Global News Summary: 6–11 January 2025
United States (USD)
• Economic Growth & Jobs: Strong jobs data showed robust hiring, with the unemployment rate unexpectedly falling. This diminished prospects for significant Federal Reserve rate cuts, with swaps pricing in less than 30 basis points of cuts for 2025. Fed officials warned of persistent inflation risks, and core inflation remained above the 2% target.
• Debt Securities: Treasury yields surged, with the 10-year yield reaching 4.76% and 30-year yields briefly exceeding 5%. Rising yields reflect concerns about prolonged monetary tightening.
• Markets: The S&P 500 fell 1.5% on 10 January, its worst day since December 2024, while the Nasdaq 100 and Dow Jones both dropped 1.6%. The VIX climbed to 20, signalling heightened volatility.
• AI: Musk’s lawyer urged OpenAI to auction off a stake, escalating tensions in the AI sector. Hewlett Packard Enterprise secured a $1 billion AI server deal with Elon Musk’s X network.
United Kingdom (GBP)
• Jobs & Economy: 55% of companies plan to raise prices in Q1 2025 due to rising tax and wage costs, dampening business confidence. Gilt yields hit 5.25%, reflecting heightened fiscal concerns and threatening growth plans. Retail sales rose 0.4% in Q4, below inflation, highlighting cautious consumer spending.
• Government Policy: Chancellor Reeves will visit China to bolster economic ties amid market turmoil and wavering domestic confidence.
Eurozone (EUR)
• Economic Growth: German industrial production rose 1.5% MoM in November, signalling potential stabilisation in manufacturing. EZ inflation increased to 2.4% YoY in December, driven by energy costs, supporting gradual ECB rate cuts.
• Debt: ECB officials indicated cuts would continue as inflation aligns with targets. The deposit rate is expected to fall from its current 3%.
Japan (JPY)
• Jobs & Inflation: Base salaries rose 2.7% in November, driving nominal wages up 3%. However, household consumption fell 0.4% YoY in November, showing economic fragility. Tokyo inflation increased to 2.4% in December, driven by energy costs.
• Monetary Policy: The BOJ signalled caution over further rate hikes amid yen weakness, with the yen nearing ¥160 per dollar.
China (CNY)
• Economic Growth & Inflation: Inflation slowed to 0.1% YoY in December, marking the fourth consecutive month of deceleration, despite government stimulus efforts. The People’s Bank of China launched measures to stabilise the yuan, with its offshore value falling past 7.3 per dollar due to economic uncertainty and tariffs.
• Debt: China announced its largest sale of offshore bonds to support the yuan amid weakening sentiment.
Australia (AUD)
• Inflation: Trimmed mean inflation slowed to 3.2% in November from 3.5%, edging closer to the RBA’s target. Retail sales rose 0.8% in November, but cautious consumer sentiment underscores challenges for the economy.
AI Developments
• Global AI Race: Anthropic is close to a $2 billion investment deal, valuing the startup at $60 billion. Musk’s lawyer called for OpenAI’s competitive stake auction. AI infrastructure continues to attract significant funding.
Key Themes
• Inflation: Persistent inflation remains a concern globally, with energy prices contributing significantly in the EZ and Japan.
• Recession Risks: Mixed economic data, including slowing retail sales in the UK and weak inflation in China, highlight ongoing risks.
• Debt & Markets: Rising bond yields in the US and UK reflect concerns about prolonged monetary tightening, while global equities faced increased volatility.
Markets and economies face significant challenges, including inflationary pressures, geopolitical uncertainty, and shifting central bank policies.