European indices under pressure amid political and economic weakness in the main countries of the bloc

At the end of Monday, the Dow Jones Index (US30) declined by 0.25%. The S&P 500 Index (US500) added 0.38%. The Nasdaq Technology Index (US100) was up 1.45%. Top gainers included Alphabet (+4.4%), Tesla (+5.1%), and Broadcom, which soared after its market value surpassed $1 trillion last week. Apple and Alphabet hit new all-time highs, while Nvidia fell 2%. 

Bitcoin (BTC/USD) rose more than 4% to a new record high of $107,000 amid President-elect Trump’s support for digital assets. Trump is seeking to create a favorable regulatory environment for digital assets by lifting restrictions imposed by the outgoing administration of President Biden. The US ETFs investing directly in Bitcoin have attracted $12.2 billion in net inflows since Trump won the November 5 presidential election.

 Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) fell by 0.45%, France’s CAC 40 (FR40) closed down 0.71%, Spain’s IBEX 35 (ES35) gained 0.23%, and the UK’s FTSE 100 (UK100) closed down 0.46%. The French Index is under pressure after Moody’s unexpected downgrade of France’s credit rating from Aa2 to Aa3, prompted by concerns over deteriorating public finances amid political instability. Meanwhile, on Friday, President Emmanuel Macron named Francois Bayrou as the new prime minister following the collapse of Michel Barnier’s government. In Germany, Chancellor Olaf Scholz lost a confidence vote as expected, confirming elections scheduled for late February. The leaders of the fall on the German stock exchange were the largest automakers: Mercedes Benz, BMW, and Stellantis, which fell in value from 3% to 5%. They were pressured by a weak retail sales report from China and industrial production, which increased competition from the country’s automakers. The UK saw the fastest decline in private sector employment in nearly four years in December, despite a slight increase in output following a payroll tax hike in Labour’s new budget. 

WTI crude oil prices fell to below $71 a barrel on Monday. A batch of economic data from China heightened fears of weakening aggregate demand from the world’s top oil importer, adding to the pessimism that the economy will struggle to gain momentum despite Beijing’s promises of fiscal stimulus. The IEA predicts the global oil market will maintain a surplus next year, despite OPEC+ members agreeing to postpone production increases.

The US natural gas (XNG/USD) prices fell to $3.15 per MMBtu, a sharp retreat from a 13-month high of $3.5, as markets lowered their expectations of strong US gas demand. Reports from the EU fueled optimism that European countries could find alternative sources of natural gas supplies after Russian flows through Ukraine were cut off later in the year, and major German companies had already struck LNG deals with Middle Eastern producers. 

Asian markets were declining yesterday. Japan’s Nikkei 225 (JP225) was down 0.03%, China’s FTSE China A50 (CHA50) lost 0.03%, Hong Kong’s Hang Seng (HK50) decreased by 0.88% and Australia’s ASX 200 (AU200) was negative 0.56%. 

Markets are awaiting a series of economic releases for New Zealand, central among which is Q3 GDP, which is estimated to contract by 0.4% quarter-on-quarter, which could signal a return to recession. The subdued data will provide further evidence in favor of a more aggressive Reserve Bank of New Zealand policy. Meanwhile, the New Zealand Treasury is prognosing a widening budget deficit this year, citing rising unemployment and slowing economic growth, delaying a return to surplus for at least five years.

In Australia, a private survey showed a decline in Consumer Confidence in December as sentiment became more pessimistic about the economic outlook. In addition, traders await the Australian government’s budget update, which is expected to show a widening deficit, partly driven by weakening activity in China, Australia’s largest trading partner.