Corporate Earnings News
Global market indices
Currencies
Cryptocurrencies
Fixed Income
Commodity sector news
Key data to move markets
Global macro updates
Corporate Earnings News
Corporate earning calendar 7 November - 13 November 2024
Thursday: Barrick Gold, Viatris, Moderna, Airbnb, Arista Networks, Block, Cloudflare, Expedia, Gilead Sciences, Lucid Group, Pinterest, Rivian Automotive, The Trade Desk, Unity Software, Upstart Holdings, Duke Energy, EOG Resources, Monster Beverage, The Hershey Company
Friday: Constellation Software, United Overseas Bank, Telus
Monday: Cellnex Telecom, Bridgestone, Monday.com, Continental AG
Tuesday: AstraZeneca, Marathon Digital, Occidental Petroleum, Shopify, Spotify Technologies, Home Depot, Live Nation Entertainment, Tyson Foods, Mosaic
Wednesday: Cisco Systems, Nu Holdings, Allianz, Tencent, Suncor Energy
Global market indices
US Stock Indices Price Performance
Nasdaq 100 +1.69% MTD +20.22% YTD
Dow Jones Industrial Average +4.71% MTD +16.03% YTD
NYSE +3.06% MTD +17.65% YTD
S&P 500 +3.92% MTD +24.30% YTD
The S&P 500 is +1.98% over the past week, with 8 of the 11 sectors in positive territory MTD. The Equally Weighted version of the S&P 500 posted a +2.59% gain this week, its performance is +3.72% MTD and +15.73% YTD.
The S&P 500 Consumer Discretionary sector is the leading sector so far this month, up +7.39% MTD and +19.67% YTD, while Utilities is the weakest at -2.98% MTD and +22.34% YTD.
This week, Energy outperformed within the S&P 500 at +5.99%, followed by Consumer Discretionary and Financials at +5.44% and 5.27%, respectively. Conversely, Real Estate underperformed at -2.98%, followed by Utilities and Consumer Staples, at -1.96% and -0.82%, respectively.
President Trump’s election victory propelled the Dow Jones Industrial Average to its largest gain in two years, as a broad market rally lifted shares across banks, industrial firms, and small-cap companies expected to benefit from continued economic growth.
The rally spanned multiple sectors as Wall Street anticipated that Trump’s promises of deregulation and tax cuts would further stimulate an economy that has already seen substantial gains in recent years. However, sectors expected to benefit from Democratic policies, such as electric vehicle manufacturers and clean-energy industries, saw notable declines.
All three major stock indexes reached record highs. The Dow Jones Industrial Average surged approximately 1,508 points, or 3.6%, to 43,729.93—its largest single-day percentage gain since November 2022. The S&P 500 rose 2.5%, while the tech-heavy Nasdaq Composite gained 3%.
Financials were among the day’s biggest winners, with investors betting that banks would benefit from lighter regulation and a potential economic boost. JPMorgan Chase, the largest US lender, soared 12% to an all-time high, while Wells Fargo and Goldman Sachs both climbed 13%.
Industrials also surged on expectations of deregulation and protective tariffs, with Caterpillar rising 8.7% to a record high and 3M up 5.8%. Domestic steelmakers Nucor and Steel Dynamics gained 16% and 14%, respectively, as investors anticipated a supportive environment for American manufacturing.
The market’s positive response was partly driven by the decisiveness of Trump’s victory, which reduced uncertainties about protracted legal battles or civil unrest.
The removal of election-related uncertainty is widely considered a positive development, especially given the recent increase in defensive positioning in the market. This positive sentiment is further bolstered by the decline in the VIX volatility index, which retreated below 20 after speculative short positions were unwound. This decrease in volatility is expected to trigger buying activity from systematic funds.
Strategists have also consistently highlighted the historically favourable seasonality for equities leading up to year-end, particularly in post-election years. Furthermore, the expiration of corporate buyback blackout periods and the strong historical trend of equity inflows in November provide additional tailwinds for the market.
