Economy Spotlight: The Most Important Events and What's Coming 30/12/2024 – 5/1/2025

Introduction:

In this week's " Economy Spotlight " report, we will explore the most important data and indicators that await the major economies in the first week of 2025, which is usually characterized by calm due to the official holidays that affect most economies in general and the major ones in particular, after reviewing the most important events that happened in the last week of last year.

Economy Spotlight. Major Economies:

First. The US Economy:

The US economy had a quiet week in terms of economic data, except for the consumer confidence and new home sales statement, as US consumer confidence unexpectedly declined in December with rising concerns about tariffs and the trade war that could erupt because of them, and new home sales rose slightly less than expected. 

After the Federal Reserve's last meeting of 2024, the markets are pricing in about 35 basis points of easing for 2025, which in turn led to the rise of US Treasury bond yields and the dollar index to new highs.

In recent news, significant developments in the US economy include comments from former President Trump, who stated that he has no objection to the continued presence of the Chinese TikTok app in the US market. He explained that during his election campaign, TikTok played a role in helping him garner billions of views before securing his victory.

A White House spokesman also indicated that the offer to acquire US Steel by the Japanese company Nippon Steel for $15 billion is now on the table of President Joe Biden to make his decision regarding this alliance within 15 days, noting that Biden had previously indicated his opposition to this alliance.

As for the most important economic indicators issued by the US side last week, they were as follows: 

• Consumer confidence CB declined from 112.8 to 104.7 in December, which is the lowest level since last September, which was explained as being driven by concerns about the potential financial policies of the incoming President Trump.
• New home sales rose from 627,000 units to 664,000 units in November, which is less than expectations of an increase to 666,000 units. 
• Unemployment claims fell slightly from 220,000 to 219,000, missing expectations for a rise to 223,000. 
• Weekly US crude oil inventories deficit rose from 934,000 barrels to more than 4 million barrels. 

Second. European Economy:

European Central Bank Governor Christine Lagarde reiterated that the eurozone is very close to reaching the central bank’s 2% inflation target in the medium term, stressing the need to monitor service sector inflation, especially since it remains at 3.9% despite inflation generally approaching 2%. 

Some reports from the Financial Times also indicated that the European Union is burning through its gas reserves at the fastest pace since the energy crisis three years ago as cold weather and reduced seaborne imports have boosted demand. 

According to data from Gas Infrastructure Europe, an industry body, the volume of gas in storage sites in the bloc fell by about 19% from the end of September, when the gas market’s refilling season ends, to mid-December.

Third. Japanese Economy:

After the Bank of Japan kept interest rates at 0.25%, the minutes of the Bank of Japan’s meeting showed that policymakers agreed to continue raising interest rates if the economy moves in line with their expectations, but some stressed the need for caution regarding uncertainty over US economic policy. 

However, current expectations from a group of participants in a Reuters poll indicate that the Bank of Japan may raise interest rates to 0.50% by the end of March 2025, although they are divided on whether this step will take place in December, January or March.

The core inflation data in the capital, Tokyo, reinforced these expectations of a rate hike in the near term, after accelerating in December. 

Factory production also fell in November for the first time in three months, indicating that weak external demand is negatively affecting the export-dependent economy. 

As for the most prominent economic indicators announced last week by the Japanese side, they were as follows:

• The Bank of Japan’s core consumer price index (annual) rose from 1.5% to 1.7%. 
• Foreign investment in Japanese stocks recorded its lowest levels since the end of last September, with a deficit of about $1 trillion. 
• Tokyo’s annual consumer price index rose from 2.2% to 2.4% year-on-year for December. • Industrial production fell to negative territory from 2.8% to -2.3%.

Fourth. Chinese Economy:

The most prominent news related to the Chinese economy in the last week of last year (2024) was related to the latest indications of the stimulus packages that China may launch to revive its economy in 2025. 

Two sources told Reuters that the Chinese authorities agreed to issue special treasury bonds worth 3 trillion yuan ($411 billion) next year, the highest level ever, which was directly reflected in the Chinese ten-year bonds, as the return on them rose by two basis points to 1.7125%, which was supported by the announcement by the Chinese Ministry of Finance that the authorities will increase financial support for consumption next year by raising pensions and medical insurance subsidies for residents, in addition to expanding the scope of consumer goods exchange. 

The Chinese government also announced late last week that it would cut tariffs on ethane and some recycled copper and aluminum raw materials starting next year, while the Ministry of Finance announced adjustments to various categories of tariffs, effective Jan. 1, to increase imports of high-quality products, expand domestic demand and promote high-level opening-up, it said in a statement.

Despite these government moves aimed at reviving the world's second largest economy, investors are still fearful of the repercussions of the potential tariffs brought by the US president who will be inaugurated on the 20th of this month, in addition to the decline in their confidence due to the ongoing problems in the real estate sector for more than two years.

Economy Spotlight. What to expect next week:

Global markets will be waiting for the following economic data: