Daily Market Outlook, January 6, 2025 

Patrick Munnelly, Partner: Market Strategy, Tickmill Group

Munnelly’s Macro Minute…

Asian markets hit new heights, driven by a strong rally in Chinese tech stocks, as investors turn their attention to the region's more attractive valuations. The MSCI Asia Pacific Index advanced 1.1%, while an index tracking Hong Kong-listed Chinese tech companies surged to its highest point since November. Meanwhile, Shanghai's stock market was on track to close at its loftiest level since 2015. Futures tied to equity indexes in the U.S. and Europe also climbed, suggesting the rally could have further momentum. Despite ongoing geopolitical tensions, including the situation in Venezuela, investors continue to pour money into stocks, extending a three-year bull market fuelled by enthusiasm for technology and artificial intelligence (AI). Markets have rebounded strongly from their April lows, buoyed by optimism about AI-driven growth and supportive measures like Federal Reserve rate cuts. Even with the recent surge, Asian stocks remain considerably more affordable than their U.S. tech counterparts. The MSCI Asia Pacific Index currently trades at a price-to-earnings ratio of 15, compared to 22 for the S&P 500 and 25 for the Nasdaq 100. Meanwhile, precious metals rebounded after an earlier dip. Gold edged up 0.3%, surpassing $4,460 per ounce, while silver skyrocketed 3.1%. Both metals saw gains earlier in the week following the reported U.S. abduction of Venezuelan President Maduro. Oil prices, which recently experienced their biggest jump in a week, have since steadied.

Domestically, The Bank of England’s November credit report exceeded expectations, with household borrowing for home purchases rising and net monthly lending reaching £4.5bn (up from £4.2bn in October). Unsecured credit growth accelerated to £2.1bn (from £1.7bn), the highest in two years, driven by credit card borrowing at £1.0bn (up from £0.7bn). Despite weak retail sales, negative GDP, and low confidence, household borrowing appetite appears stronger than anticipated. Deposit data showed caution, with net household deposits increasing by £13.0bn, the highest in over a year. Rising credit demand is unlikely due to lower interest rates, as mortgage and consumer loan rates increased slightly, raising concerns about potential financial stress during the holiday season. Meanwhile, the BRC reported a 0.7% y/y rise in shop prices in December, driven by a 3.3% y/y increase in food prices, while non-food items remained in deflation at -0.6% y/y. The BRC food price index suggests a likely increase in December’s CPI food inflation, aligning with BoE forecasts but still below earlier expectations. This could leave the overall headline CPI (3.2% y/y) slightly below BoE projections heading into February’s MPC meeting.

The macro spotlight this week is on the December US employment report (Friday), particularly after the Fed minutes highlighted the weakening labour market as the key factor behind the December rate cut. Ahead of that, Wednesday brings the November job openings data and the December ADP report, both of which could shape market expectations against the current 55k consensus for the official employment change. Also worth watching is the inflation expectations component of the January University of Michigan survey, due Friday. Business surveys will also draw attention, with the final December PMIs (Tuesday) under scrutiny to see if they echo the downgrades observed in last Friday’s preliminary manufacturing estimates. Additionally, the December ISM services report (Wednesday) will provide further insight into the US economy. Across the Atlantic, the eurozone’s flash estimate for December inflation is expected to align with the 2% target (Wednesday), preceded by French and German inflation figures on Tuesday. In the UK, the week wraps up with the KPMG/REC jobs report for December (Friday), although any signs of a post-Budget recovery may be overshadowed by typical year-end seasonal trends. The central banker speaking schedule appears light, but the Fed’s Barkin (Tuesday) and the ECB’s Lane (Friday) will kick off the year. Lastly, could President Trump surprise markets with an announcement on the next Fed Chair? Stay tuned.

Overnight Headlines

  • UK Urges US To Comply With International Law On Venezuela

  • Trump Asks Rubio To Lead Venezuela Overhaul After Maduro Arrest

  • Trump’s Venezuela Attack Deepens Europe’s Greenland Dilemma

  • US Plans To Intercept Venezuela’s Oil Tanker Claimed By Russia

  • US Ouster Prompts Region To Reassess China, Trump’s Next Move

  • US May Reimburse Oil Firms For Rebuilding Venezuela’s Infrastructure

  • US Pushes Oil Majors To Invest Big In Venezuela To Recover Debts

  • Canadian Dollar Lags G10 Currencies On Venezuela Uncertainty

  • China’s Influence In US Backyard Tested By Trump’s Capture Of Maduro

  • Investors Pull Money From Australia On Rate Risks, Weak Profits

  • Hyundai Unveils Humanoid Robot To Work In Car Factories

  • Nvidia Announces First ‘Reasoning’ AI For Autonomous Vehicles

  • Vistra To Buy Cogentrix Energy’s Big US Gas-Powered Fleet For $4B

  • Eni, Repsol Fight To Recoup $6B In Gas Payments From Venezuela

  • UK Food Inflation Quickens In Renewed Blow To Shoppers

  • Economists Favour Hernández De Cos And Knot As Next ECB President

FX Options Expiries For 10am New York Cut 

(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)

  • EUR/USD: 1.1640-55 (2.1BLN), 1.1700 (215M), 1.1740-50 (1.1BLN), 1.1770 (1BLN), 1.1800-05 (760M)

  • USD/CHF: 0.7925 (360M). EUR/CHF: 0.9350 (575M)

  • GBP/USD: 1.3400 (441M), 1.3500 (431M)

  • AUD/USD: 0.6700-10 (1.8BLN), 0.6750 (260M)

  • NZD/USD: 0.5750 (210M), 0.5800 (618M), 0.5850 (304M)

  • USD/JPY: 155.00 (2.4BLN), 155.50-60 (730M), 156.00 (766M), 156.70-75 (723M), 157.50 (790M)

CFTC Positions as of December 23rd:  

  • - S&P 500 CME net short position down 18,436 to 372,091  

  • - S&P 500 CME net long position down 27,949 to 936,689  

  • - CBOT US 5-year Treasury net short up 41,847 to 2,340,036  

  • - CBOT US 10-year Treasury net short up 72,262 to 742,370  

  • - CBOT US 2-year Treasury net short up 11,570 to 1,362,703  

  • - CBOT US UltraBond net short down 18,163 to 232,146  

  • - CBOT US Treasury bonds net short down 37,884 to 8,742  

  • - Bitcoin net short at –479 contracts  

  • - Swiss franc net short at –43,989 contracts  

  • - British pound net short at –41,199 contracts  

  • - Euro net long at 159,891 contracts  

  • - Japanese yen net long at 1,223 contracts

Technical & Trade Views

SP500

  • Daily VWAP Bullish

  • Weekly VWAP Bearish

  • Above 6875 Target 7030

  • Below 6850 Target 6811

EURUSD 

  • Daily VWAP Bearish

  • Weekly VWAP Bullish

  • Above 1.1750 Target 1.18

  • Below 1.1730 Target 1.1660

GBPUSD 

  • Daily VWAP Bullish

  • Weekly VWAP Bullish

  • Above 1.3490 Target 1.36

  • Below 1.3490 Target 1.3440

USDJPY 

  • Daily VWAP Bearish

  • Weekly VWAP Bullish

  • Above 157.40 Target 160

  • Below 156.50 Target 155

XAUUSD

  • Daily VWAP Bullish

  • Weekly VWAP Bullish

  • Above 4366 Target 4687

  • Below 4360 Target 4200

BTCUSD 

  • Daily VWAP Bullish

  • Weekly VWAP Bearish

  • Above 91.8k Target 98.17k

  • Below 91.2k Target 88.7k