US stocks
According to LSEG I/B/E/S data, y/o/y earnings growth for the S&P 500 in Q3 is projected to be 7.8%. This number jumps to 10.5% when excluding the Energy sector. Of the 399 companies in the S&P 500 that have reported earnings to date for Q3 2024, 75.9% have reported earnings above analyst estimates, with 59.5% of companies reporting revenues exceeding analyst expectations. This falls short of the historical average of 62.2% and the last four quarters’ average of 62.3%. The y/o/y revenue growth is projected to be 5.1% in Q3, increasing to 6.2% when excluding the Energy sector.
Communication Services, at 91.7%, is the sector with most companies reporting earnings above estimates, while Consumer Discretionary with a surprise factor of 11.8%, is the sector that’s beaten earnings expectations by the highest surprise factor. Within Materials, only 58.3% of companies have reported above estimates, while it’s also the sector with the lowest earnings surprise factor at -5.3%. The S&P 500 surprise factor is 7.3%. The forward four-quarter price-to-earnings ratio (P/E) for the S&P 500 sits at 21.9x.
This week, 102 S&P 500 companies are scheduled to report quarterly earnings.
Mega caps: A mostly positive for the ‘Magnificent Seven’ as 4 members ended in positive territory. Alphabet +1.18%, Amazon +7.45%, Apple -3.21%, Meta Platforms -3.34%, Microsoft -2.86%, Nvidia +4.50%, and Tesla +12.03%.
Energy stocks outperformed this week, as the Energy sector itself was +5.99% due to Q3 earnings reports exceeding expectations by major oil companies, as well as higher oil prices. Oil prices are +4.43%. The Energy sector’s YTD performance is +12.07%. Over the week Baker Hughes +14.00%, ConocoPhillips +10.34%, Halliburton +10.15%, Marathon Petroleum +7.25%, Chevron +6.53%, Apa +5.37%, Phillips 66 +4.78%, Shell +4.10%, ExxonMobil +3.69%, Occidental Petroleum +2.43%, and Energy Fuels -4.09%.
Marathon Petroleum Q3 earnings. On 5th November, Marathon Petroleum released its Q3 earnings report, exceeding analyst expectations across key performance indicators. The company reported revenue of $35.37 billion, surpassing the FactSet consensus estimate of $34.34 billion. Adjusted EBITDA reached $2.49 billion, significantly exceeding the FactSet estimate of $2.02 billion.
Marathon Petroleum's Refining & Marketing (R&M) segment generated $1.05 billion in earnings, exceeding the consensus estimate of $759.4 million. Total throughput reached 2.99 million barrels per day (bpd), surpassing the anticipated 2.87 million bpd. Crude throughput also exceeded expectations, reaching 2.78 million bpd compared to the estimated 2.64 million bpd. The company achieved a gross margin per barrel of $14.35, slightly higher than the estimate of $14.32.
Marathon Petroleum's Midstream segment, operated through MPLX LP, reported earnings of $1.63 billion, in line with estimates.
The company’s operating income reached $1.35 billion, and CapEx for the quarter totaled $950 million, significantly higher than the estimate of $535.7 million.
During Q3, Marathon Petroleum returned approximately $3.0 billion to shareholders through a combination of share repurchases ($2.7 billion) and dividends ($273 million). Additionally, the Board of Directors authorised an incremental $5 billion share repurchase program, bringing the total authorization to $8.5 billion.
MPLX is progressing with growth projects concentrated in the Permian and Marcellus basins. These integrated footprints provide a consistent pipeline of growth opportunities. In the Permian Basin, MPLX anticipates increasing its gas processing capacity to 1.4 billion cubic feet per day (bcf/d) by the second half of 2025. In the Northeast, with the addition of a newly announced facility, MPLX's gas processing capacity is projected to reach 8.1 bcf/d and total fractionation capacity to 800,000 bpd by the second half of 2026. In the Utica basin, utilisation of existing capacity is increasing, driving continued growth in gas processing volumes.
Materials and Mining stocks had a slightly positive week, as the Materials sector was +0.14%, bringing the sector’s YTD performance to +10.45%. Nucor +17.55%, Freeport-McMoRan +1.96%, CF Industries +1.59%, Mosaic +1.55%, Albemarle +1.11%, while Yara International -0.06%, Newmont Corporation -5.24%, and Sibanye Stillwater -6.30%.
Dupont de Nemours Q3 earnings. On 5th November, DuPont de Nemours reported Q3 earnings that demonstrated robust performance.
