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What’s happening: European stocks closed slightly higher on Monday after surging to a three-month high earlier in the session.
What happened: Investors widely expect the new US President Donald Trump to be cautious about raising tariffs.
Weakness in the US dollar and Eurozone’s economic data releases also supported European stocks on Monday.
Why it matters: European stock markets had remained volatile since Trump won the Presidential race in November last year on concerns around tariffs and inflationary pressures.
Donald Trump was sworn in as the 47th US President on Monday. During his inaugural address, Trump pledged to bring in a “golden age” for the country, with his pro-business agenda of tax cuts, easing government regulations and trade reforms. Expectations of these policies boosting the world’s largest economy supported market sentiment.
Investors were also relieved that the new US President did not announce any tariffs on his Inauguration Day.
Europe’s automobile sector, which is most sensitive to tariff news, gained around 1.1%, with BMW’s stock rising around 3% and shares of Mercedes-Benz climbing 2.3% on Monday. The Eurozone banking index also jumped around 1.2% on Monday.
On the economic data front, Germany’s producer prices rose 0.8% year-over-year in December, following a 0.1% rise in the previous month. Although the market estimates were at 1.1%, the latest reading signalled an increase in the PPI for the second straight month, following deflation for more than a year.
Eurozone’s construction output grew by 1.4% year-over-year in November, after stalling in the previous month and following eight straight months of contractions up to September.
The European Central Bank is widely expected to cut interest rates by 25 basis points at its upcoming policy meeting later this month.
The STOXX Europe 600 Index rose 0.05% to close at 523.87 on Monday. London’s FTSE 100 gained 0.18% to 8,520.54, while Germany’s DAX 40 and France’s CAC 40 added 0.42% and 0.31%, respectively.
What to watch: Investors will watch the World Economic Forum in Davos, Switzerland this week, which is expected to provide some direction to global equity markets.
Data on ZEW Economic Sentiment Index (1400 UAE Time) from the Eurozone will be released today. The ZEW Indicator of Economic Sentiment for the Eurozone, which rose by 4.5 points to 17 in December, is expected to edge lower to 16.9 in January.
Context: The CAD/USD forex pair rose on Monday mainly on weakness in the US dollar.
Details: The Bank of Canada is expected to announce another rate cut of 25 basis points this month. On the other hand, the US Federal Reserve is widely expected to remain cautious about rate cuts with President Donald Trump being sworn in on Monday, gearing up for his ambitious trade reform plans.
Weakness in the US dollar lent support to the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, tumbled more than 1% on Monday.
A decline in the price of crude oil, one of Canada’s major exports, exerted some pressure on the loonie. WTI crude oil prices fell by more than 1% during the session.
The CAD/USD rose sharply to 1.4310 on Monday. The forex pair has been on a recovery path after having slumped to its lowest level in around five years last month. The S&P/TSX Composite Index gained 0.41% to close at 25,171.58.
What to watch: Investors await the release of inflation data (1730 UAE Time) from Canada today. The annual inflation rate in Canada, which eased to 1.9% in November from 2% in the previous month, is expected to fall further to 1.9% in December. Analysts expect the annual core inflation rate in Canada to ease to 1.5% in December, from 1.6% in the previous month.
Other Markets: Asian indices traded higher this morning, with Japan’s Nikkei 225, China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index up by 0.13%, 0.16% and 1.11%, respectively.
US President Donald Trump said that Russian President Vladimir Putin was “destroying” his country by not striking a deal to end the ongoing war with Ukraine. The news sent the RUB/USD pair slightly lower in forex trading this morning.
New Zealand’s BusinessNZ Performance of Services Index fell 1.2 points to a reading of 47.9 in December. The services sector contracting for the tenth straight month exerted pressure on the NZD/USD forex pair.
Argentina recorded a trade surplus of $1.666 billion in December, versus a year-ago gap of $1.018 billion. However, the ARS/USD pair fell in forex trading this morning.
Spain reported a trade deficit of €5.13 billion in November, compared to a year-ago gap of €5.14 billion. Exports declining by 6.4% year-over-year exerted pressure on the EUR/USD forex pair.
South Korea’s producer inflation rose by 1.7% year-over-year in December, following a 1.4% rise in the previous month. However, the KRW/USD pair gained in forex trading this morning.
South Africa’s gold production (1330 UAE Time) and mining production (1330 UAE Time), Germany’s ZEW economic sentiment index (1400 UAE Time) and ZEW current conditions (1400 UAE Time), Mexico’s retail sales (1600 UAE Time), as well as Russia’s current account (1700 UAE Time).
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