The changing of the guard

The S&P 500 reclaimed its place above the 6,000 level, and was further boosted to a fresh all-time high after news broke on Wednesday of a $500 billion investment into AI infrastructure via a joint venture comprising OpenAI, SoftBank, and Oracle.

The 10-year US treasury yield traded largely flat, ending near 4.6%, while the dollar weakened against the euro, with EUR/USD rising above 1.046.

The 2024 World Economic Forum in Davos concluded on Friday, and European equities enjoyed a strong rally during the week as fears surrounding trade tensions with the US were eased. The Euro Stoxx 600 posted its seventh consecutive session of gains on Thursday to notch a new record high.

The Eurozone Composite PMI rose from 49.6 to 50.2, a five-month high that beat expectations. While the data is still indicative of a stagnant economy, it at least showed signs of marginal growth.   

In the UK, the unemployment rate rose unexpectedly to 4.4% in the three months from September to November 2024, up from 4.3% in the previous period. The weakening labour market reinforced market projections for rate cuts next week, and the FTSE 100 rose to a new record high as stocks responded accordingly to the dovish sentiment.

On Friday, the Bank of Japan announced its decision to raise the policy rate from 0.25% to 0.5%, the highest it’s been in 17 years. The decision followed inflation data which showed that core CPI rose 3% annually in December, a 16-month high.

Equities

Global stocks finished at 0.0% in euro terms and 2.1% in local terms last week. Year-to-date global markets are up by 2.5% in euro terms and down by 4.1% in local terms. The US market, the largest in the world, finished at -0.3% in euro terms and 1.8% local terms.

Fixed Income & FX

The US 10-year yield finished at 4.6% last week. The German equivalent finished at 2.6%. The Irish 10-year bond yield finished at 2.8%. The Euro/US Dollar exchange rate finished at 1.05, whilst Euro/GBP finished at 0.84.

Commodities

Oil finished the week at $75 per barrel and is up 2.7% year-to-date in euro terms. Gold finished the week at $2,771 per troy ounce and is up 4.1% year-to-date in euro terms. Copper finished the week at $9,156 per tonne.

The week ahead

Wednesday 29^th January

Fed rate decision is announced.

Thursday 30^th January

ECB rate decision is announced.

Friday 31^st January

US PCE price index goes to print.