The last full trading week in 2024 was characterized in particular by the US Federal Reserve meeting. Jerome Powell threw a spanner in the works for investors just before Christmas. Investors fear that the monetary policy headwinds will ease less in the coming year than previously thought. Shortly before the turn of the year, the markets could therefore switch into correction mode and take profits in the face of ambitious price highs.
DAX Chart
Source: TradingView
China data mixed - Middle Kingdom fears Trump administration
At the start of the week, investors were already confronted with significant economic data from the kingdom. While industrial production in the world's second-largest economy increased significantly in November, retail sales fell short of expectations. Compared to the same month last year, the manufacturing sector grew by 5.4 percent, which was stronger than expected (5.3 percent). The retail sector only grew by 3.0% in November, compared to 4.8% in October.
China's economy fears headwinds from the new US administration under the leadership of Donald Trump, particularly in the new year.
Ifo index falls to lowest level since May 2020 - sixth decline in a row
The widely observed ifo business climate index caused quite a stir on Tuesday, falling to 84.7 points in December after 85.6 points in November, its lowest level since May 2020. "The weakness of the German economy has become chronic," said the institute.
Meanwhile, the ZEW index for economic expectations was slightly better than expected. The outlook for the next six months unexpectedly rose by 8.3 points to 15.7 points in December.
On Tuesday, stronger-than-expected retail sales data for the US, which came in at 0.7 percent, higher than previously forecast (0.5 percent), dampened the fear of interest rate cuts. Investors fear that a strong US economy could give the Fed less leeway to cut interest rates.
Interest rate spread in the USA now at 4.25 to 4.50 percent - Muted interest rate cut fantasies catch investors on the wrong foot
Late on Wednesday evening, the US monetary watchdog did turn the notorious interest rate screws downwards by 25 basis points, as expected, so that the interest rate band now stands at 4.25 to 4.50 percent. However, the Fed's interest rate outlook caused unease. The markets expect that the Fed could reduce its pace in the coming months, not least due to the change of policy in the United States. President-elect Donald Trump had announced the introduction of punitive tariffs on imports and overall tax cuts, which could fuel inflation.
The Fed's interest rate forecast for 2025 signals interest rate cuts of just 0.50 percentage points, which are dependent on inflation and economic developments.
US GDP stronger than expected - PCE deflator likely to provide important inflation signals
The annualized GDP growth rate for the US was 3.1 percent in the third quarter of the year, higher than expected (2.8 percent), new data showed on Thursday.
Finally, the focus today is on the publication of the so-called PCE deflator for personal consumption expenditure (14:30). Investors are hoping for new indications on the development of inflation. An increase of 2.90 percent is expected compared to the same month last year, after 2.80 percent in the previous month.
Consumer sentiment data from Reuters and the University of Michigan could also send important signals (16:00).
