Global equity markets experienced a decline following renewed trade tensions between the United States and Europe. U.S. President Donald Trump’s threats of additional tariffs on eight European nations have dampened investor sentiment.
Market Reaction and Economic Indicators
Canadian securities mirrored this downturn, with TSX futures reflecting the negative sentiment. Investors were keenly observing inflation statistics for December. Consumer prices witnessed an unexpected annual increase of 2.4%, influenced by last year’s sales tax adjustments. Notably, core inflation metrics experienced a third consecutive month of cooling.
Today’s U.S. markets are closed in observance of Martin Luther King Jr. Day. According to George Lagarias, chief economist at Forvis Mazars, the financial markets are evidently reacting to tariff threats. He expressed concerns that the White House may frequently invoke tariff threats, even when agreements have been established.
European Market Performance
Over in Europe, the pan-European STOXX 600 index fell by 1.21% in morning trading. Additional notable declines included:
- Britain’s FTSE 100: down 0.48%
- Germany’s DAX: down 1.29%
- France’s CAC 40: down 1.5%
Asian Markets
Asian markets followed suit, as Japan’s Nikkei closed down 0.65%, and Hong Kong’s Hang Seng fell by 1.05%.
Commodity Market Trends
In commodities, oil prices dropped amid decreasing civil unrest in Iran, which alleviated concerns over potential supply disruptions. Brent crude futures decreased by 0.62% to USD 63.79 per barrel, while West Texas Intermediate (WTI) for February delivery fell around 0.74% to USD 59 per barrel. The contract is set to expire tomorrow, and the more active March contract traded at USD 58.98, down 0.61%.
John Evans, an analyst at PVM Oil Associates, noted that market caution stems from concerns over how escalating trade tensions might impact global trade and consequently oil demand.
Gold Prices Surge
Spot gold saw significant upward movement, jumping 1.5% to USD 4,662.85 an ounce after reaching an all-time high of USD 4,689.39. U.S. gold futures for February rose by 1.6% to USD 4,668 an ounce.
Currencies and Bonds
The Canadian dollar has shown strength against the U.S. dollar, trading around 72.01 U.S. cents, marking a 0.2% increase for the day. Despite this, the loonie has weakened by approximately 1% against the greenback over the past month. The U.S. dollar index also declined by 0.26% to 99.14.
Other currency movements included the euro increasing by 0.19% to USD 1.1631 and the British pound advancing 0.23% to USD 1.3410. The U.S. bond market is closed due to the holiday.
Upcoming Economic Data
Tomorrow’s economic highlights include:
- Canadian CPI for December, with expectations for an inflation rate of 2.4%, up from an anticipated 2.2%.
- Canadian new motor vehicle sales for November, projected to drop by 9.5% year-over-year.
- Canadian household and mortgage credit for November.
- Bank of Canada’s Business Outlook Survey and Survey of Consumer Expectations for Q4.
Investors remain cautious as they navigate these complex market dynamics and prepare for upcoming economic reports.
