Ahead of the game: 27 January 2025
President Trump's recent call for interest rate cuts and lower oil prices has propelled the S&P 500 and ASX 200 to new heights ahead of key economic indicators.
S&P 500 reaches new heights
United States (US) stocks closed higher on Thursday, with the S&P 500 hitting a new record high above 6100, following a 5.3% pullback in December. Investor sentiment was boosted by President Trump's virtual address to the World Economic Forum, where he called for immediate interest rate cuts and urged Saudi Arabia to lower oil prices.
ASX 200 continues upward trend
In Australia (AU), the ASX 200 gained for the third consecutive week, falling just 84 points short of its record high of 8415.5 from early December. The gains came ahead of next week’s crucial Australian fourth quarter (Q4) consumer price index (CPI) reading, which will determine whether the Reserve Bank of Australia (RBA) will cut rates for the first time since November 2020 or maintain the current cash rate of 4.35%.
The week that was: highlights
- In the US, initial jobless claims rose by 6000 to 223,000, still near their lowest levels of the past year. Meanwhile, continuing claims increased by 46,000 to 1.899 million
- In the United Kingdom (UK), the unemployment rate rose to 4.4% in November, its highest in three months
- In China (CN), the People's Bank of China (PBOC) kept its key one-year and five-year lending rates unchanged
- In Japan (JP), machinery orders surged 10.3% year-on-year (YoY) in November
- In New Zealand (NZ), Q4 headline inflation was unchanged at 2.2% YoY
- Crude oil lost 4% to $74.29
- Gold rose 1.9% to $2754
- Bitcoin climbed 2.8% to $104046
- Wall Street's gauge of fear, the volatility index (VIX), fell to 15.03
Key dates for the week ahead
Australia & New Zealand
- AU: National Australia Bank (NAB) business confidence (Tuesday, 28 January at 11.30am AEDT)
- AU: Q4 CPI (Wednesday, 29 January at 11.30am AEDT)
- NZ: Australia and New Zealand Bank (ANZ) business confidence (Thursday, 30 January at 11.00am AEDT)
- AU: Q4 producer price index (PPI) (Friday, 31 January at 11.30am AEDT)
China & Japan
- JP: Consumer confidence (Wednesday, 29 January at 4.00pm AEDT)
- CN: National Bureau of Statistics (NBS) manufacturing purchasing managers' index (PMI) (Friday, 31 January at 12.30pm AEDT)
- CN: Caixin manufacturing PMI (Friday, 31 January at 12.45pm AEDT)
United States
- US: Durable goods orders (Wednesday, 29 January at 12.30am AEDT)
- US: Federal Open Market Committee (FOMC) meeting (Thursday, 30 January at 6.30am AEDT)
- US: Gross domestic product (GDP) advanced Q4 (Friday, 31 January at 12.30am AEDT)
- US: Personal consumption expenditures (PCE) inflation and personal income/spending (Saturday, 1 February at 12.30am AEDT)
Europe Area (EA) & United Kingdom
- EA: Q4 GDP (Thursday, 30 January at 9.00pm AEDT)
- EA: European Central Bank (ECB) interest rate decision (Friday, 31 January at 12.15am AEDT)
Key events for the week ahead
-
AU
Q4 CPI
Wednesday, 29 January at 11.30am AEDT
For the third quarter (Q3) of 2024, headline inflation increased by 0.2%, for an annual rate of 2.8% YoY, the lowest since the March 2021 quarter. The decrease was largely anticipated, driven by falling electricity prices (-17.3%) due to government rebates and automotive fuel prices (-6.7%).
The RBA's preferred measure of inflation, the trimmed mean, rose by 0.8% in Q3 2024, reducing the annual rate to 3.5% from 4.0% prior, marking the seventh consecutive quarter of lower annual trimmed mean inflation.
The most recent monthly CPI indicator (for November, released in early January) showed further encouraging signs. It rose by 2.3% YoY in November. Annual trimmed mean inflation eased to 3.2% YoY in November from 3.5% in October.
