January 17th Financial News

Unlike a team in need of a rebuilding year, the U.S. economy did not disappoint in 2024. Economic activity was robust, job creation proceeded and inflation fell. Investors saw asset appreciation, while workers’ wage gains exceeded inflation. Momentum was strong as 2025 began; the stage is set for the nation’s winning streak to continue.

Washington is in the midst of a change in leadership. The new administration will prioritize an agenda of domestic growth and deregulation, adding to momentum. Changes to immigration and trade policies may raise risks to the goal of taming inflation. These elements reinforce our expectation of a more cautious monetary policy posture.

Following are our thoughts on recent data and developments.

The U.S. labor market finished the year on a high note with a broad-based increase of 256,000 jobs in December; the unemployment rate fell one-tenth to 4.1%. Average hourly earnings declined slightly to 3.9% year over year, still higher than pre-pandemic norms and frustrating hopes of services disinflation.

Details of other labor data show mixed signals. Weekly continuing jobless claims have stayed elevated, while the rates of both hiring and quitting are holding low. Fewer employees are leaving their jobs, and fewer employers are terminating their workers. However, fewer job seekers are finding work. We expect improving business sentiment to support a return to more hiring.

Inflation’s improvement has stalled. The November consumer price index (CPI) rose to a 2.7% annual gain, or 3.3% on a core basis (excluding food and energy). The deflator on personal consumption expenditures, the basis for the Federal Reserve’s 2% target, also showed a discouraging step up to 2.4% headline and 2.8% core over the past twelve months. While we do not see a risk of rapid reflation, these rates are too high for comfort.

The December meeting of the Federal Open Market Committee (FOMC) delivered a rate cut that we expect to be the last easing before a prolonged pause. The cut was accompanied by a quarterly Summary of Economic Projections showing a consensus of much slower progress toward the 2% inflation target, with no participants seeing a return to 2% next year. After a full percentage point of reduction in 2024, the median committee member now expects only 50 basis points of overnight cuts in 2025.

In his press conference, Chair Powell admitted that policy uncertainty surrounding the change in presidential administrations did arise in the committee’s discussion. While it would be speculative to change course based on future policies, the committee is positioning for higher inflation risks ahead by keeping rates higher for longer.

More optimistically, the U.S. economy is not in urgent need of support through easing, with employment and activity holding up well. Inflation and unemployment will remain the primary drivers of rate decisions, and neither supports the need for further easing at this time. If the FOMC needs policy clarity, it will need to be patient for several months while new policies are finalized. We have adjusted our forecast for the Fed to make three cuts in 2025, starting in June.

U.S. Treasury yields have entered a new, higher range, which we expect to persist. Higher short-term yields reflect the Fed’s more cautious signaling, while long-end yields reflect greater term and risk premia for the highly indebted nation. Higher yields have brought the Treasury yield curve out of inversion after more than two years.

Front-loaded import orders to capitalize on the current trade environment will increase the trade deficit and weigh on gross domestic product (GDP) in the fourth quarter, though inventory accumulation will be accretive to economic growth estimates. We expect the final demand components of GDP (consumption and business investment) to continue their gains despite economic noise.

Bitcoin “likely” faces rejection at a key level even if it reclaims $100,000, new analysis says.

In an X post on Jan. 16, trading resource Stockmoney Lizards warned that BTC/USD has weeks of rangebound trading left.

Bitcoin bounced firmly from two-month lows this week, but for Stockmoney Lizards, bulls are far from out of the woods.

Examining short-term BTC price action, it concluded that despite fresh taps of the $100,000 mark, the real resistance zone slightly higher up was in no mood to shift.

“BTC is entering a resistance zone (upper channel level),” it wrote alongside the 4-hour chart.

“Fibs are drawn here and should guide future short-term PA: 1. 91 -92k is the high volume lower support level (1.618 Fib Extension) 2. If BTC moves higher, the previous high at 102k will be the hardest nut to crack.”

BTC/USD circled $99,000 at the time of writing, per data from Cointelegraph Markets Pro and TradingView, still buoyed by positive US inflation reports.

Despite the upcoming Presidental inauguration, however, Stockmoney Lizards saw little chance of a genuine bull market comeback in January.

