Economy Spotlight: The most important events and what is coming 09-15/12/2024

Introduction:

Last week witnessed many events and statements that cast their shadows on the performance of various financial markets, whether the continued impact of Trump's promises regarding potential tariffs, or the new restrictions imposed by the US administration that affected dozens of Chinese companies.

In this week's " Economy Spotlight " report, we will discuss these news and events and other matters that cast their shadows in one way or another on the global economic arena, whether in terms of important statements, or by shedding light on the most prominent geopolitical tensions, specifically in the Asian region.

Economy Spotlight. Main Economies:

First. The US Economy:

This week, the US economy was on a date with the third campaign of the Biden administration in three years against the semiconductor industry in China; a campaign that restricted exports to 140 Chinese companies, under the pretext of protecting US national security from the risk of China using chips and exploiting them in developing artificial intelligence in military applications.

China responded to this decision a day later by banning the export of rare industrial metals (gallium, germanium, antimony and very hard materials) on the pretext that they may have military applications to the United States.

The markets were also on a date with the Federal Reserve Chairman's speech to the New York Times, in which Jerome Powell indicated his confidence in the strength of the US economy compared to what it was last September, when the first decision to reduce interest rates was taken since 2020, which was positively reflected in the financial markets, specifically with the support of giant technology companies' stocks.

As for the data, the US economy was facing a set of important economic data, which are directly related to the labor market, which showed positive signs, whether in terms of the unemployment rate or the jobs added after the end of the impact of the hurricanes and the Boeing strike, or even in terms of the largest decline in layoffs in a year and a half, specifically since April 2022.

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

• Manufacturing PMI (November) rose more than expected from 48.5 to 49.7
• The ISM Manufacturing PMI rose more than expected from 46.5 to 48.4
• Unemployment claims rose from 215,000 to 224,000.
• The unemployment rate rose to 4.2%, allowing the Federal Reserve to cut interest rates again this month.
• Wages held steady at 0.4%, above expectations of a 0.3% decline.
• Nonfarm payrolls rose from a revised 36,000 to 227,000 in November.

Second: The European economy:

The European economy is affected by political problems in both France and Germany, against the backdrop of Paris’ efforts to address Europe’s growing deficit and faltering competitiveness, in addition to the French parliament’s vote of no confidence in the prime minister, which threatens to make Michel Barnier the shortest-serving prime minister under the Fifth Republic, increasing pressure on President Emmanuel Macron to appoint a replacement as soon as possible, in light of France’s worst budget imbalance in the eurozone.

As for Germany, the most prominent economic giant in Europe, it is still suffering from an economic and political malaise, especially in light of the economic problems of car companies that are suffering from two things: Chinese competition in electric cars, and potential tariffs from Donald Trump, in light of political problems that led to the collapse of the ruling coalition consisting of three parties in November following disagreements over fiscal policy between the socialist leader and his liberal finance minister.

The European Commission expected the German economy to grow slightly by 0.7% next year, after contracting in 2024.

The Organization for Economic Co-operation and Development issued its forecasts for the Eurozone, saying that it could benefit from the European Central Bank's easing of monetary policies, which would push it to grow from 0.8% in 2024 to 1.3% in 2025, and by 1.5% in 2026.

As for the European economic indicators for the past week, the most important of them were as follows:

- The unemployment rate stabilized at 6.3%.

- The third quarter GDP reading stabilized in the third revised reading at 0.9% on an annual basis and at 0.4% on a quarterly basis.

Third: The Japanese economy:

The future of interest rates on the Japanese yen remains one of the most prominent files that the markets are following, and the Bank of Japan has remained cautious about announcing the timing of this increase even at the bank's next meeting at the end of December, as the last major central banks to meet this year.

The Governor of the Bank of Japan said that he will remain cautious about making this decision considering the uncertainty about US economic policy under Trump's presidency, and weak consumption in Japan, to confirm that the meeting will be direct, with his openness to an imminent increase in interest rates.

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

• Capital spending rose annually for the third quarter from 7.7% to 8.1%, contrary to expectations of a decline.

• The services purchasing managers index rose to the good range of 50.5, up from 49.7 and higher than expected.

• Household spending declined to the bad range from 1.1%- to 1.3%- on an annual basis and rose monthly from 1.3%- to the positive range at 2.9%.

• Foreign exchange reserves (dollar) stabilized at levels of 1.239 billion US dollars.

Fourth. The Chinese economy:

The Chinese economy is still facing potential tariffs from Trump, in addition to the restrictions imposed by the Biden administration on 140 Chinese advanced chip companies.

China also had an appointment with the Organization for Economic Cooperation and Development assessments that expected growth in the world's second-largest economy to slow from 4.9% in 2024 to 4.7% in 2025 and 4.4% in 2026 despite monetary and fiscal easing as consumer spending remains slow due to high rainy day savings.

As for the most prominent new economic steps by China, it was related to granting Chinese manufacturers a 20% price advantage in sales to the Chinese government, with the aim of stimulating its economy considering the unclear relationship with America under President Trump, a step that comes ahead of the annual high-level economic planning conference scheduled to be held next week.

Fifth. Geopolitical events and oil:

Last week was marked by several geopolitical events, the most important of which were related to South Korea, which cast a negative shadow over both the Korean financial markets and the Korean currency, in addition to the political problems in France, related to the vote of no confidence in the Prime Minister and the related budget problems, which did not have a direct negative impact on the European stock markets.

As for oil, OPEC+ on Thursday postponed the start of oil production increases by three months until April and extended the complete cancellation of the cuts for a year until the end of 2026 due to weak demand and booming production outside the group.

OPEC+, which pumps about half of the world's oil, had planned to start easing the cuts from October 2024, but slowing global demand and rising production elsewhere forced it to postpone plans on several occasions.

Economy Spotlight. What to expect next week:

Global markets will be awaiting the following economic data:

Monday, December 09, 2024

China:

• Consumer price index.

Japan:

• Third quarter GDP, expected to hold steady at 0.2%.

Tuesday, December 10, 2024:

China:

• Trade balance

Wednesday, December 11, 2024:

USA:

• Inflation index (CPI).

• Crude oil inventories.

Canada:

• Canadian dollar interest rate decision

Thursday, December 12, 2024:

USA:

• Inflation rate (PPI).

• Unemployment claims rate.

Sweden:

• Consumer price index.

Switzerland:

• Quarterly interest rate decision by the Swiss National Bank.

Euro:

• Interest rate decision by the European Central Bank.

Friday, December 13, 2024:

Euro:

• Industrial production.

Japan:

• Industrial production.

UK:

• Domestic GDP.