News Recap • Week 52 2024

It was a slow week in terms of news and markets around the world were closed for the holidays. We did get some interesting macro data out of both Asia and the US though, and equities managed to recover some of last week’s losses.

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Market recap

Equities

• 🇺🇸 S&P 500 rose 0.67% for the week despite a 1.11% drop on Friday.
• 🇺🇸 Nasdaq Composite gained 0.76% for the week.
• 🇪🇺 STOXX 600 rose 0.99% after three consecutive days of gains.
• 🇬🇧 FTSE 100 added 0.81%, slightly lagging the broader European market.
• 🇩🇪 DAX rose just 0.5% for the week but has significantly outperformed broader Europe this year.
• 🇩🇰 C25 rallied 3.27% to recover most of last week’s 5.14% drop, Novo Nordisk being the main driver in both weeks.
• 🇯🇵 Nikkei 225 jumped 4.08% to its highest weekly close since July, seemingly fueled by the news of Japan’s record 2025 budget (more on that below).
• 🇨🇳 Hang Seng rose 1.87% for the week after new Chinese stimulus plans were announced for 2025 (also more on that below).
• 🇨🇳 CSI 300 gained 1.36% for the week.
• 🇮🇳 Nifty 50 rose 0.96% as the Indian market tries to recover from last week’s 4.77% sell-off.

Currencies & Commodities

• The DXY inched up by 0.18% to close above 108 for the first time since its big drop in November 2022.
• USD.EUR was virtually flat for the week while the USD.GBP pair actually fell a bit on a stronger British pound.
• USD.JPY was the main driver behind the dollar’s strength, gaining 0.92% for the week to get within 3% of its all-time high from July. The move here is somewhat concerning. More on that below.
• Gold barely moved this week and continues to consolidate after its strong 2024.
• The crypto market is slightly up for the week as of Saturday morning (CET), primarily led by gains in Solana (+3.3%) and Ethereum (+1.9%). Bitcoin is actually down 0.7% this week to around $94,000 and almost 13% off of its $108,000 peak on December 17.

Other

• The VIX dropped 13.13% for the week, settling down after last week’s big volatility spike.
• The 10-year US treasury yield jumped another 2.19% to 4.629%, its highest level since April. The move most recently has been fueled by the Fed’s updated expectation for fewer rate cuts next year. The 2-year lagged with a 0.25% gain.

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Upbeat macro data from Japan

Japan’s industrial output declined for the first time in three months, falling 2.3% in November. That’s down from a 2.8% increase in October but still much better than the -3.4% expected.

Industrial product also declined on an annual basis, shrinking 2.8% from a year ago.

Retail sales data surprised to the upside as well, growing 2.8% year-over-year in November vs 1.6% expected. It was also significant acceleration from 1.3% in October.

On a monthly basis, retail sales grew 1.8% in November for its fastest rate since September 2021. This was the first increase in three months.

In other news, the latest reading of Japan’s unemployment rate showed 2.5%, matching market expectations and remaining unchanged from the month prior.

Perhaps a little too upbeat was the latest inflation reading from Tokyo. The consumer price index (CPI) jumped 3% year-over-year in December, its highest level of the year.

The hotter inflation increases the likelihood of more rate hikes from the Bank of Japan who made its first hike in 17 years when it brought rates from negative 0.1% to 0.1% in March this year. It hiked again in July, taking rates to 0.25%.

And on the note of rate hikes, a summary of the BoJ’s latest meeting showed that it is indeed ‘likely to hike in the near future’.

All in all, the market seemed to like the data. The Japanese Nikkei 225 index rose more than 4% for the week and closed at its highest level since July. It’s now up more than 20% for the year.

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Big drop in US consumer confidence

The Conference Board’s consumer confidence index came in at 104.7 in December. This was down by 8 points from 111.7 in November and well below the 113.2 expected by economists surveyed by Bloomberg.

Zooming out, however, the data point doesn’t look bad at all. The index was hovering around 100 for most of 2024 until it took a jump up to 109.6 in October.

The expectations index, which includes the short-term outlook for income, business, and labor conditions, told a similar tale, dropping 12.6 points from 93.7 in November to 81.1 in December.

Some analysts are concerned about this because of the notion that the 80 level has historically signaled a recession ahead. However, that hasn’t really been the case since the great financial crisis in 2008 - 2009.

In fact, the expectations index was below 80 for the better part of four years after the recession ended in 2009. And more recently, the index only had brief spikes above 80 from the start of 2022 to the latter half of 2024. While a recession may come in 2025, the index clearly hasn’t worked as an accurate predictor.

Furthermore, the Federal Reserve may actually welcome a slowdown in consumer sentiment to combat inflation. This may be what we need to finally close that chapter and enable the Fed to make some significant rate cuts next year. If this latest sentiment data is in fact accurate, that is.

