Daily Money Talks 18/Dec/2024.

🌍 Market Report.

🇨🇭 Not even Switzerland has been spared from the economic downturn in Europe. The Swiss government has adjusted its economic growth forecast for 2025 downward to 1.5%. The previously expected growth was around 2% for 2025. Some of the factors cited for the lower growth outlook include ongoing global economic uncertainty and volatility, inflationary pressures impacting consumer spending and business investment, and potential slowdown in Switzerland's major trading partners.

🇨🇦 Canada's annual inflation rate unexpectedly dropped to 1.9% in November, down from 2% in October. This was driven by a broad-based slowdown in prices. The Bank of Canada's preferred core inflation measures, CPI-median and CPI-trim, remained unchanged at 2.6% and 2.7% respectively. However, the previous month's data was revised up slightly. The central bank has forecast core inflation to average 2.3% in Q4, but it is currently trending around 2.7%. The Bank of Canada will get two more inflation reports before its next rate decision on January 29th, where a 25 basis point cut is currently seen as a 55% probability.

🇯🇵 Japan, the key US ally in Asia, increases its imports from Chima and decreases imports from the US. Japan's exports rose faster than expected in November, increasing by 3.8% year-on-year, exceeding the median market forecast of a 2.8% rise. This was helped by a weaker yen and solid global demand. Exports to China, Japan's biggest trading partner, rose 4.1% in November, while those to the United States fell 8% due to a drop in automobile exports.

🇺🇸 U.S. manufacturing production rebounded less than expected in November, increasing by 0.2% after a downwardly revised 0.7% decline in October. The forecast was a 0.5% rebound. On the other hand, U.S. retail sales increased more than expected in November, rising 0.7% after an upwardly revised 0.5% gain in October. This was driven by stronger purchases of motor vehicles and online merchandise. The solid increase in retail sales is consistent with strong underlying momentum in the U.S. economy as the year winds down. This could complicate matters for the Federal Reserve, which is expected to cut interest rates again on Wednesday. Factors supporting consumer spending include labor market resilience, strong household balance sheets, and elevated savings. However, there are some signs of belt-tightening among low-income households.

🇫🇷 Due to poor domestic demand, France's economy, the second largest in the euro area, is only expected to grow by 0.2% each quarter in the first half of next year. Additionally, seven French banks, including BNP Paribas and Credit Agricole, had their credit ratings reduced by Moody's. This credit downgrade comes on top of the one applied to the French bond over the weekend.

📊 Market View:

📈 US index futures remain slightly higher but static, awaiting the Federal Reserve's rate cut decision. Mini S&P 500 futures remain at 6,135 points, while Mini Nasdaq 100 futures trade at 22,325 points.

💵 The dollar also remains unusually strong, with the dollar index DXY hovering around 107 points in anticipation of the Fed's decision. Meanwhile, the EUR/USD remains paused, hovering near 1.05.

🇪🇺 In Europe, markets are slightly lower. The DAX 40 has lost recent support at 20,300 points and is trading around 20,250 points, but remains relatively close to its all-time highs reached last week. The EuroStoxx 50, meanwhile, is trading around 4,950 points.

⛽ As anticipated in previous reports, Brent crude oil has continued its correction, falling from over $74 per barrel to a low of $72.50, from where it has rebounded slightly to the current $73.45. Gold is also showing signs of stability, with the price of crude oil showing a slight decline.

🏅 Gold is also showing signs of stability, currently trading at $2,660 per ounce as investors await the Fed's decisions.

📈 Finally, Bitcoin reached a new high during yesterday's session, surpassing $108,000, although it has retreated from that level and now stands at around $104,000.

🌐 Geopolitics:

🌍 The Joint Expeditionary Force (JEF), a coalition of 10 countries including the U.K., Denmark, Netherlands, and Sweden, has finalized a new scheme to crack down on Russia's "dark fleet". Authorities will seek accident insurance documentation from tankers transporting Russian oil through the Baltic Sea, including the Danish straits, the Gulf of Finland, and the straits between Sweden and Denmark. Tankers without adequate insurance cover and those that refuse to answer authorities' questions could be added to future sanction lists. This in practice functions as an additional business barrier, which could harm energy prices once again in Europe.

🇷🇴 Romania's Constitutional Court has ordered the country to rerun the first round of the presidential race and cancel the second round runoff due to accusations of meddling in the voting, according to an email statement. As one European bureaucrat said years ago about the European constitution referendums, ‘if the result is not what we expect, we will repeat it until we get the right result’.

The European Union has opened proceedings against TikTok. A TikTok-driven social media campaign propelled a "pro-Russia" candidate, Călin Georgescu, from obscurity to victory in the first round of Romania's presidential elections last month. In other words, the social network seems to have benefited the opposition candidate more than the EU candidate and is now facing retaliation from the EU.

🔫 The assassination in Moscow, mentioned yesterday of Lieutenant General Igor Kirillov was a "special operation" carried out by Ukraine's SBU security service, according to a source inside the agency. The general, in an interview given months ago, launched a series of ‘conspiracy theories’, claimed that the US was moving its biological laboratories from Ukraine to Africa and was planning to release a strain of bird flu to provoke another pandemic. Let's hope it's not another one of those theories that has come true months later.

🌍 Russia is increasing its military presence in Libya as it faces being pushed out of Syria. At least three Russian military cargo planes have flown from Belarus to Libya since December 8th, following the toppling of the Assad regime by Islamist rebels. Russia is moving defense materials from Belarus to Libya, which is crucial for expanding its influence in Africa. Russia is now seeking to negotiate with the new Syrian leadership to retain its key bases and strengthen its military presence in Libya.

🇺🇸 Donald Trump has suggested he would revoke the authorization given to Ukraine by the Biden administration to use US-supplied long-range missiles to strike targets within Russia. He made these remarks during a press conference at his Mar-a-Lago resort, criticizing the decision as "stupid" and questioning why his incoming administration wasn't consulted. News sources like Hindustan Times, RBC, and RFE/RL have reported on this.