Daily Money Talks 19/Dec/2024.

📈 Market Report.

🇦🇷 Argentina's economy experienced a 3.9% growth in Q3, marking its first quarter of growth since entering recession late last year. The positive data fueled a 7.3% gain in the Merval stock index, which has more than doubled in value due to President Javier Milei's reforms. Despite BBVA estimations of a 4% GDP decline in 2024 and a 6% rebound in 2025, the poverty rate has risen, with nearly 53% of the population living in poverty during the first half of 2024, up from 41.7% in the second half of 2023.

📻 Last night I had the opportunity to participate live on the economic radio broadcast of Vision Global, Spain. Despite the rate cut, the Fed gave a forecast contrary to a policy of lowering rates. It revised upwards US GDP growth for 2025. It also revised upwards the expected inflation rate and cut downwards the estimates for the unemployment rate. The Fed's new projections show officials expect core inflation to remain stuck at 2.5% through 2025, significantly higher than the 2% target. Fed Chair Jerome Powell signaled that further rate cuts will depend on more progress in lowering high inflation.

🇯🇵 The Bank of Japan (BOJ) has kept interest rates unchanged, signaling a cautious path of next interest hike. The decision came after the US Federal Reserve cut rates, but the yen fell to a one-month low against the dollar. The BOJ said Japan's economy was recovering moderately, with consumption only increasing moderately. However, uncertainty surrounding the economy and prices remained high. A Reuters poll predicts the BOJ to raise rates to 0.5% by the end of March, though respondents are divided on the exact timing.

🇬🇧 The Bank of England is set to maintain interest rates at 4.75%, despite signs of a slowing economy, due to persistent inflation pressures. The divergence in interest rate outlooks between the Bank of England and the European Central Bank has increased the difference in yields between British and German 10-year government bonds to its widest since 1990. The Bank's November forecasts showed inflation staying above its 2% target until 2027, with British consumer price inflation exceeding its own forecast. An 8-1 Monetary Policy Committee vote is expected to keep rates unchanged, with Swati Dhingra, member of the Bank of England's Monetary Policy Committee, likely to call for faster cuts.

📹 Today we will publish in our social networks a new video report analyzing the latest UK economic data as well as the technical analysis outlook for cable (GBPUSD).

🚗 New car sales in Europe fell in November, with a 2% year-on-year drop to 1.06 million. The decline was attributed to weak demand, high production costs, and the shift to electric vehicles (EVs). Volkswagen and Renault saw increases, while Stellantis saw a decline. Fully electric car sales were down 9.5%, while hybrid car sales rose 18.5%. Tesla and SAIC Motor experienced a 40.9% and 7.8% decline, respectively, due to new EU tariffs on Chinese-made cars. The ACEA has called for a review of the EU's carbon dioxide emission reduction targets.

🔧 In addition, Volkswagen and the unions are still negotiating an agreement to avoid job losses. They are expected to reach an accord before Christmas.

🗳️ Ahead of the February 23 snap german election, Alice Weidel, whose party is currently in second place, charged that the EU bloc was ruining Germany's auto sector. In an interview with Bloomberg TV, she stated, "We don't need all of these bureaucrats who don't know what they're doing."

📉 Market View:

📊 Bearish market response to last night's rate cut announced by the Federal Reserve. The reasons for the decline seem to be related to the Fed's shared economic outlook, which projects an upward rebound in US GDP growth, a projected rise in inflation by 2025 and a lower unemployment rate. In addition, the Fed reiterated its concerns about the inflationary impact of Trump's tariff policies. In other words, it remains to be seen whether there will be further rate cuts in the future.

💹 The S&P 500 lost the 5,600 level for good and is currently trading at 5,955 points. The Nasdaq 100 fell from the 22,400 points reached in its mini futures this week to 21,535 points, where it seems to have found support.

💵 The dollar responded with strength. The dollar index (DXY) rose to a new high of 108 points and remains above this level at the moment. The EUR/USD, on the other hand, lost 1.0350 and is currently trying to regain the 1.04 area. Remember the prediction we have been repeating for months? EUR/USD will fall below parity in the medium to long term.

🇪🇺 In Europe, markets also started the day negative. The DAX 40 has retreated back towards the 20,000 point area, where it seems to be trying to establish support. The EuroStoxx 50 lost 4,900 points, showing weakness in its movement.

⛽ Brent crude oil remains virtually unchanged at around $73 per barrel. In contrast, gold has intensified its declines following the Fed update, accumulating almost 6% losses since last week and currently trading at $2,630 per ounce. Bitcoin, however, seems to have better cushioned the impact of the Fed's decisions. Despite the dollar's strength, it is more resilient than gold, currently trading at $101,600.

🇫🇷 Geopolitics:

🔨 France's Court of Cassation has upheld an appeal court decision that found former President Nicolas Sarkozy guilty of corruption and influence peddling. Sarkozy was sentenced to one year in prison, but is expected to serve the sentence at home with an electronic bracelet. He was found guilty of trying to bribe a magistrate in exchange for information about a legal case. Sarkozy also faces another trial next month over allegations of taking millions of dollars from former Libyan dictator Moammar Gadhafi to finance his 2007 campaign. Paradoxically, Sarkozy actively participated in the campaign to overthrow Gaddafi, which led to his lynching and public assassination by Western-backed mercenary groups. Gaddafi's son went so far as to say at the time, ‘we have paid for your election campaign and we have the bills’ accusing him of being a traitor. Sarkozy's predecessor, Jacques Chirac, was previously given a suspended sentence for misuse of public funds.

🛢️ Rosneft, Russia's state oil firm, has agreed to supply nearly 500,000 barrels per day (bpd) of crude to Indian private refiner Reliance in the biggest ever energy deal between the two countries. The deal further cements energy relations between India and Russia, which is under heavy Western sanctions over its invasion of Ukraine. The new deal accounts for roughly half of Rosneft's seaborne oil exports from Russian ports, leaving limited supply available for other traders and middlemen. India has become the largest importer of Russian crude after the European Union imposed sanctions on Russian oil imports in response to the 2022 invasion of Ukraine.