Global Markets Kickstart: Credit Easing, Housing Booming
Credit Easing, Housing Booming
Chart of the Week:
ECB Turns Dovish with Rate Cuts;
Euro Weakens, Dollar Stays Strong
China’s November export growth of 6.7% and import decline of 3.9% missed expectations, weakening demand for European goods as China remains the EU’s top export market. Eurozone manufacturing PMI stayed weak at 45.2 in November, reflecting ongoing struggles. Inflation slowed to 2.3%, while political instability persists in key nations. German Chancellor Olaf Scholz called for a December 16 confidence vote, potentially leading to February elections. In France, President Macron is reorganizing his government with a new prime minister. Limited fiscal options led the ECB to cut rates by 25bps in December, with President Lagarde signaling more easing to lower financing costs and support growth.
Market Recap:
NVIDIA Antitrust Probe Fuels U.S.- China Trade Tensions, Stocks Waver
Stubborn U.S. Inflation Drives Yields Higher; Dollar Gains, Yen Volatility Widens
U.S. CPI and last week’s nonfarm payroll data met expectations, strengthening market confidence in a December Fed rate cut. However, China’s December 9 announcement of an antitrust investigation into NVIDIA dragged down U.S. stocks. Despite ongoing political unrest in France, optimism persists over Macron’s appointment of a new prime minister to ease the stalemate. Meanwhile, the ECB’s December 12 decision to cut rates by 25 bps lent support to European equities. In China, the December 9 Politburo meeting introduced a “moderately loose” monetary policy for 2025, marking the first such stance in 14 years and boosting expectations for further easing, spurring a significant rebound in Chinese and Hong Kong stocks.
What’s Trending: U.S. Inflation Shows Uptick, Fed Rate Cut Still Likely
U.S. November CPI rose to 2.7% YoY, matching expectations, while core CPI held steady at 3.3% YoY. Core goods inflation accelerated from 0.05% to 0.31% MoM, driven by higher prices for household items, apparel, and transport goods. Housing inflation eased slightly from 0.38% to 0.34% MoM, while core services excluding housing edged up from 0.31% to 0.34%. November PPI posted its highest MoM increase since June, at 0.4% doubling expectations, with the annual rate climbing from 2.6% to 3.0%, the highest since February 2022. Persistent inflationary pressures kept markets volatile ahead of the upcoming FOMC meeting.
In Focus:
Economic Soft Landing and Loan Growth Support Housing Recovery
Luxury Housing Market Resilient to Rates and Economic Conditions
After two years of high rates and housing costs, Trump’s election and expected deregulation of bank lending, along with ongoing Fed rate cuts, have led to looser mortgage standards. Real estate lending by commercial banks has rebounded from its trough, turning positive. Historically, rising loan volumes have preceded increases in existing home sales by about six months.
