A Look at the Day Ahead in European and Global Markets

Overview

The tone in the equities markets was decidedly feeble as the week came to an end. Chinese markets received little support from GDP figures that exceeded estimates, achieving Beijing’s 2024 growth target of 5%.

Japanese stocks are also struggling, weighed down by the yen strengthening beyond 155 per dollar for the first time in almost a month. This rise is largely due to traders ramping up bets for a Bank of Japan (BOJ) rate hike next week.

An MSCI gauge of global shares is still on track for its best week since early November, but this rally primarily reflects one notable day—Wednesday—when U.S. bank results kicked off the earnings season positively.

Caution is likely to dominate globally, with Donald Trump’s inauguration as U.S. President on Monday looming large. This event might bring significant announcements, including possible massive tariffs affecting various trading partners.

The recent sharp retreat in bond yields—driven by increased bets on a Federal Reserve (Fed) rate cut by June—should provide some relief for global investors, although it seems to have had minimal support for stocks in the latest market movements.

Current macroeconomic trends remain a central focus for both fixed income and foreign exchange markets, with the dollar on the back foot after six consecutive weeks of gains against other leading currencies.

The beleaguered pound appears to have found stability this week, alongside the euro, much to the chagrin of bears who anticipated a plunge to parity with the dollar at the start of the week.

What’s on the Calendar

Today in Europe, significant data releases include:
– UK retail sales for December
– Final reading of eurozone consumer inflation for December

Additionally, Bank of Spain Governor Jose Luis Escriva is scheduled to speak on central bank independence in Madrid. Wall Street will hear earnings reports from State Street (NYSE:STT) and Citizens Financial (NYSE:CFG) Group.

Note that Monday will be a market holiday in the U.S. in observance of Martin Luther King Jr. Day.

Key Developments to Watch on Friday

• UK retail sales (December)
• Eurozone HICP final (December)
• Bank of Spain Governor Escriva speech
• U.S. earnings from State Street and Citizens Financial Group

(By Kevin Buckland; Editing by Edmund Klamann)