upcoming meetings. This statement aligns with market predictions, which anticipate a total reduction of 100 basis points in ECB rates this year.
The British pound saw a decrease in its value against major currencies, following unexpected data revealing a decline in British retail sales for December. This drop was primarily attributed to reduced sales in food stores. Retail sales volume fell by 0.3% in December on a monthly basis, opposing the revised 0.1% increase recorded in November and contradicting the predicted rise of 0.4%. Annually, retail sales increased by 3.6%, falling short of the expected 4.2% growth. This data strengthens the likelihood of a Bank of England interest rate cut in the near future.
In corporate developments, Glencore and Rio Tinto shares surged following reports that the two companies engaged in discussions last year regarding a potential merger of parts or all of their operations. Additionally, AstraZeneca experienced gains as the pharmaceutical company announced that its drug, Calquence (acalabrutinib), received FDA approval for the treatment of previously untreated mantle cell lymphoma (MCL) in adults ineligible for stem cell transplants.
**U.S. Economic Update**
A report from the Commerce Department revealed a significant increase in new residential construction in the U.S. for December, exceeding expectations. Housing starts escalated by 15.8%, reaching an annual rate of 1.499 million, after a decline of 3.7% in November to a revised rate of 1.294 million. Economists had projected a smaller increase of 2.4%, reaching an annual rate of 1.320 million from the previously reported 1.289 million.
However, the report also indicated a decrease in building permits, which fell by 0.7% to an annual rate of 1.483 million in December, following a 5.2% rise to a revised rate of 1.493 million in November. Building permits, a precursor to future housing demand, were anticipated to drop by 3.0%, resulting in an annual rate of 1.460 million from the initially reported 1.505 million.
Later at 9:15 am ET, the Federal Reserve is set to release its December industrial production report. Expectations are that industrial production will increase by 0.3%, following a slight 0.1% decrease in November.
The material has been provided by InstaForex Company - www.instaforex.com
