Economy Spotlight: The Most Important Events and What's Coming 27/12-2/2/2025

Introduction:

A very important economic week awaits various global markets. After a volatile week as a result of Trump's return to power in the United States of America, these markets are preparing to receive meetings of the main central banks, led by the US Federal Reserve, the European Central Bank, the Bank of Sweden, and the Canadian Central Bank, which will be discussed in this week's "Economy Spotlight" report, in addition to talking about the most prominent events, especially the results of the giant companies' businesses and upcoming indicators.

Economy Spotlight. Major Economies:

First. The US Economy:

The American economy began its last week, with the return of former US President Donald Trump again, laden with various promises regarding financial policy, especially foreign policy. However, on the day of his inauguration, he did not explicitly refer to his policy clearly and specifically regarding customs tariffs and was satisfied with his emphasis on making America stronger again. 

On the first day after his inauguration, Trump ordered officials to take retaliatory measures against countries that impose "extraterritorial" taxes on American multinational companies, in a move that threatens to ignite a global confrontation over tax systems, whether if other countries such as the European Union, South Korea, Japan or Canada want to respond to Trump's orders, or if America withholds tax revenues due to these countries. 

Participants in the 54th symposium of the World Economic Forum in Davos, in turn, expressed their concern about Trump's policies, indicating that Trump's return could bring trade turmoil, so Trump came out speaking before the forum at the end of last week in statements that are the clearest about his policy and that he is open to supporting the American economy and encouraging production within the American market and calling for reducing interest rates in general. 

The US economy is awaiting a very important week, in terms of both economic indicators and financial data from major companies, as the GDP reading for the fourth quarter of 2024 will be issued, in addition to the inflation reading represented by the Personal Consumption Expenditures Price Index. 

The results of giant companies will also be issued, most notably: General Motors, Tesla, Microsoft, Meta, IBM, Alibaba, Qualcomm, Apple, Amazon, Visa. 

As for the economic indicators that the US economy witnessed last week, they were as follows: 

• Unemployment complaints rates rose higher than expected from 217 thousand complaints to 223 thousand complaints. 
• US crude oil inventories recorded a decrease in the deficit to record nearly one million barrels compared to about two million barrels last week.
• The Manufacturing Purchasing Managers Index recorded a higher-than-expected increase from 49.4 to 50.1.
• Services Purchasing Managers Index also decreased from 56.8 to 52.8. 
• Existing home sales (December), increased from 4.15 million units to 4.24 million units.

Second. European Economy:

Like the US Federal Reserve, the European Central Bank is preparing for its first meeting of 2025 and is cautiously awaiting Trump's financial policies that impose tariffs on many European industries that head to the US market. Some analysts have even expressed deep concern about Trump's talk about the need to address the US trade deficit with the European Union in particular.

The powerful German auto industry also warned a day after Trump's inauguration that his policy would lead to higher car prices for the American consumer, which would harm the auto industry around the world.

The head of the rescue fund also expressed his concern that Trump's policies would exacerbate financial problems in Europe, especially considering the still high borrowing costs, especially on the US side.

Third. Japanese Economy:

The Bank of Japan was the first major central bank to hold a meeting to decide on interest rates on the Japanese yen, which were raised to their highest levels in 17 years, when they rose from 0.25% to 0.50%, with the Governor of the Bank of Japan, Kazuo Ueda, indicating that there is room to raise borrowing costs before they reach levels considered neutral for the economy. The central bank’s comments come as inflation is rising, with the national core consumer price index hitting a high of 3% in September 2023.

Despite the uncertainty surrounding the Japanese economy, World Bank Deputy Chief Economist Ayhan Kavous predicted that Japan will see healthy and moderate growth through 2026, with the World Bank forecasting Japan’s GDP to grow by 1.2% in 2025 and 0.9% in 2026.

The Japanese government has kept its economic outlook cautious, partly as policymakers keep a wary eye on US President Donald Trump’s policies and their potential impact on global economic growth, with optimism about both strong wages and a strong corporate sector.

Fourth. Chinese Economy:

The fallout from Trump’s arrival in the White House continues to worry Beijing, with more than half of American companies in China, the highest in five years, saying they are concerned about further deterioration in bilateral relations between the world’s two largest economies, according to a survey by the American Chamber of Commerce in China. Despite these concerns, the head of the World Economic Forum came out and expressed optimism about China’s economy in the medium and long term. China will enter a 15-day Chinese New Year holiday starting on Tuesday, January 28, 2025.

Economy Spotlight. What to expect next week:

Global markets will be awaiting the following economic data: