Weekly Commentary

Last week, U.S. indices showed positive dynamics: the S&P 500 index rose by 2.9%, the Nasdaq by 2.8%. The European EUR STOXX 50 added 3.4%. Brent crude oil prices increased by $1.0, closing at $80.8.

In the U.S., 79% of companies reporting Q4 results exceeded EPS expectations. This is above the 5-year average of 77% and the 10-year average of 75%. Additionally, 67% of reporting companies beat revenue expectations, which is below the 5-year average of 69% but above the 10-year average of 64%.

CPI in the U.S. for December came in better than expected: +0.4% MoM (in line with forecasts), +2.9% YoY (in line with forecasts), while core CPI was +3.2% YoY, slightly below the expected +3.3%. Other inflation data for December also exceeded expectations: retail sales were up +0.4% MoM (vs. +0.6% expected), and core PPI increased by +3.5% YoY (vs. +3.8% expected). This raises hopes that the strong labor market and economy will not reignite inflation growth.

Ahead of the January 20 inauguration, Trump’s team announced discussions on a gradual increase in tariffs, month by month. This step-by-step approach aims to strengthen negotiation leverage while avoiding a sharp inflation spike. The plan includes raising import tariffs by 2-5% per month for trade partners. This approach has eased market concerns about an abrupt escalation in trade policy.

Israel and Hamas signed a ceasefire agreement, with the Israeli government set to vote on it on Saturday. The agreement includes guarantees from the U.S. that Tel Aviv retains the right to resume military actions if Hamas violates any part of the deal. A Trump advisor also stated that the U.S. will support further efforts to eliminate Hamas in Gaza.

The market is anticipating a rate hike by the Bank of Japan on Friday, raising it to 0.5%, the highest in 17 years. This comes amid record-high yields on sovereign bonds and accelerating wage growth. Investors are closely monitoring this event, as the last hike (in August 2024) led to a significant correction in global markets.

Consumer inflation data (CPI) in the UK for December exceeded expectations: +0.3% MoM (vs. +0.4% expected) and +2.5% YoY (vs. +2.6% expected), while core CPI stood at +3.2% YoY, below the expected +3.4%.

CPI in the Eurozone for December matched forecasts: +0.4% MoM, +2.4% YoY, and core CPI at +2.7%.

China's GDP data for Q4 2024 surpassed expectations, driven by new stimulus measures: +1.6% QoQ (in line with forecasts) and +5.4% YoY (vs. +5% expected). The greatest contribution came from industrial growth: overall production rose by +6.2% YoY, high-tech industries by +7.9% YoY, the automotive sector by +17.7% YoY, computers by +8.7% YoY, and semiconductors by +12.5% YoY. However, sectors tied to construction and consumption are stagnating: cement production declined by -2% YoY, and retail sales grew by only +3.7% YoY. For 2024 as a whole, economic growth reached the planned +5% YoY, driven by manufacturing, government investments, and exports, despite pressure from the real estate market and consumer activity.

Key events for this week:

• 20.01.2025: U.S. Presidential Inauguration and interest rate decision in China;
• 21.01.2025: UK unemployment data;
• 23.01.2025: Bank of Japan meeting and consumer inflation (CPI) data in Japan.

Companies reporting this week include:

• 21.01.2025: Prologis, The Charles Schwab, Netflix, 3M, D.R. Horton;
• 22.01.2025: Johnson & Johnson, Procter & Gamble, Abbott, GE Vernova, Halliburton, Ally Financial, Travelers Companies, Amphenol, Comerica, TE Connectivity, Teledyne Technologies, Textron;
• 23.01.2025: Elevance Health, Union Pacific, GE Aerospace, American Airlines, Freeport_mcMoRan, Northern Trust Corp, MakeMyTrip, OSI Systems;
• 24.01.2025: American Express, Verizon, NextEra Energy, Ericsson, HCA Healthcare, Moog.