Author: Gino Bruno D'Alessio

Gino D’Alessio is a professional Forex trader with 20+ years of experience in the financial markets as a broker-dealer. Having worked in New York and London, Gino is regularly featured on Seeking Alpha. He completed the CAIA program in 2015, which also gave great insight into global macro factors. His main focus is FX majors, indices and commodities.

NIKKEI225 Gets a Boost from Better than Forecast GDP Data

Posted on by Gino Bruno D'Alessio

GDP data for the 4th quarter of 2024 showed the economy expanded faster than expected. Leaving the BoJ on track to raise rates.

nikkei225 gest some relief from better than expected gdp data

  • Q4 2024 GDP YoY expanded 2.8%
  • Capital spending reversed decline, rose 0.5%
  • Growth prospects in line with BoJ hikes

This morning the [[NIKKEI225]] reversed Friday’s decline posting a small gain of 0.15% after today’s GDP beat. The index remains in a wide trading range due mostly to uncertainty about BoJ hiking.

Positive GDP Data not Enough to Boost a Rally in NIKKEI225

The Q4 2024 GDP forecast was for a rise of 1.0% YoY, today’s data beat that prediction by a multiple of close to 3.

Private consumption, which accounts for more than 50% of economic activity rose by 0.1%. That seems a small number, but the forecast was for a decline of 0.3%.

Capital spending, which reversed the previous quarter’s decline, rose by 0.5% but missed forecast for an increase of 1.0%.

Economists highlight that continued price increases for food and energy may dampen consumer sentiment and reduce upcoming GDP data expansion.

NIKKEI225 Live Chart

[[NIKKEI225-graph]]

 

BoJ on Route to More Hikes in 2025

GDP growth is one of the key factors in the BoJ’s policy decision making. A rapidly expanding economy will inevitably create price pressure, and hiking rates is how the central bank would respond.

The Japanese economy is also heavily reliant on exports and the USA is its largest trade partner. The USA accounts for 20% of all Japanese exports, and the threat of trade tariffs is a considerable concern.

However, the prevalent view from economists is that the current GDP growth and price pressures support the BoJ view that further hikes are due in 2025.

The nominal GDP for 2024 topped $4 trillion for the first time, just below the nominal GDP of Germany, keeping the country in 4th place of the world’s largest economies.

DAX Posts 4 Consecutive New All-Time Highs in 1 Week – Eyes Possible Ukraine Peace Deal

Posted on by Gino Bruno D'Alessio

European stocks get a boost from Trump’s efforts to seal a peace deal between Russia and Ukraine. The DAX led the way over the week but profit taking puts the breaks on further highs.

dax end week on a new high, peace talks help momentum

  • Trump holds talks with Putin and Zelensky
  • Goldman raises 12-month forecast for European stock prices

The [[DAX]] has gained almost 3.5% over this week, today’s price action shows signs of profit taking. The early session took the index higher by 0.44% before retracing lower.

The index has enjoyed a rally fueled by ECB policy hopes, and the latest news of a possible peace deal has given the index extra momentum.

Trump’s Efforts for a Peace Deal

Trump has been negotiating with Russia and Ukraine over week, where the US president has held separate discussions with the leaders of both nations.

The EU has complained that they were sidelined from the negotiations, stating that they should have a say in the talks.

I find that their participation may only hinder a peace deal since the EU has only been advocating extending the war for as long as needed.

I believe the market sees the absence of an institution that was pro-war, making the possibility of a peace deal more likely.

The news is seen as reducing the risk of holding EU stocks due to a possible escalation of the conflict.

DAX Live Chart

[[DAX-graph]]

 

Goldman Raises STOXX600 12-Month Forecast by 7.4%

Goldman Sachs strategists stated that European stocks faced potential benefits from a peace deal between Russia and Ukraine.

The analysts see a peace deal as a reduction in risk and that European stocks benefit from lower inflation, lower valuations and improving consumer confidence.

The difference in valuations with US peers is wide, the [[SPX]] has an index average P/E of 27 while the STOXX600 has an average of just over 17.

The investment bank sees a peace deal would add as much as 0.2%, even with a simple ceasefire.

Energy costs have also been impacted due to sanctions on trade with Russia for natural gas. A peace deal could reduce energy prices and improve economic outlooks.

