13/01/25 09:14:10

Weekly outlook: Tariff worries slow down markets

Fears of tariffs, inflation and interest rates - the mood is not really good. This also has a lot to do with Donald Trump taking office in exactly one week's time. However, there is optimism for the US reporting season starting this week.

13 January 2025 FRANKFURT (Frankfurt Stock Exchange). If the first trading days of the year really do set the direction for the year as a whole, as some people believe, things are looking rather bleak for 2025. “The price trend on the leading US stock exchange in particular has not been extremely dynamic,” comments Markus Reinwand from Helaba. “Inflation and economic concerns, the continued rise in yields and uncertainties about Donald Trump's trade policy are creating a difficult market environment,” explains his colleague Ralf Umlauf. Trump's renewed tariff threats, as well as his threats regarding Greenland and the Panama Canal, are making the markets nervous.

The DAX stood at 20,170 points on Monday morning after closing at 20,215 points on Friday and 20,522 points as a record from mid-December. The US stock markets suffered significant losses on Friday. One reason was the surprisingly strong US labour market report, which dampened expectations of interest rate cuts. The development on the bond market is also striking: yields have risen sharply in anticipation of higher inflation and rising government debt. 

Magnificent 7: Good figures expected, but outlook?

This week's highlight: the US consumer price data for December. These are expected to send signals about the further development of key interest rates. In addition, the US reporting season for the fourth quarter starts this week. Banks such as JP Morgan, Wells Fargo, Goldman Sachs and Citigroup will kick things off. DekaBank expects another good reporting season for the S&P 500 companies with results well above the recently reduced analysts' forecasts - mainly due to the surprisingly strong US economy. This would at least support the equally weighted S&P 500. “The Magnificent 7 will report strong figures, but the reactions to the outlook are difficult to predict,” explains Ulrich Kater.

Ulrich Kater

“Europe's stock markets weaker again in 2025”

Commerzbank assumes that the US earnings season will set a positive tone, as the US economy has continued to develop very robustly. “In 2024, S&P 500 companies will probably have increased their profits by an average of just under 10 percent, but corporate analysts are also optimistic for 2025 and expect 15 percent,” explains Thorsten Weinelt. Companies in the Nasdaq Composite are even expected to grow by 25 percent. The US stock markets started the new stock market year with rather high P/E ratios of 22. However, the continued strong earnings growth in the US is a decisive positive trend. “We therefore expect above-average price gains for the US equity markets in 2025 as well.” The bank is forecasting a similar picture for Europe's stock markets in 2025 following the already significantly weaker performance in 2024. 

 

Just a recovery, nothing more

For chart technician Christoph Geyer, the keyword “recovery” describes quite well what is currently happening on the German stock market: “The most recent upward movement took the DAX almost exactly to the previous record levels,” he explains. A resistance zone has built up here, which is unlikely to be overcome at the first attempt. As some of the indicators are in overbought territory, this analysis method does not provide any support for a breakout. “Another test of the 20,000 mark should characterize the start of the week,” explains Geyer.

Christoph Geyer

Christoph Geyer.

Important economic and business events of the week

Wednesday, 15 January

10.00 am. Germany: GDP 2024. German gross domestic product is likely to have shrunk slightly in 2024, says DekaBank, for the second time in a row. However, the estimate of the Federal Statistical Office should be treated with caution, as some indicators are only available up to October.

2.30 pm. USA: Consumer prices December. A clear easing of US inflation is still a long way off, says Commerzbank. Nevertheless, price pressure is likely to have eased somewhat in December, if energy and food are excluded. The bank is forecasting an increase of 0.3 percent compared to November and 0.2 percent for the core rate.

Thursday, 16 January 

1:30 pm. Eurozone: Minutes of the ECB meeting on 12 December. According to DekaBank, the summary is likely to reflect a controversial discussion. While the macroeconomic projections described a soft landing, some Council members probably emphasized increasing economic downside risks. In the end, it was probably a compromise to lower the key interest rates by only 25 basis points, but to hold out the prospect of further easing more clearly than before.

2.30 pm. USA: December retail sales. Retail sales are likely to show an increase of 0.5 percent compared to November, underlining the fact that US consumers and thus the US economy remain in good, spending-friendly shape, explains Commerzbank.

Friday, 17 January 

3.00 am. China: GDP 4th quarter 2024. Chinese GDP is likely to have developed significantly better than in the weak previous quarter, says DekaBank. However, the continuing uncertainty among consumers, the real estate crisis and the expectation of an escalation of the US trade conflict in the coming months weigh on the outlook for 2025.

3.00 am. China: Industrial production/retail sales December. Commerzbank expects Chinese industrial production to grow by a robust 5.2% year-on-year. Retail sales growth is also expected to have picked up to 4 percent year-on-year.

By Anna-Maria Borse, 13 January 2025, © Deutsche Börse AG

 

Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.

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