“Conclusion: A rejection from here is likely, we expect BTC to continue trading in the 90 - 100k range in the next weeks,” it summarized.

Others saw similar difficulties with $102,000, among them the popular X trading account currently known as BigMike7335.

“$BTC must flip $102k into support to remove us from the threat of the triangle IMO,” it stated about 12-hour timeframes alongside a chart with various trading indicators.

More optimistic takes, meanwhile, focused on the invalidation of a bearish head and shoulders uptrend reversal pattern on the daily chart.

“And just like that, head and shoulder breakdown sellers completely and utterly rekt,” fellow trader Bluntz announced to X followers.

For Tony “The Bull” Severino, the pattern had likewise become irrelevant.

“How many right shoulders need to fail before the market realizes this isn't a head and shoulders top in Bitcoin?” he queried.

The Eurozone economy stagnated in 2023, in response to a spike in energy prices and inflation, and as European Central Bank monetary policy moved into restrictive territory. The region’s economy has since experienced a recovery starting from early 2024, although that rebound has been uneven—a trend we think is likely to continue in 2025 given distinctly mixed fundamentals and as sentiment surveys remain downbeat.

Among the brighter pieces of recent economic news, Eurozone Q3 GDP grew 0.4% quarter-over-quarter, lead by a 0.7% gain in consumer spending. There are also indications that consumer activity may have continued expanding during the fourth quarter, with real retail sales for the October-November period up 0.4% compared to their third quarter average. However, while consumer fundamentals remain favorable overall (and certainly more so than for the corporate sector), there are signs they may become less supportive as 2025 progresses.

For the latest available figures (Q3-2024), growth in real employee compensation (3.1% year-over-year) and household disposable income (2.3%) outpaced growth in consumer spending (1.0%). While those favorable income trends would usually be considered supportive for the consumer outlook, the European Central Bank argued in a recent Economic Bulletin article that household savings could remain high, as households aim to rebuild their “real” net wealth that has been eroded by inflation in recent years. That is consistent with the Q3 household saving rate, which fell slightly to 15.3% of disposable income, but remains noticeably above the average of 13% in the year prior to the pandemic. Finally, while employment growth has held up to date, survey data suggest a slowdown in job gains may be ahead. The European Commission’s Employment Expectations Indicator fell to 97.3 in December, a level that is historically consistent with job growth well below its current pace of 1.0% year-over-year in Q3-2024. Thus, while household fundamentals are favorable overall, they may become less supportive as 2025 progresses. Overall, we expect consumer spending will continue to advance this year. However, the combination of the potential for slower employment (and thus income) growth and continued consumer caution suggests gains in consumer expenditures may struggle to match the pace seen during the second half of 2024.

In contrast to the household sector, the outlook for the corporate sector remains more challenging. In Q3-2024, fixed investment spending rose 2.0% quarter-over-quarter, however much of that rise reflected a jump in the volatile intellectual property products component. We estimate that our measure of core ex-housing investment (which excludes both residential investment and intellectual property products) fell 1.6% quarter-over-quarter and 2.4% year-over-year. Moreover, we see reasons for investment spending to remain restrained in the quarters ahead. Net entrepreneurial income, a proxy for corporate profits, fell 4.6% year-over-year in Q3, a lack of profitability that may crimp investment spending. With manufacturing capacity utilization also at its lowest level since the pandemic, a further decline in investment spending cannot be ruled out.

In addition to these mixed fundamental factors, sentiment has slipped through the latter part of 2024, suggesting some downside risk to business investment in particular, and consumer spending to a lesser extent. Eurozone sentiment was at its most upbeat earlier in 2024, with the services PMI peaking at 53.3 in April and the manufacturing PMI peaking at 47.3 in May. Since then, however, Eurozone sentiment has followed a softening overall trend. By December the manufacturing PMI fell further into contraction territory at 45.1, while the services PMI was consistent with only modestly positive expansion at 51.6. As result, the composite (or economy-wide) PMI printed at 49.6, a level historically consistent with a stagnating economy.

Political uncertainty has weighed on sentiment to some extent, with French President Macron’s centrist ruling coalition losing legislative elections in July, and the new French Prime Minister (and government) subsequently losing a vote of no-confidence in December.

German Chancellor Scholz also lost a confidence vote late last year, with an election now scheduled for 23 February. Another factor likely weighing on sentiment is the threat of U.S. tariffs on imports from Europe. While the economic impact may be moderate—with Eurozone merchandise exports to the United States accounting for a little more than 3% of the region’s GDP—the uncertainty surrounding tariffs could certainly weigh on investment spending and employment decisions.

Given the mixed fundamental backdrop and softening sentiment, our Eurozone GDP outlook for 2025 is for growth of just 0.9%. However, considering the prevailing uncertainties, we view the risks to even this modest outlook as to the downside.

Considering the underwhelming Eurozone economic outlook, and even with some lingering inflation pressures, we expect the European Central Bank (ECB) to continue steadily along its monetary easing path through much of 2025. Eurozone headline and core inflation are running moderately above the central bank’s 2% inflation target, with January readings of 2.4% year-over-year and 2.7% year-over-year respectively. Services inflation is proving somewhat more stubborn at 4.0%. Still, with ECB policymakers expecting wage growth to slow and services inflation to ease, overall inflation is expected to converge more sustainably toward the 2% target by later in 2025.

Moreover, we expect the European Central Bank to lower its policy interest rate largely independent of how fast, or how far, the Federal Reserve eases monetary policy. ECB policymakers have said as much in recent days. Governing Council member Olli Rehn said against “the backdrop of disinflation being on track and the growth outlook having weakened it makes sense to continue rate cuts” adding the ECB “is not the 13th federal district of the Federal Reserve System, we take decisions on the basis of our mandate, which is price stability in the euro area.” Croatia’s Boris Vujcic said “we are not dependent on the Fed or any other central bank,” while Chief Economist Philip Lane said the ECB is likely to reduce rates further in order to ensure price stability and growth.

Considering the economic environment and central bank signals, we maintain our outlook for 25 bps ECB rate cuts at the January, March, April and June meetings, with a final 25 bps rate cut in September, for a terminal ECB policy rate of 1.75%. Moreover, given a growing wedge between European Central Bank and Federal Reserve policy interest rates, we expect the euro to remain on the defensive versus the greenback over the medium term. As of now, we target a long-term EUR/USD exchange rate of $0.9700.

特朗普曾威胁要对来自中国的商品征收 10% 至 60% 的关税，他将于 1 月 20 日就任美国总统。在他的第一个任期内，特朗普主要针对中国零部件。经济学家和贸易专家预测，他的下一波关税可能适用于成品。

“因此，中国对美国的最终产品出口有所增加，因为进口商的目标是抢先对消费品征收可能的关税，”汇丰银行（HSBC）驻香港的首席亚洲经济学家弗雷德里克·诺伊曼（Frederic Neumann）说。

中国贸易官员周一表示，12 月的出口飙升至创纪录水平。

中国海关总署发言人吕大良在北京举行的新闻发布会上表示，大幅上升在一定程度上反映了对贸易保护主义升级的担忧。

根据贸易数据供应商笛卡尔系统集团（Descartes Systems Group）的数据，12月美国海港处理了相当于451,000个来自中国的40英尺集装箱货物，同比增长14.5%。

根据笛卡尔的数据，与 2023 年以来，美国从中国进口的床上用品、塑料玩具、机械和其他产品增长了 15%。

OXO 厨房用具、Hydro Flask 水瓶和 Vicks 非处方药的销售商 Helen of Troy Ltd 为这一增长做出了贡献。该公司高管在上周的财报电话会议上表示，它一直在建立战略库存，以减少关税风险敞口。

“就职典礼真的是几天后。我认为一旦当选总统特朗普上台，我们将变得更加明确，“特洛伊首席执行官 Helen of Troy 在谈到美国新的关税政策时说。

工具和电气以及管道用品分销商 MSC Industrial Direct 大约有 10% 的库存来自中国。高管们上周告诉投资者，该公司正在囤积可能面临新关税风险的最受欢迎的产品，同时为美国制造的商品开展促销活动。

