JASPER’S MARKET SQUAWK 18-01-2024

USD Rises After US Retail Sales Beat

European Central Bank’s firm stance on interest rates and unexpected US retail sales resilience driving forex markets.

Key Factors for Today

1. ECB President Christine Lagarde’s remarks dampening expectations for rate cuts.
2. US retail sales surpassing predictions, impacting Federal Reserve’s rate cut prospects.
3. Rising bond yields influencing global stock market dynamics.
4. Geopolitical tensions affecting shipping rates and market sentiment.
5. Apple overtaking Samsung in global smartphone sales.

Chart of the Day

And if we look at the two-year period 2024-2025? In this case I post this nice analysis by Corrina Ricker of the EIA.

Source: Matteo Marchetti, KTM Market Analyst

For all the latest market developments follow Matteo @MMTradingKTM and Key to Markets @keytomarkets on Telegram

Biggest Stories

Christine Lagarde, President of the European Central Bank, has recently reaffirmed the bank’s cautious approach towards interest rate cuts, emphasizing the need for clear signs of inflation retreat. This position mirrors the sentiments of the Bank of England, especially in light of Britain’s accelerating inflation rate. Lagarde’s comments are significant in shaping market expectations and monetary policy outlook in Europe.

Contrary to expectations, December saw a robust increase in U.S. retail sales, signalling sustained economic strength. This development casts doubts on the Federal Reserve’s likelihood to initiate rate cuts soon, especially considering the better-than-expected retail performance. The resilience of the US economy is playing a pivotal role in shaping the Federal Reserve’s monetary policy and market expectations.

The rise in bond yields is sending ripples across global stock markets. Investors are recalibrating their expectations, moving away from previous dovish stances on the 2024 interest rate outlook. This shift is particularly felt in emerging market stocks, which are off to a challenging start this year, and major indices like China’s CSI300 and Hong Kong’s Hang Seng Index are also experiencing downturns.

Recent geopolitical events, including the US’s reclassification of the Yemen-based Houthi rebels as terrorists and associated military actions, are impacting global markets. These events have led to increased shipping rates as freighters seek alternative routes, exemplifying how geopolitical tensions can have immediate economic repercussions and influence investor sentiment.

In a significant market shift, Apple has ended Samsung Electronics’ 12-year reign as the world’s largest seller of smartphones. This achievement marks a key moment in the tech industry, reflecting shifting consumer preferences and competitive dynamics. Apple’s rise to the top spot in smartphone sales is a noteworthy event, underscoring the company’s market influence and innovation strategies.

Econ Calendar

• ECB to release December meeting minutes; Lagarde’s speech expected.
• Bank of England’s credit conditions survey.
• France’s reopening of multiple government debt auctions ranging from 4 to 15 years.
• US to report building permits and housing starts data.