Asia & European Sessions:
- Stock markets are turning cautious as markets prepare for Trump’s presidency. Growing concern that tariffs will disrupt global trade and fuel inflation has been denting sentiment.
- Indexes declined and Japan and Hong Kong, European markets are posting modest gains and US futures are in the red, as yields rise.
- Wall Street stumbled as the Trump trade ran out of steam after 5 straight days of gains on the S&P500 and Dow, along with 4 days of gains on the NASDAQ to more record highs.
- The Yen weakened beyond 155 against the US Dollar for the first time since July, raising concerns that Japan might intervene in the currency market to curb its depreciation. A Bloomberg poll of 53 economists last month suggested intervention could be triggered at 150, with a median forecast of 160.
- A spike in Treasury yields is pressuring the Yen, with the two-year yield hitting its highest mark since July, driven by Trump’s economic agenda boosting US rates and the reduced cost of hedging due to the Federal Reserve’s rate cuts.
- The upcoming US data on CPI, PPI, and Retail sales could accelerate the Yen’s decline if the Ministry of Finance doesn’t step in with verbal warnings. Prolonged yen weakness may push the Bank of Japan to consider earlier rate hikes.
- Concerns over sticky high inflation ahead of the CPI report and concerns over potentially inflationary aspects of Trump’s fiscal policies exacerbated selling.
Financial Markets Performance:
- The USDIndex is settling above 106.
- Oil declined -0.09% to $67.98 per barrel with Trump’s “drill baby drill” reverberating.
- Gold lost -0.82% to $2597.26 per ounce as interest rates surged. The rising Dollar also impacted commodities.
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Andria Pichidi
Market Analyst
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