This Week
US GDP figures and inflation linked PCE price index data releases on Friday, will be among the most important data releases this week as traders search for more cues on when the Fed might opt for rate cuts. The earnings season continues with Netflix posting results on Tuesday.
Geopolitically, the focus is likely to be upon President Trump’s comments over the weekend threatening to impose tariffs on European states that do not support a US bid for Greenland, raising concerns about a potential return to trade conflicts. On Monday gold and silver prices surged to fresh record highs on the news. Traders will also watch oil rich Iran, as speculation continues that the US may yet decide to launch military strikes against the country. President Trump is also set to give a speech at the World Economic Forum on January 21st.
Stocks
CATERPILLAR
Caterpillar’s stock price jumped 4.9% and hit a record high before the end of the trading week. The construction company contractor surged after it outlined expanded partnership with NVIDIA, increasing the company’s profile as an AI linked stock. The company’s ability to build out data centres makes it a central player in AI. The launch of CAT AI Assistant at the CES event in early January outlined how the company intends to use the latest AI enabled software to improve performance. In recent weeks the stock has benefitted from geopolitics surrounding US policy on Greenland since it’s a company that provides machinery for rare earth extraction. The company will post its earnings on January 29th.
MICROSOFT
Microsoft’s stock price fell 3.2% to a multi month low by the end of the week. The tech company has been subjected to profit taking in recent days amid a sector rotation into growth / industry based stocks since the beginning of the year. But the AI linked stock remains well placed due to its positioning around AI infrastructure and the increase of its stake to 27% in OpenAI, (owner of ChatGPT) shows it will remain at the forefront of development. The company will reveal its earnings results on January 28th.
Commodities
Crude Oil
Crude oil prices edged 0.25% lower despite hitting a more than two month high early in the week. The reversal came after the US appear to draw away from an imminent attack upon Iran which was the subject of speculation early on. Rising US inventories also slightly pressured prices.
Gold
Gold prices rallied 1.24% and hit fresh record peaks amid geopolitical tensions surrounding possible US strikes on Iran. Over the weekend reports that President Trump would implement a new 10% tariff on Denmark, UK, France, Germany and other European countries unless they took steps to support the US bid to own Greenland may be at the forefront of trader’s minds this week and might encourage safe haven bids.
SUGAR
Sugar prices rose 0.4%, extending gains from earlier in the month amid signs of increased trading volumes and demand for the commodity. At this time of year inflows into soft commodities like sugar are expected amid the rebalancing of portfolios, providing short term boost to demand. Expectations that major producer, Brazil may produce a smaller crop have supported prices, while this reduced supply has been offset by increased output from India, the world’s second largest producer.
USD/CAD
The USD/CAD inched 0.01% higher in a largely range bound week for the currency pair which hit a fresh one month high and saw a significant geopolitical development. Canada signed a trade deal with China that reduced tariffs on major exports and could benefit the Canadian economy and the Loonie. Conversely, the commodity linked Canadian dollar was slightly pressured as oil prices fell back from multi week highs.
Recap
Last week the S&P 500 fell 0.4%, the Nasdaq slipped 0.7% and the Dow Jones declined 0.3%.
US stock indices declined despite the S&P 500 hitting an all time high on Tuesday as traders took profits by the end of the week. In the earnings season most banks and Taiwan Semiconductor posted better than expected results, spurring a rally in AI linked stocks. In geopolitics an anticipated US strike on Iran did not materialize, although US warships are moving towards the Middle East region.
Crude oil prices after a strong start, finished the week lower, while natural gas prices declined to three month lows. Gold and Silver prices hit record peaks in another positive week for the metals. Platinum and Palladium prices turned slightly lower.