December 24th Financial News

Consumer mood remains above the long-term average

The Czech consumer confidence indicator shed 1.2 points to 100.4 in December, remaining just above its long-term average. The business confidence indicator decreased by 0.4 points to 96.9 in the same month, with the country's underperforming industry proving the main drag. Both indicators came in below market expectations.

The share of consumers expecting the overall economic situation in Czechia to worsen over the next 12 months has increased slightly, and the proportion of consumers who believe that the current period is not appropriate for large purchases has increased. In contrast, the number of households assessing their current financial situation as worse than in the previous year fell slightly.

When looking at the business domain, confidence picked up again in the service sector (+1.5 points) and slightly in trade (+0.4 points). Meanwhile, the mood in industry dropped by 2.4 points to 88.5 in December, setting a clear downward trend. Confidence in the construction sector remained unchanged at an elevated level, reflecting the recent upswing in demand for residential property.

Services continue to gain; the industry loses out

Source: CZSO, Macrobond

Overall, the December survey corrected the previous month's uptick for both consumers and businesses. Consumers expressed increased concerns about the economic outlook. The lousy mood in industry relates to the havoc in the European automotive sector and the continued industrial misery in Germany. Indeed, these are challenging conditions for the future performance of the Czech economy. Meanwhile, service providers see better times ahead, which may foster price inertia in this segment.

No fundamental turnaround in sight

The dichotomy between a well-performing consumer and an underperforming industry is set to continue. With Czech industry closely linked to that of Germany, this recent weakness is likely to persist given that barriers to Europe's economic performance are predominately of a structural nature. It seems that leaders in Europe do not perceive such a peculiar situation as a pressing issue, and we've seen quite some resistance to the adoption of growth-oriented adjustments to regulations, policies, and investment incentives.

For now, no fundamental turnaround in industry can be seen on the horizon. We're reminded of the classical maxim Fiat iustitia, et pereat mundus – let justice be done, though the world may perish. Or in this case, let the world perish but preserve the regulations. A tough choice, perhaps.

Where does it stop?

Source: Macrobond

TOKYO (Dec 24): Oil prices were up on Tuesday in thin trade ahead of the Christmas Day holiday, with prices supported by US economic data and rising oil demand in India, the world's third-largest oil importer.

Brent crude futures were up 33 cents, or 0.45%, to US$72.95 a barrel and US West Texas Intermediate crude futures rose 29 cents, or 0.42%, to US$69.53 a barrel at 0114 GMT.

New orders for key US-manufactured capital goods surged in November amid strong demand for machinery, while new home sales also rebounded in a sign that the US economy is on a solid footing towards the year-end.

The US is the world's top oil consumer.

In the shorter term, traders are looking for indications of US demand from the crude oil and fuel stockpiles data due from the American Petroleum Institute industry group later on Tuesday.

Analysts polled by Reuters estimated on average that crude inventories fell by about two million barrels in the week to Dec 20 in a sign of healthy demand. The Energy Information Administration is due to release its data on Friday.

WTI crude oil finished the last three sessions just below the US$69.50 level as volatility seeped out of the market ahead of the holiday period, IG market analyst Tony Sycamore said.

"As such, I suspect we remain pinned in a narrow range either side of US$69.50, perhaps until Wall Street re-opens on the 27th," he said by email.

Meanwhile crude oil imports by India, the world's third-largest oil importer, rose 2.6% year-on-year to 19.07 million metric tons in November, government data showed, on the back of strong demand amid rising economic and travel activity.

In the Middle East, a fresh bid by mediators Egypt, Qatar and the US to end the fighting between Israel and Hamas has gained momentum this month and gaps between the parties narrowed, according to Israeli and Palestinian officials' remarks, yet crucial differences have yet to be resolved.

Source: Theedgemarkets

The Bottom Line:

The GDP report shows Canadian economic growth accelerated in October from September; however, the early estimate points to a contraction (-0.1%) in November, consistent with preliminary reports showing softer wholesale sales, declining manufacturing volumes, and flat retail sales.