These indices are interesting to follow because of how much attention they get, but it’s important to separate signal from noise. As with most charts, nothing goes up (or down) in a straight line. The December data point looks like noise in the trend that’s been in place for almost three years: Consumers feel fine, both about the present and the near future.

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Record bond issuance from China

China plans to issue a record $411 billion (3 trillion yuan) worth of special treasury bonds next year, three times as much as this year.

What’s really interesting about this is that the proceeds will be used to boost consumption via subsidy programmes, equipment upgrades by businesses, and funding investments in innovation-driven advanced sectors.

The move underscores China’s commitment to support its local economy and soften the blow from a potential trade war with the US.

China’s 10-year and 30-year treasury yields rose 1 and 2 basispoints respectively on the news, although the latter gave it all back with a 3% drop on Friday. The Hang Seng index rose 1.87% during the holiday-shortened week.

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In other news

Macro

• S&P 500 jumped 1.1% on the shortened trading day of December 24, its biggest Christmas Eve rally since 1974.
• Japan’s government is working on a record $735 billion (115.5 trillion yen) budget for the new fiscal year starting in April 2025. Japan has been trying to boost its struggling economy for decades, leaving them with the world’s largest public debt burden. Because of that, the government will trim new bond issuance to 28.6 trillion yen compared to this fiscal year’s initially planned 35.4 trillion yen.
• Japan’s Finance Minister, Katsunobu Kato, expressed concerns about the recent yen weakness and speculation. He also appeared ready to intervene, saying that “the government will take appropriate action against excessive FX moves”. The yen has weakened even further against the dollar after the Bank of Japan postponed its expected rate hike and the Federal Reserve moved in the opposite direction by lowering its forecast for rate cuts in 2025. The yen is now just 2.6% away from its July peak where the BoJ intervened and managed to strengthen it by 12% in just a couple of weeks, setting off the massive yen carry trade unwinding that crashed markets around the world.
• China’s industrial profits dropped 7.3% in November from a year earlier. While this was the fourth straight month of declines, the rate has tapered off significantly from 27.1% and 10% year-over-year declines in September and October.
• China revised its 2023 GDP from 126 to 129.4 trillion yuan ($17.73 trillion).
• The US has initiated a trade investigation into China’s production of legacy semiconductors, citing evidence suggesting that China is utilizing anti-competitive and non-market policies to dominate global chip production. Invesco’s Semiconductor ETF (SOXQ) rose 2.81% on Monday after the news with Nvidia jumping as much as 3.69%.
• South Korea’s acting president, Han Duck-soo, was impeached on Friday after two weeks on the job. He took over after Yoon Suk Yeol imposed martial law, a decision that also led to an impeachment. Finance Minister Choi Sang-mok is now next in line for the job. The South Korean stock market was virtually flat for the week despite the political turmoil.
• GDP in the UK flatlined in the third quarter according to revised data from the UK’s Office for National Statistics. GDP had initially been estimated to grow by 0.1% in the quarter.
• Uruguay raised its interest rate from 8.5% to 8.75% in an attempt to bring inflation back down to its 4.5% target. This was the country’s first rate hike in two years and signals a reversal of its recent cutting cycle. Uruguay was one of the first Latin American countries to begin easing in April 2023 and managed to lower rates by a full 3 basispoints from 11.5% before this latest move.

Other

• Nvidia became the most-bought stock by retail investors in 2024 with $30 billion in net inflows.
• Toyota, the world’s largest automaker, reported a decline in global production for the 10th month in a row. The company produced 869,230 vehicles in November, down 6.2% from the same month last year and a much larger drop than October’s 0.8% dip.
• Elon Musk’s xAI raised $6 billion in its series C funding round, valuing the company at more than $40 billion. Nvidia was among the investors.
• Xerox announced that it will acquire Lexmark in a deal valued at $1.5 billion.
• Uber’s $950 million acquisition offer for Delivery Hero’s Foodpanda operations in Taiwan was blocked by local regulators over competition concerns.
• The Bank Policy Institute sued the Federal Reserve over the annual stress test, saying it falls short of its goals. The institute represents big banks like JPMorgan, Goldman Sachs, and Citigroup.

Crypto

• Bitcoin reserves on Binance dropped to the lowest level since January this year. This is usually seen as a bullish sign, indicating reduced interest in selling among current holders.
• Asset manager Strive filed for an actively managed ETF that will invest in convertible bonds issued by MicroStrategy and other corporate Bitcoin buyers, aka ‘Bitcoin Bonds’. Strive was founded by Vivek Ramaswamy who ran for president for the Republicans this year and is now leading the new Department of Government Efficiency along with Elon Musk.