梳理特朗普关税风险对整体进口收益的真正影响是很困难的，因为公司密切关注贸易数据。

使分析更加复杂的是，有弹性的美国购物者一直在推动需求。一些进口商还带来了安全库存，以防止胡塞武装对苏伊士运河贸易捷径附近航运的袭击以及美国东海岸和墨西哥湾海港的劳资纠纷造成的中断。

与此同时，特朗普还威胁要对来自许多其他国家的商品征收关税，包括北美邻国墨西哥和加拿大。

货运数据分析师表示，沃尔玛是集装箱运输的最大用户，是近几个月来增加进口的零售商之一。沃尔玛没有对这一评估发表评论。

根据 S&P Global Market Intelligence 的数据，来自所有地理来源的美国进口的几类商品在第四季度都出现了显著的增长。

纺织品和服装上涨 20.7%;休闲产品，主要是玩具，增长了 15.4%;家居用品增长了 13.4%;根据标准普尔的数据，家用电器和消费电子产品分别上涨了 9.6% 和 7.9%。

标准普尔表示，家居和个人护理以及食品和饮料等必需消费品类别分别上涨了 14.2% 和 12.5%。

Element Electronics Corp 首席执行官 Michael O'Shaughnessy 表示，年底美国出现了一股市场热潮。

Element imports components, mainly from China, for its flat-screen TV assembly plant in Winnsboro, South Carolina – America’s last large-scale television production plant. It also imports finished televisions. The company built buffer stocks when dockworkers were threatening to shut the East Coast ports it uses.

Still, O’Shaughnessy said there’s a limit to how much he is willing or able to bring in.

“There’s just no place to put everything,” he said. “Also, there are working capital constraints. Every day it sits there it costs you money.”

Australian employment sped past forecasts in December although the jobless rate ticked higher as many more people went looking for work - the combination of trends signalling a healthy labour market that leaves alive the chance of a near-term cut in rates.

Driven by an increase in part-time roles, net employment jumped by 56,300 in December from November when it climbed by a downwardly revised 28,200, according to figures from the Australian Bureau of Statistics on Thursday.

The December jump was well above a market consensus for a rise of 15,000.

Annual jobs growth accelerated to a brisk 3.1%, more than double the historical average. The labour force also expanded at a similar rate.

The jobless rate rose to 4.0% from 3.9%, as expected, while the participation rate edged up to a record high of 67.1% from 67.0%.

"Overall it's fairly messy, but you would characterise the labour market as remaining pretty strong... It still leaves that basic message that the labour market remains fairly tight," said Shane Oliver, chief economist at AMP.

Slowing wage growth also suggests the labour market is not a source of inflationary pressures.

"It kind of leaves the Reserve Bank in a difficult position then... I think ultimately the the rate call for February will depend on the December quarter inflation numbers when they come out," said Oliver.

The RBA expects underlying inflation in the fourth quarter to come in at 0.7%. Anything below that number would make it hard for the RBA not to cut rates next month, said Oliver.

The market reaction to the jobs data was muted. The Australian dollar rose 0.1% to $0.6230. Three-year bond futures trimmed earlier gains but were still up 8 ticks at 96.06 thanks to tame inflation figures from Britain and the U.S. overnight.

Swaps still imply a 68% probability that the RBA will cut rates on Feb. 18, following the quarterly inflation report and another reading on retail sales which is expected to show a pull-back in sales in December after a strong showing the prior month.

The RBA has held its policy steady for a year, judging that the current cash rate of 4.35% - up from 0.1% during the pandemic - is restrictive enough to bring inflation to its target band of 2-3% while preserving employment gains.

The central bank unexpectedly turned dovish last month as economic growth has stayed anaemic. A pick-up in consumer spending has been disappointing even with the government's tax cuts.

Thursday's data showed part-time jobs jumped by 80,000 in December, while hours worked rose a strong 0.5%.

"We see no evidence of labour market slack, and the labour market alone does not warrant the RBA to reduce policy rates in the near term," said Faraz Syed, an economist at Citi.

"We keep the timing of the first rate cut unchanged for May 2025, but note risks of a lower CPI could allow the RBA to bring rate cuts forward."