At the end of Friday, the Dow Jones Index (US30) was up 1.18% (for the week -2.25%). The S&P 500 Index (US500) gained 1.09% (for the week -2.19%). The Nasdaq Technology Index (US100) increased by 0.85% (for the week -2.75%). Friday’s rally followed lower-than-expected inflation data, with the November PCE Index showing an increase to 2.4% year-over-year, slightly below expectations of 2.5%. That helped ease market anxiety over the Federal Reserve’s prediction of fewer rate cuts in 2025. However, despite Friday’s gains, all three indices closed negative at the end of the week.
Goldman Sachs updated its economic projections to reflect nuanced changes in monetary policy expectations and global growth trends for 2025. The US Federal Reserve’s ultimate policy rate is now expected to be in the 3.5–3.75% range, up from previous estimates of 3.25–3.5%. The broker expects the next 25 basis point rate cut to occur in March, followed by additional cuts in June and September. The US economic performance is projected to continue to outperform developed economies, supported by strong real income growth and excellent productivity gains. The European Central Bank (ECB) is expected to continue to cut rates through mid-2025, eventually reaching the 1.75% level. In China, the outlook remains cautious despite recent policy easing.
The Mexican peso (MXN) strengthened to 20.2 per US dollar, amid a weaker US dollar following the release of softer-than-expected Core PCE data. Last week, the Bank of Mexico cut interest rates by 25 basis points to 10%, matching investor expectations. The rate cut came amid lower inflation in Mexico. The Bank of Mexico anticipates further easing next year amid prognoses for inflation to fall to 4.6% by the end of the year, although it does not expect to reach its 3% target until mid-2026.
Donald Trump said on Saturday that the Panama Canal charges “exorbitant prices and tariffs for passage” for US military and merchant ships. He demanded the fees be lowered or Panama must return the canal to the United States. The US is the canal’s largest customer, with about three-quarters of its cargo passing each year. China is its second-largest customer. Trump has suggested that China should not run the canal. A Chinese company based in Hong Kong controls two of the five ports adjacent to the canal, one on each side. “If the principles, both moral and legal, of this magnanimous gesture of giving are not honored, we will demand that the Panama Canal be returned to us, fully and without question,” Trump said. The US completed the 51-mile (82-kilometer) canal across the Central American isthmus in 1914. However, in 1977, US President at the time Jimmy Carter handed the Panama Canal back to Panama.
Equity markets in Europe were mostly down on Friday. Germany’s DAX (DE40) fell by 0.43% (for the week -2.34%), France’s CAC 40 (FR40) closed down 0.27% (for the week -1.46%), Spain’s IBEX 35 (ES35) gained 0.24% (for the week -2.25%), and the UK’s FTSE 100 (UK100) lost 0.26% (for the week -2.60%) on Friday. Concerns over the potential impact of a second Trump administration in Europe intensified after Donald Trump threatened to impose tariffs on the European Union if EU countries do not increase their purchases of US oil and gas.
WTI crude oil prices decreased by 0.1% to close at $69.46 per barrel on Friday, recovering some losses but still showing a 3% decline for the week. China’s energy outlook added to market uncertainty, with Sinopec estimating crude imports could peak by 2025 and oil consumption by 2027. OPEC+ lowered its demand growth projection for 2024 for the fifth consecutive time, emphasizing the need for supply discipline. In addition, President-elect Trump has indicated the possibility of imposing tariffs on the EU if it fails to address trade imbalances, particularly with US oil and gas.
Natural gas prices (XNG/USD) rose to $3.7 per mmbtu on Friday, the highest in a month. The reduced likelihood that Europe will continue to receive Russian gas via Ukraine has prompted investors to take long LNG positions as EU countries look for alternative sources of gas. These boosts demand for US LNG at the turn of the US presidential election: President-elect Trump has pledged to issue more LNG export permits, prompting companies to favor more profitable exports over cheaper domestic gas sales due to the abundance of gas available in the United States.
Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) fell by 0.29%, China’s FTSE China A50 (CHA50) gained 0.19%, Hong Kong’s Hang Seng (HK50) lost 1.14% and Australia’s ASX 200 (AU200) was negative 1.48% for the week.
Singapore’s Core Consumer Prices showed 1.9% year-on-year in November 2024, down from 2.1% in the previous month, below market estimates of 2.1%. This was the lowest core inflation rate since November 2021, thanks to lower inflation in food and services. MAS core inflation is expected to remain below 2% until the end of 2024. Core inflation is projected to average 2.5–3.0% in 2024 before falling to 1.5–2.5% in 2025.