FTSE Declines After Surprise GDP Growth Dampens BoE Hopes

Posted on by Gino Bruno D'Alessio

GDP expanded in the last quarter of 2024 in a show of resilience in the UK economy. The FTSE reacted with a selloff.

ftse declines after stronger than forecast gdp data

  • UK GDP QoQ expanded by 0.1%
  • Growth was led by the services sector
  • Challenges still remain

The [[FTSE]] dropped 500 points or 1% after the data for GDP was released this morning. The data showed a positive surprise, beating forecasts for a contraction in the last quarter. The trend is in contrast to European peers which have rallied today on talk of a Ukraine peace deal.

GDP Growth Shows Resilience

UK GDP Growth beat forecasts of -0.1% to print at 0.1% expansion for Q4 2024. The YoY growth for Q4 was also higher at 1.4%, beating predictions of 1.1%.

Overall, GDP growth for 2024 came in at 0.9% for the FY 2024 after 2023 showed growth of 0.4%.

Today’s number shows the UK economy may be more resilient than thought. Last week the BoE reduced its growth forecast for 2025 to 0.75% from 1.5 %.

However, the National Institute of Economic and Social Research has kept its forecast for 1.5% growth in 2025.

An interesting and often overlooked data is the per capita production. The UK population is growing, and per capita growth fell by 0.1% in 2024, raising concerns about living standards.

FTSE Live Chart

[[FTSE-graph]]

 

BoE and the Cause for a Rally in the FTSE

The FTSE rally has predominantly been fueled by hopes for dovish policy from the central bank. Interest rates are playing a key part in the current momentum higher in the index.

I have often mentioned this, it’s more of an interest rate play than a pure growth play. Companies with high debt ratios will find that financing their debt load is cheaper with lower rates.

The cheaper money allows for less profits being used to finance the debt. Automatically, all things equal, the company becomes more profitable as it saves a lot of cash on financing debt.

Therefore, we se that positive news of economic expansion are not always met well by the broader stock market.

A moderately expanding economy is enough to keep companies in the black, and cheaper financing will simply boost profits.

DAX Hits New All-Time High on Siemens Energy Earnings Beat

Posted on by Gino Bruno D'Alessio

German stock continue to rally fueled by AI tech and dovish ECB policy. US Fed policy takes a back seat.

dax hits hew high on siemens energy earnings beat

  • Q1 orders from the US up 62%
  • Net income Q1 doubles forecast
  • Shares jump 1.6 in pre-market trading

The [[DAX]] hit a new all-time high today of 22,140 as positive earnings from Siemens Energy lifted the index. Other European companies such as Heineken and Anheuser Busch posted gains adding to the momentum.

Siemens Energy Earnings Beat Ignites AI Rally

The company posted net income for its first fiscal quarter (from October to December) at €252 million. More than double the average forecast of €130 million.

Siemens Energy also reported a record €131billion order book, thanks to an increase in the use of artificial intelligence.

“Our strong first quarter reflects the market opportunities arising from the increasing demand or electricity,” CEO Christian Bruch said.

The order book represents approximately 93% of the company’s projected sales for 2025. The company forecasts sales growth of 8% to 10% over 2024 figures.

The main drivers for the increase in demand have been gas and wind turbines, power converter stations, electrolysers and other equipment. These orders have increased by over 33% over the past 2 years.

DAX Live Chart

[[DAX-graph]]

 

Fed Policy Takes Back Seat

Many market analysts see European stocks eyeing the next moves from the Fed, and the focus today is on this afternoon’s CPI data.

I believe the DAX is propelled by exceeding expectations and some good results from core blue chips.

ECB dovish policy and the likelihood of a change in German politics after the upcoming election is also fueling the rally.

In January, we already saw how a change of policies from restrictive to expansive, including turning back to fossil fuels boosted the DAX.

Today’s CPI data may create some volatility for the DAX, especially if the number is higher than expected. However, the reasons propelling the index higher will prevail in the long run.

FTSE Posts All-Time High Again – Retail Sales Show Strong Start to 2025

Posted on by Gino Bruno D'Alessio

UK retailers posted higher sales in January compared to the same month last year. Retailers see job cuts for 2025 due to new budget levies.

fste posts new all time high fueled by strong retail sales

  • January retail spending rose by 2.6% compared to 2024
  • YoY consumer spending was up 1.9%
  • Consumer confidence down to -22 in January

The [[FTSE]] posted another all-time today of 8,791 before declining slightly. The main UK stock index started the week with a previous ATH yesterday.

Retail Spending Remains High

Consumers started the year spending more than they did in January 2024. The British Retail Consortium posted dated showing an increase of 2.6% of the same month last year.

The number is also considerably higher than the average monthly growth of 0.8% over the past year.

Barclays also reported consumer spending up   1.9% on the year, the highest figure since March 2024.

The data shows a contrast in consumer confidence, which came in at -22 in January, dropping 4 points from December’s number of -18.

“January sales kicked off a solid month for retail,” BRC chief executive Helen Dickinson said. “While the bouts of stormy weather put a temporary dampener on demand, sales growth held up well throughout the rest of the month.”

FTSE Live Chart

[[FTSE-graph]]

 

Retailers See Tough Year Ahead

Some of the main UK retailers have signaled a tough year ahead, these include Tesco, Next, and Marks & Spencer.

Their main concerns are the increases in employer taxes and the pressure they may add to prices and job growth.

The UK’s second largest supermarket chain, Sainsbury’s stated plans to cut over 3,000 jobs in 2025. The supermarket chain stated concerns of what it sees as a “particularly challenging cost environment”.

Retail spending data showed a rise of 1.3% in Q4 2024 excluding auto fuel, but when adjusted for inflation the volume of sales showed a drop of 2%.

January’s figure from the BRC also needs some context. The figure from January 2024 was particularly weak, while sales for December 2024 showed a rise of 3.1%.

Gold Hits New All-Time High Boosted by Tariff Threat & CCP Pilot Program

Posted on by Gino Bruno D'Alessio

As a tariff war looms, China has released a pilot program allowing insurers to invest in gold.

gold hits new all time high on chinese pilot program

  • Pilot program announced on Friday
  • Top insurers in China can allocate funds to gold
  • Gold hits new ATH

[[GOLD]] hit a new all-time today of $2,902 after the Chinese government announced a pilot program on Friday. The pilot program will allow Chinese insurers to buy gold and opens up a hard to quantify amount of demand.

Pilot Program for Gold Buying

The National Financial Regulatory Administration said that the program aims to optimize asset allocation for insurance companies.

The move will enhance asset liability management and allow insurers to hedge against market shocks.

The pilot program will allow insurers to invest in gold for medium- to long-term investment strategies. The program lists the top Chinese insurers including China Life Insurance and Ping An.

The program will allow insurers to invest in spot gold and other contracts, including:

  • Spot gold through the Shanghai Gold Exchange
  • Forward gold contracts
  • Gold swap contracts
  • Gold leasing

All of these markets directly or indirectly increase the demand for gold.

Gold Live Chart

[[GOLD-graph]]

 

How Much Capital Will Flow into Gold

The amount of capital that will flow into gold from this new program is not easy to determine, but we can make an educated guess.

Firstly, it won’t be like opening the flood gates. The insurers will need to have qualified personnel in place to navigate the gold market efficiently.

Second, the allocation process would be most likely paced out and implemented over time. This type of allocation is standard practice among large institutions.

As of end-2024, Chinese insurers had $5 trillion in assets under management. Most asset managers would consider an allocation to gold of between 5% and 20%.

Those percentages equal between $250 billion and $1 trillion in additional demand for gold. Given the prudent nature of insurance companies , I believe their allocations to gold are more likely to be on the lower end of the range, around 5% of AUM.

FTSE Set to Finnish Week on a High – BoE Rate Cut and Earnings Beat Drive Rally

Posted on by Gino Bruno D'Alessio

UK stocks shake off the rout from the DeepSeek fallout on Monday, boosted by monetary policy optimism despite reduction in economic forecast.

ftse rally fueled by boe rate cut

  • BoE cuts rates to 4.50% from 4.75%
  • Economic forecast for 2025 halved
  • AstraZeneca earnings beat – Anglo American production upgrade

The [[FTSE]] posted a new all-time high yesterday of 8,767 before the BoE MPC meeting. Today’s session is set to leave the index on a 1-week gain of over 2%. Save any surprises from NFP data due later this afternoon.

BoE Monetary Policy Driving FTSE Higher

The MPC voted in favor of cutting rates by 25 basis points yesterday as the market expected. The dovish BoE policy, more than enough to drive the FTSE to new all-time highs.

All nine members of the committee voted in favor of a rate cut, with 2 of the members voting for a bumper 50 basis cut.

The market expects at least two more cuts for the rest of the year. The unanimous vote helps the optimism of that view.

At the post-meeting press conference, the governor of the BoE said that inflation would primarily be due to energy prices rather than underlying price pressure on goods and services.

The comment further cements the perception that the central bank may continue to ease monetary policy.

FTSE Live Chart

[[FTSE-graph]]

 

BoE Slashes Growth Forecast

The central bank’s previous forecast for 2025 GDP growth was 1.5%. At yesterday’s meeting the committee revised the forecast down by 50%, indicating they expect the economy to grow by 0.75%.

Usually, such negative news for the general economy leads to pressure on stock prices. But in the modern environment stock investors are more concerned about interest rate projections than economic facts.

Lower interest rates could send the pound lower, the [[GBP/USD]] has already lost over 6% during the past 3 months. A weak exchange rate will mean foreign investors see FTSE stocks as cheaper in the domestic currency.

The markets expects the BoE to stay on track with rate cuts given the weakening growth outlook.

AstraZeneca Beat Earnings

AstraZeneca beat both forecast revenue and earnings yesterday propelling the stock higher by nearly 6% and helping the FTSE achieve the new high.

Revenue increased in 2024 by 21% to $54.1 billion and earnings grew by 19%. The CEO, Pascal Soriot, reconfirmed the company’s target for revenue in 2025 of $80 billion.

Joining AstraZeneca among the top performers of the FTSE was Anglo American, which saw the stock jump 5%.

The mining company updated its production forecast on higher growth from various copper prospects.

FTSE Hits New All-Time High as Market Expects Rate Cut Today

Posted on by Gino Bruno D'Alessio

The UK Stock market shakes off trade tariff risks and sluggish economy on hopes of dovish BoE policy.

FTSE hits new all time high

  • Investors expect BoE to cut rates by 25 basis points
  • Two more cuts forecast for 2025
  • Focus pivots to clues from central bank on policy outlook

The [[FTSE]] hit a new all-time high today of 8,714, up 0.74% on the day. The UK index is outperforming its European peers such as the [[DAX]] and [[CAC]] both up around 0.50%.

From the start of this week the FTSE gained nearly 2%, while the DAX and the CAC have gained close to 1.5%.

Investors Bet on Rate Cut at Today’s MPC Meeting

The market sees the BoE cutting rates by 0.25% today, from 4.75% to 4.50%. The UK’s central bank has the highest interest rates of the G7.

The BoE has only cut rates twice so far since the start of the pandemic in 2020. The central bank has had to juggle a stubborn inflation rate and a sluggish economy.

Investor focus has turned to what signs the MPC may give on their policy plans for 2025. I would say the market is betting for rate cuts to happen in H1, to keep this current rally alive.

FTSE Live Chart

[[FTSE-graph]]

 

Sluggish Economy & Inflation; Concerns for BoE

Economists see growing signs of stagnation, as Britain’s economy barley posted GDP growth in 2024. At the same time, inflation remains stubbornly above the BoE 2% target.

The central bank’s economic projections are likely to show that growth will be weaker in the near term, while inflation is forecast higher than at its meeting 3 months ago.

The BoE will publish its economic projections today at 12:00 GMT, 30 minutes before the governor Bailey and senior officials hold a press conference.

The market is pricing 3 interest rate cuts for 2025, while a Reuters poll predicts 4 cuts as the most likely outcome.

Dovish monetary policy would be good news for the Prime Minister and Chancellor of the Exchequer. The UK cabinet is under pressure after their budget is expected to require more taxation to meet higher spending goals.

However, some economists see inflation rising going into 2025, due to a reversal of energy prices and increase in labor costs.

Some forecast see inflation rising to 3% to 3.5% by April, making further interest rate cuts a difficult task for the BoE.

DAX Continues Unsteady Path on Trade War Concerns – Infineon Gives Some Uplift

Posted on by Gino Bruno D'Alessio

German stocks had there worse single day drop since November 2024 after Trump confirmed tariffs on neighbors and China.

