Daily Market Outlook, January 7, 2025
Patrick Munnelly, Partner: Market Strategy, Tickmill Group
Munnelly’s Macro Minute…
The record-setting surge in global stocks hit a speed bump in Asia as markets showed signs of overheating after their rapid ascent. Adding to the cautious mood, rising tensions between China and Japan dampened sentiment. On Wednesday, a global market index slipped by 0.1%, ending a four-day winning streak that had pushed it to unprecedented highs. Asian markets retreated 0.6%, cooling off after their strongest start to a year ever recorded. In Japan, stocks dropped by 1% following China’s decision to impose export restrictions targeting the country. Meanwhile, in other regions, US equity-index futures hinted at slight losses, while Europe saw a marginal uptick. Commodities experienced notable shifts as well. Gold slid 0.9%, while silver took a sharp 2.9% dive. Nickel gave up some of its recent gains after achieving its biggest rally in over three years in London just a day earlier. Oil prices also retreated amid claims by former President Trump that Venezuela might transfer up to 50 million barrels of crude oil to the US. In Asia, the spotlight remained on the escalating friction between China and Japan. This geopolitical strain overshadowed the optimism fuelled by advancements in artificial intelligence and hopes for potential interest rate cuts by the Federal Reserve, which had previously driven global stocks to record-breaking levels. Attention now turns to upcoming US economic data, which could determine whether investor confidence will hold steady, even as traders largely brushed aside other geopolitical concerns, including those linked to Venezuela. Adding fuel to the fire, Beijing intensified its restrictions on exports to Japan, particularly on goods that could have military applications. This move marked the latest development in the ongoing diplomatic standoff between the two nations, with Taiwan at the centre of their disagreements. On Tuesday, MSCI announced it would continue its current index classification for digital asset treasury firms, including those with crypto holdings exceeding 50% of their total assets. This decision means companies like Strategy, which holds over $60 billion in Bitcoin—accounting for approximately 99% of its enterprise value—will stay included in MSCI’s global benchmarks for now. However, the index provider revealed plans to initiate a "broader consultation" to reassess how non-operating companies should be categorised.
The unexpected drop in Germany's CPI on the EU harmonised measure to 2.0% y/y in December, below forecasts, suggests the euro area flash CPI at 10am GMT may also underperform at 1.9% y/y, down from November's 2.1%. This would place Q4 average inflation at 2%, slightly below ECB projections. While the impact may be minimal due to potential data anomalies, the weaker December PMIs support Lagarde's cautious "in a good place" policy stance over Schnabel's earlier hawkish tone.
The UK Deloitte CFO survey for Q4 2025 showed a rise in optimism, with a net balance improving to -13 from -24 in Q3, possibly due to post-Budget relief during the December fieldwork. However, its small sample size (55 large corporates) contrasts with the Federation of Small Businesses (FSB) index, which has consistently shown lower SME confidence since Q2 2024. Factors like minimum wage hikes and complex business rate changes may limit a similar SME recovery in Q4. This divergence highlights the UK's "K-shaped" economy, with optimism varying significantly between large and small businesses.
In terms of the macro slate that could impact the markets on Wednesday, highlights include Germany's release of retail sales figures and unemployment data, along with France's consumer confidence report for December. Additionally, construction PMIs from the eurozone, Germany, France, and the UK will be in focus. In the U.S., the JOLTS job openings report and the ADP employment data are also set to be released.
Overnight Headlines
Australia Core Inflation Slows In November, Boosts RBA Hold Case
Trump Says Venezuela To Give 30–50 Million Barrels Of Oil To US
Oil Futures Slide After Trump Says Venezuelan Oil To Be Shipped To US
US Presses Venezuela To Dismiss Agents From China, Russia, Iran, Cuba
UK, France Sign Intent To Send Forces To Ukraine In Event Of Peace Deal
Saudi Arabia To Open Financial Market To All Foreign Investors Next Month
Musk’s xAI Raises $20B From Investors Including Nvidia, Cisco, Fidelity
Nvidia Stepping Up H200 Production Ahead Of Sales To China, CEO Says
OpenAI Challengers Test Appetite For Chinese AI With Twin Debuts
Eli Lilly In Advanced Talks To Acquire Ventxy Biosciences For Over $1B
Mobileye To Buy Robot Startup Mentee For $900M In Cash And Stock
TSMC’s Record Stock Rally Spurs Wall Street Rush To Hike Targets
Asia’s Rare Earth Stocks Climb On New China–Japan Export Curbs
FX Options Expiries For 10am New York Cut
(1BLN+ represents larger expiries, more magnetic when trading within daily ATR)
EUR/USD:1.1620-25 (1.2BLN), 1.1725-30 (1.5BLN), 1.1735-40 (677M), 1.1775 (1.5BLN)
USD/CHF: 0.7820 (237M), 0.8010 (200M), 0.8050 (301M)
EUR/CHF: 0.9300 (374M), 0.9315 (420M). EUR/GBP: 0.8730-40 (250M)
GBP/USD: 1.3420 (306M), 1.3440-55 (382M), 1.3490 (234M)
NZD/USD: 0.5650 (1.1BLN), 0.5700 (390M)
USD/CAD: 1.3800 (1BLN), 1.3835-40 (870M)
USD/JPY: 156.00 (611M), 165.50 (300M), 157.00 (712M), 157.50 (231M)
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 6890 Target 7030
Below 6860 Target 6812
EURUSD
Daily VWAP Bearish
Weekly VWAP Bullish
Above 1.1750 Target 1.18
Below 1.1730 Target 1.1630
GBPUSD
Daily VWAP Bearish
Weekly VWAP Bullish
Above 1.3490 Target 1.36
Below 1.3490 Target 1.3440
USDJPY
Daily VWAP Bullish
Weekly VWAP Bullish
Above 157.40 Target 160
Below 156.50 Target 155
XAUUSD
Daily VWAP Bullish
Weekly VWAP Bullish
Above 4400 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
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Past performance is not indicative of future results.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!