Momentum compass: US markets lead the way in early 2025
The Momentum Compass for the week beginning 6 January 2025. This article focuses on the market’s driving forces and where they might lead next by summarising the previous week’s events and looking at upcoming data.
Last week’s main events
The trading week saw varied performance across major US indices, with a strong Friday session helping to cushion earlier declines amid low volume trading due to the post- festive season.
December's Chicago purchasing managers index (PMI) reading of 36.9 fell significantly below the expected 42.9, marking the 13th straight month of contraction.
The Atlanta Fed revised its quarter 4 (Q4) gross domestic product (GDP) forecast downward from 3.1% to 2.6%, weighing on market sentiment.
Initial jobless claims provided a bright spot, coming in at 211,000 for the week ended December 28, kick starting a recovery in US stock indices.
Treasury yields range traded below recent highs
US Treasury yields range traded before declining into year-end across the board, with longer-dated bonds showing the weakest performance.
The bond market moves reflect ongoing uncertainty about the inflation picture in the US.
US 10-year Treasury bond yield chart
Yield movements continue to influence broader market trading activity with US 10Y yield holding above the 4.50% mark but so far staying below its late December peak at 4.64%. Investors are closely monitoring the US 10-year Treasury bond yield for a potential rise above the 4.65% mark which may weigh on US stock indices.
Week ahead: key economic data
On Monday a series of promising services PMI readings provided insight into economic activity across major European economies.
Higher-than-expected German Consumer Price Inflation (CPI) didn’t negatively affect the German stock market with the DAX 40 index rising by around a percentage point around mid-day. US factory orders, industrial production and retail sales data will offer further economic context.
Eurozone inflation figures out on Tuesday will be closely watched by forex trading participants with the US dollar already trading lower by a percent on Monday.
US employment reports later in the week will be crucial for market direction, especially US non-farm payrolls on Friday.
UK corporate updates in focus
Major UK retailers including Next, Tesco and Marks & Spencer will report quarter three (Q3) and Q4 trading updates.
Shell will provide insights into energy sector performance.
Market participants will scrutinise these reports for signs of consumer spending trends and corporate health.
The updates could significantly impact UK share trading activity.
For IG’s "The week ahead" and economic calendar please have a look at https://www.ig.com/uk/trading-subscriptions/week-ahead and https://www.ig.com/uk/economic-calendar.
This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa 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. See full non-independent research disclaimer and quarterly summary.
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