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European stock markets posted modest gains on Monday as investors anticipated U.S. President-elect Donald Trump’s second-term inauguration later in the day, while keeping an eye on global developments like the World Economic Forum in Davos.
Market Overview
- DAX (Germany): +0.1%
- CAC 40 (France): +0.3%
- FTSE 100 (UK): +0.1%
With U.S. markets closed for Martin Luther King Jr. Day, trading volumes were subdued as investors awaited Trump’s policy announcements, expected to follow shortly after his inauguration.
Focus on Trump’s Inauguration
Trump’s inauguration as the 47th U.S. president is expected to dominate market sentiment. Equities have broadly rallied since his November victory, fueled by expectations of deregulation, tax cuts, and an aggressive energy policy. However, Bloomberg’s report of Trump potentially declaring a national emergency to advance his agenda has added a layer of uncertainty.
Key points from Trump’s policy agenda:
- Signing nearly 100 executive orders, with a focus on energy deregulation, immigration, and regulatory rollbacks.
- Potential introduction of higher trade tariffs targeting China, the European Union, and other major economies.
Davos: World Economic Forum Kicks Off
The World Economic Forum begins this week in Davos, Switzerland, with global political and business leaders discussing economic growth strategies.
Notable participants include:
- Christine Lagarde, President, ECB
- Ursula von der Leyen, President, European Commission
- Rachel Reeves, Chancellor, UK
- Ding Xuexiang, Vice Premier, China
Trump is scheduled to address the forum via video link on Wednesday, potentially signaling his administration’s international priorities.
Economic Data and Central Bank Policies
- German Producer Prices (December): Rose 0.8% YoY, below the 1.1% forecast.
- The report indicates continued inflationary easing, aligning with the European Central Bank’s (ECB) recent rate cuts aimed at stabilizing prices.
- ECB Outlook: Following four rate cuts since June, further reductions are expected as inflation nears the 2% target.
- China: The People’s Bank of China kept its loan prime rates unchanged, reflecting caution amid uncertainty over Trump’s trade policies.
Corporate and Commodity Updates
- Earnings: A quiet day for major European earnings. Wall Street kicked off earnings season last week, with strong results from major banks buoyed by robust equity markets and deal-making activity.
- Oil Prices: Slight declines in oil were noted as traders reduced risk ahead of Trump’s inauguration.
- WTI Crude: -0.1% to $77.33/barrel
- Brent Crude: -0.1% to $80.68/barrel
Reports suggest Trump may relax curbs on Russia’s energy sector in exchange for a potential peace deal in Ukraine, a development that could impact global energy markets.
Market Sentiment: Cautious Optimism
While European stocks managed slight gains, overall sentiment remains cautious. Investors are navigating mixed signals, including Trump’s aggressive policy agenda, moderating inflation in Europe, and geopolitical uncertainties. The week ahead promises significant developments that could influence global markets.