The Electronics & Industrial segment generated $1.55 billion in revenue, slightly exceeding the FactSet consensus estimate of $1.54 billion. Adjusted EBITDA for the segment reached $467 million, surpassing the FactSet estimate of $455.4 million. This strong performance was driven by $40 million in pre-buy activity related to new fabrication facilities (fabs) in China, coupled with broad-based strength in semiconductors across all technologies. Advanced nodes were a particularly strong contributor to results.
The Water & Protection segment recorded $1.38 billion in revenue, slightly below the FactSet estimate of $1.39 billion. However, the segment's adjusted EBITDA of $364 million exceeded the FactSet estimate of $343.5 million. DuPont noted sequential improvement in its water business and anticipates continued recovery in the fourth quarter, with normalisation expected by 2025.
DuPont generated $737 million in CFO during Q3.
For Q4, DuPont expects net sales of $3.07 billion, operating EBITDA of $719 million, and adjusted EPS of $0.98. For FY 2024, DuPont anticipates operating EBITDA of $3.125 billion and adjusted EPS of $3.90, representing a 12% y/o/y increase.
DuPont expressed confidence in its ability to meet its 18-month separation timeline, with the completion of its legal entity and IT work targeted for December 2025. The company observed normal seasonality exiting the third quarter and anticipates the usual Q4 seasonal uplift, particularly in electronics and shelter solutions. Operational execution improvements and restructuring actions drove strong margins in Q3, with positive impacts expected to continue.
DuPont highlighted strong demand in the Electronics segment and a gradual recovery in the Water and Medical Packaging segments.
European Stock Indices Price Performance
Stoxx 600 +0.28% MTD +5.80% YTD
DAX -0.20% MTD +13.66% YTD
CAC 40 +0.26% MTD -2.30% YTD
IBEX 35 -1.52% MTD +13.79% YTD
FTSE MIB -0.99% MTD +11.83% YTD
FTSE 100 +0.70% MTD +5.60% YTD
This week, the pan-European Stoxx Europe 600 index was -0.92%. It was -0.54% on Wednesday, closing at 506.78.
In the STOXX Europe 600, Financial Services is the leading sector, +3.82% MTD and +14.53% YTD, while Autos & Parts is the weakest at -3.96% MTD and -15.50% YTD.
This week Financial Services outperformed within the STOXX Europe 600 with a +1.96% gain, followed by Travel & Leisure and Banks at +1.68% and +1.36%, respectively. Conversely, Autos & Parts underperformed at -4.30 %, followed by Food & Beverage and Retail, -4.09% and -3.80%, respectively.
Germany's DAX index was -1.13 % on Wednesday and closed at 19,039.31. It was -1.13 % for the week. France's CAC 40 index was -0.51 % on Wednesday, closing at 7,369.61. It was -0.79 % for the week.
The UK's FTSE 100 index was +0.09% this week to 8,166.68. It was -0.07 % on Wednesday.
On Wednesday, the Stoxx Europe 600 Utilities sector led market declines, particularly renewable energy stocks, as President Trump vowed to halt offshore wind projects via executive order on his first day in office. The Autos & Parts sector also saw significant losses amid concerns over potential Trump-imposed trade tariffs, adding pressure to an industry already facing weakening demand, especially from China. BMW shares in the US fell following Q3 results that revealed a drop in core profitability to its lowest point in over four years due to recalls and issues in China.
Basic Resources and Oil & Gas sectors experienced notable declines as the US dollar surged on Trump’s election win, putting downward pressure on commodity prices. Health Care performed well, with Novo Nordisk reporting better-than-expected Q3 sales of its popular Wegovy weight-loss drug and revising its 2024 outlook upward. Siemens Healthineers also reported Q3 earnings per share of €0.67, excluding items, beating the consensus of €0.60, and guided FY24 EPS to a range of €2.35 - 2.55, close to FactSet’s estimate of €2.55.
Defence stocks bolstered the broader Industrial Goods & Services sector, driven by Trump’s calls to reduce US military support abroad and to compel NATO members to allocate 2% or more of their GDP to defence spending. The Construction & Materials sector also rose, supported by expectations of increased US infrastructure investment under President Trump’s administration.
Other Global Stock Indices Price Performance
MSCI World Index +2.88% MTD +18.39% YTD
Hang Seng +0.70% MTD +20.02% YTD
This week, the Hang Seng Index was +0.45%, while the MSCI World Index was +1.24%.
Currencies
EUR -1.41% MTD -2.78% YTD to $1.0729.
GBP -0.19% MTD +1.15% YTD to $1.2872.
The euro was -1.15% against the USD over the past week, while the British pound was -0.63%. The Dollar Index was +1.11% this week, +1.13% MTD, and +3.77% YTD, settling at 105.20.
Current market expectations, as reflected by CME's FedWatch Tool, indicate an 96.8% probability of a 25 bps rate cut at the FOMC's meeting today, with a 3.2% chance that the central bank will maintain its current policy stance.
The US dollar surged to a four-month high on Wednesday following Republican Donald Trump’s victory in the US presidential election, as anticipated shifts in immigration, tax, and trade policies are expected to drive stronger US growth and inflation.
The eurozone, Mexico, China, and Canada are viewed as vulnerable to potential new tariffs, which could negatively impact economic growth in these regions. Such trade policies may widen their interest rate differentials with the United States, exerting downward pressure on their currencies.
The euro may face additional pressure from political uncertainty in Germany. On Wednesday, German Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner after prolonged disputes over the government’s economic direction.
The dollar index rose +1.73% to 105.20, reaching a peak of 105.44, its highest level since 3rd July. The euro declined -1.80% to $1.0729, hitting a low of $1.0683, its lowest since 27th June.
The dollar also gained +1.74% against the Japanese yen, reaching ¥154.23 and climbing as high as ¥154.70, the strongest since 30th July.
The Japanese yen may now approach levels that earlier prompted government intervention to stabilise the currency. Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated on Wednesday that the government plans to monitor foreign exchange movements, including speculative activity, with heightened vigilance.
Note: As of 5:15 pm EST 6 November 2024
Cryptocurrencies
Bitcoin +8.12% MTD +81.10% YTD to $76,046.00.
Ethereum +7.15% MTD +17.43% YTD to $2,695.50
It was a very positive week for the two major cryptocurrencies with both soaring after Republican Donald Trump was elected the 47th US President. The “Trump” trade was firmly back on the cards for investors as they now expect pro-crypto policies and deregulation to boost the demand for crypto products. Bitcoin was +9.56% on Wednesday, surging to a new all-time high of $76,000 and +5.04% over the week, while Ethereum was +11.16% on Wednesday and +1.35% over the week. The surge in Ethereum was linked to increased optimism around De-Fi and the possible recognition of tokens as commodities, which could enhance the sector's growth.
Crypto ETFs also benefitted following the announcement of Trump’s win. BlackRock’s Spot Bitcoin ETF recorded its largest daily trading volume of $4.1 billion. The 12 US Spot Bitcoin ETFs traded over $6 billion yesterday, marking their highest daily total since March.
Traders will be looking closely at the Federal Reserve's movement’s later today, particularly for signals from Fed Chair Jerome Powell's about the further pace and depth of rate cuts. Lower borrowing costs has historically supported bullish sentiment among traders as cheaper credit spurs growth in riskier sectors.
Note: As of 5:15 pm EST 6 November 2024
Fixed Income
US 10-year yield +14.5 bps MTD +55.4 bps YTD to 4.435%.
German 10-year yield +1.8 bps MTD +39.9 bps YTD to 2.408%.
UK 10-year yield +13.3 bps MTD +102.5 bps YTD to 4.564%.
US Treasury 10-year bond yields are +13.2 basis points (bps) this week. Donald Trump winning the Presidency and Congress propelled 10-year Treasury yields +14.9 bps to 4.435% on Wednesday, their highest levels since July and the largest one-day increase since April, as investors weighed the implications of his victory on debt markets.
However, US yields trimmed gains following a stronger-than-anticipated 30-year Treasury bond auction. The yield on the 30-year Treasury traded up +16.5 bps at 4.612%, after reaching an earlier high of 4.678%, the highest level since late May. This surge reflects growing concerns over future borrowing costs, with the 30-year yield experiencing its biggest single-day rise since March 2020.