DAX down, gets help from Infineon earnings beat

  • DAX posted the largest 1-day drop since November 12
  • Infineon jumps on better than forecast earnings report
  • Auto and Telecos drag on index

The [[DAX]] posted a 1-day loss of 1.07% yesterday and today’s open sees the index losing 0.38% from the open. The confirmation of US tariffs on Canada, Mexico, and China shock the stock market as inflationary fears ignited.

Some Reprieve Seen from Counter Offers

Mexico and Canada have cut a deal to postpone tariffs for 1 month as Mexico commits to sending troops to the boarder. Both governments have pledged to fight illegal crossings.

The deal highlights the possibility of concessions on tariffs for the Eurozone. Something Trump has spoken openly about is EU military spending. Raising expenditure for their armed forces may be a path to avoiding tariffs in Europe.

DAX Live Chart

[[DAX-graph]]

 

Auto and Teleco Sectors Weigh on DAX

The automobile sector lost 1% as the outlook for a turnaround in weak sales fails to arrive. The Teleco sector lost 0.8% as Vodafone dropped 6% after reporting another deterioration in Q3 in the German market.

The earnings report showed that Q3 earnings in Germany dropped 6.4%, an increase in the decline in Q2 of 6.2%. The company attributed the fall in revenue to the impact of a change in pay-tv laws.

Paring the decline of the DAX is the German chip-maker Infineon’s earnings report, stocks jumped as higher as 11%. The report showed a revised higher outlook for 2025 and beat quarterly revenue.

The revenue for fiscal Q1 (which runs from September) rose 8% to $3.5 billion from the previous company forecast of $3.25 billion.

The company also expects Q2 fiscal quarter revenue to rise to $3.7 billion, up from the previous forecast of $3.5 billion.

DAX: Stock Market Hits Wall of Reality on Trump Trade Tariffs

Posted on by Gino Bruno D'Alessio

Global stocks opened lower on Monday as trump kept hi promise on tariffs for China, Mexico, and Canada.

dax tumbles after trade tariffs

  • Mexico and Canada hit with 25% tariffs
  • ECB warns of risks of possible trade war
  • HCOB Manufacturing PMI higher than forecasts

The [[DAX]] opened lower today and fell 2.44% from Friday’s close before recovering some ground. Global stock markets all felt the harsh reality of US trade tariffs, the [[NAS100]] is down 1.8% and the [[FTSE]] is down 1.00%.

Trade Tariff Take Effect Tuesday 4

Trump signed an executive order that takes effect Tuesday, imposing 25% tariffs on all goods from Mexico and Canada. China has also been handed a 10% tariff on imports.

Mexico and Canada have both responded that they will also react with retaliatory tariffs. China has shown a more pragmatic approach, pledging to curb fentanyl precursor exports and invest in the USA.

The trade surplus of these countries means that the tariffs will hit the bottom line of these countries harder than it would the US. Cananda has a monthly trade surplus of $63.9 billion and Mexico a surplus of $71.8 billion.

At the same time, the USA has an abundance of resources and could be completely or almost independent. I believe tariffs may initially create some disruption for the US but will hurt these countries for longer.

DAX Live Chart

[[DAX-graph]]

 

ECB Policy Hopes & Fears

The monetary loosening cycle of the ECB is keeping the DAX alive despite bout after bout of poor economic data from Germany.

The economy contracted for a second year in a row in 2024, various top manufacturers are closing plants and shedding thousands of jobs.

Exports to what once used to be its largest trading partner, China, are down and now the country is facing tariffs to its new number 1 export country, the USA.

The ECB has reiterated multiple times its intention to bring the main interest rate down to 2% in 2025. This seems to be the only factor keeping stock valuation of DAX companies at current levels.

Even the ECB has shown concern for the imminent trade war. Frenche central bank chief, Villeroy said that Trump’s decision to impose tariffs will increase economic uncertainty.

HCOB Manufacturing PMI Higher than Forecast

The above sounds like a positive headline, partially it is. The forecasts were for a number at 44, while the release showed the index improved to 45 from last month’s figure of 42.5.

However, a number below 50 shows a contraction in economic activity. And today’s number is way off the 50 mark, and it may take more than just lowering interest rates to spur economic activity.