Equity Markets closed higher on Friday supported by optimism on US/Sino relations after a phone call with US President-elect Trump and China President Xi, who both expressed desire for a positive start to their relationship when President Trump gets inaugurated on Monday. T-notes meanwhile flattened in likely profit taking after the dovish inflation data and dovish commentary from Waller this week ahead of Trump’s Inauguration where focus will lie on executive orders around tariffs/spending. The long end of the curve was flat by settlement but the front-end saw notable pressure. In FX, the Dollar outperformed, supported by the move in yields and strong IP data with eyes turning to the inauguration, while the Japanese Yen underperformed, although more reports are suggesting a rate hike is to be expected next week from the Bank of Japan. Crude prices settled in the red but finished the week in the green after Russian energy sanctions supported the weekly rally. Gold and Silver prices were sold amid the Dollar strength, while Crypto prices were buoyed with reports suggesting Trump is to plan an Executive Order for Crypto and make it a national priority. Elsewhere, Fed’s Hammack echoed her hawkish remarks and concerns around inflation, while Housing Starts and Building Permits beat, but the surge in starts was due to favourable seasonals. Industrial Production rose 0.9% in December, above the expected 0.3% and high end of analysts forecast range (0.6%), with the prior decline of 0.1% revised up to +0.2%. Manufacturing output grew by 0.6% (exp. 0.2%) from the upwardly revised prior of 0.4% (was 0.2%). Capacity Utilisation jumped to 77.6% above the expected 77.0% (prev. 76.8%, rev. 77.0%) and the highest analyst estimate of 77.4%. Within the report, the output of consumer goods increased 0.5% due to a rise in non-durables production outweighing a broad-based decline in Durables. A 1.9% gain in the energy index supported the 0.7% move higher in nondurable consumer goods, while a strong gain in the production of civilian index helped the index for businesses equipment rise by 1.4%. The Index for materials rose 1.2%, with all components gaining-ex consumer parts, which dropped 1.4%. Oxford Economics points out that when stripping out certain factors (post-strike Boeing recovery and the rebound in utilities and mining output), underlying manufacturing output is still recovering only slowly. The firm expects modest growth in Industrial Production in 2025, anticipating lower interest rates to be a modest tailwind, and the potential for more aggressive use of tariffs and uncertainty around the future of tax credits as a downside risk. Note, in wake of the data, the Atlanta Fed GDP Now tracker for Q4 24 was unchanged at 3.0%. Housing Starts surged 15.8% in December to 1.499 million from 1.294 million, well above the 1.320 million forecast. However, Oxford Economics highlights that this surge is misleading as it was impacted by favourable seasonable factors. The desk notes this improvement does not signal to them that construction is weathering the rise in mortgage rates, and that the balance of risks to the outlook for residential investment this year remain weighted to the downside. Meanwhile, Building Permits fell 0.7% to 1.483 million from 1.493 million, but above the 1.460 million forecast. OxEco also points out that housing starts “are running slightly ahead of permits, which isn’t overly favourable for residential construction over the next couple of months”. Although a strong Housing Starts print, it appears to be driven by seasonals while looking ahead concerns remain due to elevated mortgage rates and potential price increases for builders if building materials are impacted by US President-elect Trump tariffs, who is set to be inaugurated on Monday. In an interview with WSJ, Fed Member Hammack said the US still has an inflation problem, and also the Fed still has a rate-of-change problem that they need to address. Hammack further added that they made amazing progress on it but need to continue to finish the job. The dissenter from December said the central bank can be “very patient” and thinks rates today are only modestly restrictive. Reflecting on last month’s rate cut she added, “for me, that December conversation was really about, did you need to do it now, or could you be more patient and wait and see.” On that meeting, Hammack added just because something’s priced into the market, to her, is an insufficient reason to do it. Elsewhere, Oil closed 0.84% lower at 78.02 while Gold rose, closing 0.2%.
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For anyone following my Platinum Service it made 244 points on Friday and is now ahead by 1320 points for January after closing December with a gain of 1997 points after closing November with a gain of 3049 points having finished October with a gain of 2179 points. September saw a gain of 4402 points following a 301-point loss for August after closing July with a gain of 1918 points while June closed with a gain of 2074 points, having made 1843 points in May. The Platinum Service made 4010 points in April after ending March with a gain of 2113 points. February closed with a gain of 1606 points, after closing January with a gain of 3675 points. December saw a gain of 1890 points after finishing November with a gain of 1734 points. October ended with a gain of 3184 after closing September with a small gain of 228 points, after finishing August with a gain of 1485 points, following a small gain of 285 points gain in July, after closing June with a gain of 2683 points. May closed with a gain of 3205 points. April saw a gain of 3354 points while March closed with a gain of 6168 points. The Platinum Service made a record 9619 points last October. Since I started this New Platinum Service in June 2015 it has averaged a monthly gain of over 1900 points. I have a YouTube Channel which contains recent interviews I have given This can be viewed by clicking HERE Please subscribe to this for new interview notification
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