However, as noted by the Financial Times, this surge in yields added more than $1 bn to the total interest it will have to pay on the new notes compared with the cost on Tuesday. The note was priced at 4.608%, below the expected rate at the bidding deadline, indicating that investors did not demand additional yield to purchase the note. Bids totaled $66 billion, with a bid-to-cover ratio of 2.64x, up from 2.50x previously and 2.31x in August.
Additionally, the MOVE index—a benchmark for interest rate volatility—reached a one-year high of 136.25 on Monday, signalling that Treasury yields across most maturities could fluctuate by at least 8.5 bps daily over the next month. The index was last recorded at 130.43.
On the shorter end of the yield curve, the two-year yield peaked at 4.312%, its highest since late July, before settling +7.5 bps higher at 4.278%, marking its largest one-day gain in a month.
The Fed commenced its two-day monetary policy meeting on Wednesday, with markets anticipating another 25 bps rate cut on today, though future policy direction appears less certain.
Market expectations currently price in roughly 42 bps of cuts for this year and another 62 bps of reductions for 2025. The projection for next year has been revised down from about 90 bps in recent weeks. Current market expectations, as reflected by the CME's FedWatch Tool, indicate a 81.0% probability of a 25 bps rate cut at both the FOMC's November and December meetings.
The German 10-year yield was +1.2 bps this week, while the UK 10-year yield was +20.2 bps this week. The spread between US 10-year Treasuries and German Bunds currently stands at 202.7 bps.
Italian bond yields, a benchmark for the eurozone periphery, were +9.5 bps this week to 3.724%. Consequently, the spread between Italian and German 10-year yields is 131.6 bps.
Euro area short-dated government bond yields experienced a significant decline on Wednesday as markets factored in the likelihood of further interest rate reductions by June 2025. This shift in market sentiment followed the US presidential election, which introduced the potential for economic headwinds in Europe, thereby increasing the probability of more aggressive monetary easing.
Concerns surrounding the potential impact of renewed trade tensions were underscored by ECB Vice President Luis de Guindos, who cautioned that fresh tariffs could impede global growth, potentially triggering retaliatory measures and a detrimental cycle of trade wars.
Reflecting these concerns, money markets adjusted their expectations for the ECB's monetary policy trajectory. Market pricing now suggests a deposit rate as low as 2% by June 2025, implying a 25 bps reduction at each upcoming meeting. This represents a notable shift from the 2.18% rate anticipated late Tuesday. Furthermore, markets have fully priced in a 25 bps rate cut in December, with an approximately 20% probability of a more aggressive 50 bps reduction.
These expectations were mirrored in the performance of German government bonds. The yield on 2-year bonds, which are particularly sensitive to interest rate expectations, fell -12 bps, marking their most substantial daily decline since early August, to reach 2.21%. The 10-year Bund yield also fell, albeit more modestly, by -2.1 bps to 2.408%. This divergence in yield movements resulted in a widening of the spread between 10-year and 2-year yields to 21.8 bps, its highest level since 3rd November, 2022.
In the UK, long-dated government bond prices experienced a downturn. Thirty-year gilt yields ended the day at their highest point since 30th October, 2023, climbing +5.6 bps to 5.018%. Similarly, 10-year yields reached their highest level since late October 2023, rising +3.4 bps to 4.564%. In contrast, 2-year gilt yields remained relatively stable, leading to a widening of the spread between 2-year and 30-year gilts.
Despite these market movements, the BoE, as widely expected, cut interest rates by 25 bps today, lowering the benchmark rate to 4.75% from 5%. BoE Governor Andrew Bailey said that rates are likely to fall “gradually from here” and that last week’s budget will lift inflation by just under half a percentage point at its peak.
Commodities
Gold spot -2.586% MTD +29.34% YTD to $2,659.42 per ounce.
Silver spot -8.19% MTD +28.89% YTD to $31.20 per ounce.
West Texas Intermediate crude +3.42% MTD +0.10% YTD to $71.73 a barrel.
Brent crude +3.26% MTD -2.45% YTD to $75.16 a barrel.