The Bank of Canada’s December messaging pointed to a more gradual approach on rate cuts going forward than the 50 bp reductions in each of October and December, but we continue to expect that interest rate cuts down to a net stimulative 2% overnight rate (below the BoC’s estimated neutral range of 2.25% to 3.25%) will be warranted to allow economic growth to strengthen and prevent inflation from falling significantly below the central bank’s 2% target.

The Details:

Canadian GDP expanded 0.3% in October following a revised 0.2% increase in September (upgraded from an initial reading of 0.08% to 0.24%). October’s growth exceeded Statistics Canada’s preliminary estimate of 0.1%.

The advance estimate pointed to a 0.1% contraction in November. These preliminary figures are typically subject to significant revision, but the pullback in November is consistent with softer looking wholesale and manufacturing sale advance estimates for the month, and a pullback in consumer spending in our own tracking of card transactions.

At current trajectory, Q4 GDP growth appears to be tracking closer to, but still slightly below, the Bank of Canada’s 2% forecast.

The goods-producing sector registered its strongest performance since January 2023, expanding 0.9% in October. This growth was primarily driven by the mining, quarrying, and oil and gas extraction sector, which surged 2.4%.

Other goods sectors also showed improvement. Mining support activities rose 1.3% in October, partially reversing declines from the previous two months. Manufacturing output increased 0.3%, breaking a four-month streak of weak readings. StatsCan reported that non-durable manufacturing posted particularly strong growth (+1.2%), boosted by petroleum refineries resuming operations following scheduled maintenance.

Growth in the services sector moderated to 0.1% from September’s 0.4% pace. While retail trade output remained flat, wholesale trade advanced 0.5%. The real estate sector maintained its strong momentum (+6.3%), supported by robust home resale activity during the month.

Source: ACTIONFOREX

Market Picture

The crypto market retreated last week and is in no hurry to recover, remaining at $3.31 trillion, roughly where it was 30 days ago. The sharp dip below $3.2 trillion was also quickly bought back, but a full-blown rebound is yet to be seen. Markets continue to digest the Fed’s tougher tone, reinforced by the accumulated urge to lock in profits after a strong year.

The Crypto Market Sentiment Index is in neutral territory, compared to the shuttling between fear and extreme fear in US stocks.

Bitcoin is trading around $95.5K, receiving support near the 50-day moving average on Friday and Monday. While we expected to see the market decline here, it’s too early to say this is the end of the correction. Further declines in the stock market, of which there are many in Bitcoin and Ethereum, could trigger institutional investors, launching a deeper pullback.

Reduced holiday liquidity has the potential to amplify this amplitude. In a potential shock scenario, they see a dip into the $70K area. However, there are more chances that a pullback to $90K in the next couple of weeks will be attractive enough for buyers to stop the sell-off.

News Background

Matrixport expects that the first cryptocurrency could see a strong start in early 2025. Messari predicts that Bitcoin and real-world tokenised assets (RWAs) will be the focus of investor attention in 2025.

The average duration between Bitcoin’s first and last all-time high (ATH) in a cycle is 318 days, K33 Research noted. If the pattern repeats, the next global peak will be reached on 17 January, before the inauguration of US President-elect Donald Trump. Analysts noted an increase in coins available on the market to the highest since 2021 (22% of supply), driven by Mt. Gox proceeds and government sales.

The US SEC approved the first spot ETFs combining Bitcoin and Ethereum, issued by Hashdex and Franklin Templeton.

El Salvador will expand BTC purchases in defiance of the IMF deal. El Salvador’s National Bitcoin Office said the country will continue to buy the first cryptocurrency and possibly at an ‘accelerated pace’.

US mining company MARA has launched a second project in Finland to use the heat generated by cryptocurrency mining for home heating. With this latest initiative, 80,000 residents of the country will be provided with heat generated by mining equipment.