S&P/TSX Composite Rises Friday While U.S. Markets Experience Tech-Led Rally
Jan 4, 2025
Markets Set for a Critical January Amid Federal Reserve and Trump Administration Changes
As the global markets reopen after the New Year holiday, trading activity is currently modest, with expectations for increased activity next week when operations fully resume. Today’s attention is directed towards final manufacturing PMI data from the Eurozone and the UK, alongside US jobless claims. Looking ahead, tomorrow’s release of the US ISM Manufacturing Index may offer an early insight into potential market volatility for the weeks to come.
This January carries significant importance due to two key developments. Firstly, crucial US non-farm payroll and inflation reports are anticipated, which may influence the Federal Reserve's decision regarding a pause in its policy easing cycle scheduled for later this month. Following a relatively hawkish rate cut by the Fed in December, the market is preparing for a much slower pace of interest rate reductions in 2025.
Compounding market uncertainties is Donald Trump’s upcoming inauguration on January 20. The new administration is expected to sign at least 25 executive orders on its first day, focused on various areas such as immigration, energy policies, and cryptocurrency regulations. Trump’s previously announced plans to impose tariffs on imports from China, Mexico, and Canada could introduce inflationary pressures by increasing costs for businesses and consumers alike. Consequently, market participants will be on high alert for such developments and their potential repercussions for global trade.
Observing the cryptocurrency markets in the coming days might provide insights into how risk sentiment is shifting post-holiday. Bitcoin has shown signs of slowing its decline from 108368 after nearing the 55-day exponential moving average, currently situated at 92441. If Bitcoin rebounds from this level and surpasses the 99866 resistance point, it may indicate that the asset has completed its correction and is set to embark on a higher trend. However, if trading remains below the EMA, it could lead to a deeper correction, potentially revisiting the 38.2% Fibonacci retracement level of 49008 to 108368, located at 85962, or even lower.
Meanwhile, in Asia, trading remains subdued, with the Hong Kong HSI down by 2.4% and China's Shanghai SSE down by 3.05%. In contrast, Singapore's Straits Times Index has risen slightly by 0.14%.
As we embark on this new year, we extend our best wishes for a prosperous and healthy 2025!
China's Caixin PMI Manufacturing Index Shows Weakness
The Caixin Manufacturing PMI for China fell to 50.5 in December, down from 51.5 and below the market forecast of 51.6, indicating a moderation in growth within the manufacturing sector.
Despite some modest expansions in supply and demand, external demand continues to pose significant challenges, as noted by Wang Zhe, Senior Economist at Caixin Insight Group. Zhe pointed out that external demand remains sluggish, with the job market experiencing notable contractions. Additionally, sales prices remain weak, and overall market optimism is fading.
The survey results reveal "prominent downward pressures," attributed to weak domestic demand and challenging global conditions that have squeezed profit margins and lowered confidence levels. The report further suggests that previous stimulus measures have not yet produced the expected consistent outcomes, thereby necessitating additional time to evaluate their effectiveness.
What Lies Ahead
Today, European markets will see the release of Swiss PMI manufacturing data, Eurozone final PMI manufacturing, M3 money supply figures, and UK final PMI manufacturing. Later, the United States will report on initial jobless claims, final PMI manufacturing, and construction spending figures.
USD/CAD Daily Outlook
The daily outlook for USD/CAD remains neutral as trading consolidates below 1.4466. While a deeper pullback is still possible, the forecast remains bullish as long as support holds at the former resistance level of 1.4177. A break above 1.4466 and sustained trading above 1.4391 could lead to a retest of the long-term resistance area around 1.4667/89.
From a broader perspective, the upward trend from 1.2005 in 2021 is ongoing and has already met the 61.8% projection threshold from 1.2401 to 1.3976 at 1.4391. Continued trading above this level would signal further upward movement towards the key resistance zone of 1.4667/89 (the highs of 2020 and 2015). Even in the event of a significant pullback, the medium-term outlook will remain bullish as long as the 1.3976 resistance level is maintained.
Recent Economic Indicators
| GMT | CCY | EVENTS | ACT | F/C | PP | REV |
|---|---|---|---|---|---|---|
| 01:45 | CNY | Caixin Manufacturing PMI Dec | 50.5 | 51.6 | 51.5 | |
| 08:30 | CHF | Manufacturing PMI Dec | 48.3 | 48.5 | ||
| 08:50 | EUR | France Manufacturing PMI Dec F | 41.9 | 41.9 | ||
| 08:55 | EUR | Germany Manufacturing PMI Dec F | 42.5 | 42.5 | ||
| 09:00 | EUR | Eurozone Manufacturing PMI Dec F | 45.2 | 45.2 | ||
| 09:00 | EUR | Eurozone M3 Money Supply Y/Y Nov | 3.50% | 3.40% | ||
| 09:30 | GBP | Manufacturing PMI Dec F | 47.3 | 47.3 | ||
| 13:30 | USD | Initial Jobless Claims (Dec 27) | 223K | 219K | ||
| 14:30 | CAD | Manufacturing PMI Dec | 51.9 | 52 | ||
| 14:45 | USD | S&P Global Manufacturing PMI Dec F | 48.3 | 48.3 | ||
| 15:00 | USD | Construction Spending M/M Nov | 0.30% | 0.40% | ||
| 16:00 | USD | Crude Oil Inventories | -2.4M | -4.2M |