Spot gold prices are -4.57% this week. Gold prices experienced a significant decline on Wednesday, reaching a three-week low as investors sought refuge in the US dollar following the election of Republican Donald Trump as US president. This movement contributed to a notable sell-off in gold markets, with spot prices tumbling -3.07% to $2,659.42 per ounce, after touching a three-week low of $2,652.19. Consequently, gold was poised to record its most substantial daily loss in five months. US gold futures mirrored this downward trend, settling -2.7% lower at $2,676.30.
Market participants are now eagerly anticipating the Fed's monetary policy decision later today, seeking further guidance on the trajectory of the bank's easing cycle. This monetary policy easing has been a key catalyst behind gold's remarkable ascent to successive record highs this year, and any potential shift in policy could have implications for bullion's future performance.
Oil prices were down on Wednesday, with major crude benchmarks, Brent and WTI -0.37% and -0.50% respectively, as market participants grappled with the implications of a robust US dollar and the potential impact of the US President-elect's foreign policy agenda on global oil supply.
The election initially triggered a significant sell-off in oil markets, driving prices downward and propelling the US dollar to its highest point since September 2022. This surge in the dollar rendered dollar-denominated commodities, such as oil, more costly for those holding other currencies, exerting downward pressure on prices.
However, the President-elect's policies could also lead to the reimposition of sanctions on major oil producers, potentially constricting global supply. This possibility introduced a bullish element into the market, creating upward pressure on prices.
Despite these political factors, prevailing market dynamics are likely to exert significant influence on the oil price outlook. The actions of OPEC+, the interplay between refinery margins and demand fluctuations, the persistence of supply challenges, and inefficiencies in oil trade flows will all play a crucial role in shaping future price movements.
EIA report: US crude oil inventories rise amidst export decline and weakening demand.
In the week ending 1st November, the US Energy Information Administration (EIA) reported a notable increase in US crude oil inventories, primarily attributed to a decline in exports. Despite record-high product exports, fuel inventories also expanded due to weakened demand.
Specifically, crude inventories augmented by 2.1 million barrels, reaching a total of 427.7 million barrels. This accumulation coincided with a 1.4 million barrel per day (bpd) reduction in exports, settling at 2.9 million bpd, while net US crude imports increased by 1.7 million bpd. Furthermore, stockpiles at the Cushing, Oklahoma delivery hub experienced a growth of 522,000 barrels.
Interestingly, exports of petroleum products reached an unprecedented 7.6 million bpd, marking a 1.3 million barrel increase. However, this surge in exports was offset by a decrease in product supplied, a key indicator of demand, which fell by 1.9 million bpd to 19.7 million bpd.
The EIA report also indicated a rise in both gasoline and distillate stockpiles. Gasoline inventories increased by 412,000 barrels, reaching 211.3 million barrels, while distillate stockpiles, encompassing diesel and heating oil, grew by 2.9 million barrels to 115.8 million barrels.
Finally, refinery operations exhibited an upward trend, with crude runs increasing by 281,000 bpd and utilisation rates climbing by 1.4 percentage points to 90.5% of total capacity.
Note: As of 5:15 pm EST 6 November 2024
Key data to move markets
EUROPE
Thursday: German Industrial Production and Trade Balance, Eurozone Retail Sales, EU Leaders Summit, and speeches by ECB Chief Economist Philip Lane and ECB Executive Board Members Isabel Schnabel, and Frank Elderson.
Friday: Speech by ECB’s Executive Board Member Piero Cipollone.
Tuesday: German CPI, Harmonized Index of Consumer Prices, Current Situation and Economic Sentiment ZEW Surveys.
Wednesday: Eurozone Industrial Production.
UK
Thursday: Bank of England Monetary Policy Decision, Monetary Policy Report, and a speech by BoE Governor Bailey.
Friday: A speech by BoE’s Chief Economist Huw Pill.
Tuesday: Claimant Count Rate and Change, Average Earnings, Employment Change, and ILO Unemployment Rate.
Wednesday: BoE Monetary Policy Report Hearings.
US
Thursday: Fed Interest Rate Decision, Monetary Policy Statement and FOMC Press Conference, Initial and Continuing Jobless Claims, Q3 Nonfarm Productivity, Q3 Unit Labor Costs.
Friday: Michigan Consumer Sentiment Index, UoM 5-year Consumer Inflation Expectations, and speeches by St. Louis Fed President Alberto Musalem and Fed Governor Michelle Bowman.