For December 2024, headline inflation is preliminarily expected to rise by 0.5% quarter-on-quarter (QoQ), for an annual rate of 2.2%. The core measure, the trimmed mean, is expected to rise by 0.6% QoQ, potentially easing the annual trimmed mean inflation rate to 3.3%.
The Australian interest rate market is increasingly confident that these inflation figures will allow the RBA to cut rates in February by 25 basis points (bp) to 4.10%, a probability that is 65% priced in.
AU all groups CPI and trimmed mean chart
-
US
FOMC meeting
Thursday, 30 January at 6.30am AEDT
At its last meeting in December, the FOMC cut rates by 25 bp to a range of 4.25% to 4.50%, widely expected and resulting in a total of 100 bp of rate cuts since September.
However, its projections (dots) of only two more 25 bp cuts in 2025 (versus four previously) were more hawkish than the three cuts expected by most pundits, though in line with market pricing.
Additionally, the Federal Reserve's (Fed) revised outlook, including a lower unemployment rate and higher GDP and core inflation forecasts, was accompanied by an increase in the terminal rate to 3.125% from 2.875%.
The FOMC’s December meeting minutes indicated that the Fed plans to slow future cuts due to uncertainties around potential changes in immigration and trade policies that might affect the US economy.
'Almost all participants judged that upside risks to the inflation outlook had increased.'
Since the December rate cut, US inflation data has met expectations, bolstering confidence in the ongoing downward trend of inflation. Economic activity data remains relatively strong. Considering the Fed’s recent guidance and the need to evaluate the economy’s response to last year's 100 bp reductions, the Fed is expected to keep rates steady next week while maintaining its easing bias.
US Fed funds rate chart
-
CN
NBS PMIs
Friday, 31 January at 12.30 pm AEDT
China's economic data has shown stabilisation, but challenges persist. The government met its 2024 GDP growth target of 5%, aided by stimulus measures and strong Q4 exports. However, the economy continues to face deflationary pressures, falling home prices, weak consumer confidence, and looming US-CN trade uncertainties.
In December, China's official manufacturing PMI dropped more than expected to 50.1, below the consensus of 50.3. However, services activity expanded at its fastest rate in seven months, indicating some success in stimulating domestic demand despite ongoing external pressures.
Looking ahead, the official manufacturing PMI is anticipated to remain steady at 50.1, while the non-manufacturing PMI may ease slightly to 52.0 from 52.2. These figures are expected to confirm further stabilisation, but caution is likely to prevail as the 1 February deadline for US tariffs approaches, as announced by US President Trump.
CN NBS manufacturing & non-manufacturing PMI chart
-
EA
ECB interest rate decision
Friday, 31 January at 12.15am AEDT
The ECB is expected to cut rates by 25 bp at its upcoming meeting, lowering the deposit rate from 3% to 2.75%. This will be the fifth rate cut since June 2024 and aligns with policymakers's commitment to continuing monetary easing.
While inflation has shown some signs of increasing in recent months, the decision to cut rates is likely driven by a focus on supporting growth. Last month, policymakers further downgraded their economic growth projections, highlighting the need to reduce rates to a neutral range of 1.75% - 2.0% from the current restrictive level.
In Germany, economic activity remains sluggish, with the manufacturing PMI still contracting despite growth in the services sector.
EA interest rate chart
-
US
Core PCE price index
Saturday, 1 February at 12.30am AEDT
In November, headline PCE prices in the US increased by 2.4% YoY, rising from a three-year low of 2.1% in September. The core PCE price index, the Fed's preferred measure for underlying inflation, rose by 0.1%, the smallest increase in six months. This left the annual core PCE rate stable at 2.8% in December, below forecasts of 2.9%.
For December, headline PCE is expected to rise to 2.6% YoY. Core PCE inflation is anticipated to remain stable at 2.8%.
US headline annual PCE chart
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Start trading forex today
Trade the largest and most volatile financial market in the world.
- Spreads start at just 0.6 points on EUR/USD
- Analyse market movements with our essential selection of charts
- Speculate from a range of platforms, including on mobile
Live prices on most popular markets
- Forex
- Shares
- Indices