Monday: Loan Officer Survey.
Tuesday: NFIB Business Optimism Index and a speech by Philadelphia Fed President Patrick Harker.
Wednesday: CPI, Core CPI, Monthly Budget Statement, and a speech by St. Louis Fed President Alberto Musalem.
JAPAN
Monday: BoJ Summary of Opinions and Current Account.
CHINA
Friday: CPI and PPI.
Global Macro Updates
German government collapses as a Trump win challenges Europe. Germany’s coalition government collapsed on Wednesday after Chancellor Olaf Scholz sacked his finance minister Christian Lindner from the pro-business Free Democrats Party (FDP), plunging the eurozone’s largest economy into political chaos hours after Donald Trump’s victory in the US presidential election. The three other FDP ministers - for transport, justice, and education - all voluntarily left the government. The decision by Scholz marked the formal end of the three-party coalition between the Social Democrats (SDP), Greens and Free Democratic Party (FDP). Lindner was fired after refusing to accept Scholz’s order to declare a state of fiscal emergency that would allow the government to bypass the debt brake rules which limits the government’s ability to borrow money.
Several hours after firing Lindner he appointed his economic adviser Jörg Kukies as the new finance minister. Kukies is a former Goldman Sachs banker and has worked with Scholz since 2018, when he was brought in to serve as state secretary in the finance ministry. Scholz told reporters late on Wednesday that he would table a confidence vote in parliament on 15th January. Given the rising unpopularity of the minority government, this may result in snap elections in March.
Euro parity back in play after Trump’s election. Bloomberg reported a significant drop in the EUR-USD following Trump’s election win, with the euro recording its largest single-day decline since 2016, falling roughly 2% to around $1.0700. Several sell-side banks have cautioned that this weakness may continue in the coming months, with some projecting the euro to reach parity with the dollar. While Trump’s trade policies are expected to fuel inflation and may limit the Fed’s flexibility, they could also weigh heavily on economic activity within the eurozone.
Interest rate markets responded immediately, with increased bets on further rate cuts from the ECB. Early European trading saw markets pricing the ECB deposit rate near 2% by November 2025. Goldman Sachs, among others, revised its forecast for the ECB’s terminal rate to 1.75% by July 2025, down from the prior estimate of 2.00%, factoring in the potential impact of Trump’s policies. The bank projects that Trump-imposed tariffs could reduce eurozone growth by 0.3% in 2025.
The ECB has underscored the importance of price stability, though recent back-to-back rate cuts in September and October have intensified policy discussions around how weaker growth might impact inflation expectations. Some analysts suggest that the euro may also underperform relative to the British pound, as the UK is less exposed to Trump’s tariffs, given its greater emphasis on service exports rather than goods, which are more vulnerable in the eurozone.
Potential Fed implications. Following the election, the probability of a 25 bps rate cut in November remains largely unchanged. However, market expectations now indicate a roughly 33% chance of no rate cut in December, an 11 percentage point increase from the previous day. The market has also adjusted its outlook for 2025, now pricing in only two 25 bps cuts, bringing rates to a range of 3.75% - 4.0%, compared to the four rate cuts anticipated as recently as 18th October.
Bank of America economists noted that they do not expect the Fed to make premature adjustments based on Trump’s policy agenda. However, they highlighted the possibility of a rate cut pause if substantial tariffs are announced. They also suggested that the Fed may adopt a more cautious approach to inflation, reflecting lessons learned from misjudging inflation trends as transitory in 2021.
Nomura economists now anticipate just one rate cut in 2025, suggesting that the Fed may hold off on further adjustments until the inflationary impact of any new tariffs has subsided. Bloomberg also observed that Trump’s victory introduces uncertainty to the Fed’s longer-term outlook, as Trump has indicated he would not reappoint Jerome Powell when his term concludes in May 2026. Furthermore, Trump’s economic advisers have reportedly floated the idea of appointing a "shadow" Fed chair before the end of Powell’s tenure—a move Barclays economists noted could unsettle markets, even if it does not directly alter policy direction.
While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.
This article is provided to you for informational purposes only and should not be regarded as an offer or solicitation of an offer to buy or sell any investments or related services that may be referenced here.
