Precious metals land in the green

US President Trump delivered a speech in which he said “I won’t use force” to take Greenland and later dropped the threat of tariffs after progressive talks with NATO chiefs. US Commerce Secretary Howard Lutnick gave a speech at a behind-closed-doors dinner that reportedly drew heckles from the audience and resulted in senior European figures walking out – among them ECB President Christine Lagarde.

The event ultimately served as a poignant indication of the currently tense EU-US relations. However, it is always worth looking through the noise and evaluating the explicit impact on investment markets.

There was a busy economic calendar, particularly for the UK which reported several key indicators. The unemployment rate held at 5.1% in November, in line with market expectations. The headline CPI inflation rate ticked higher to 3.4% in December, outpacing forecasts of 3.3%. Finally, retail sales in December came in stronger than projected, growing 0.4% compared to November’s figures and outperforming expectations for a contraction of -0.1%.

In Europe, the Eurozone inflation rate for December was revised lower to 1.9%, below the ECB’s target of 2%. Meanwhile, the German ZEW index rose to its highest level since July 2021 at 59.6, significantly beating expectations of 50.0, while Eurozone consumer confidence also improved from -13.2 to -12.4 this month.

Elsewhere, the Bank of Japan decided to keep rates on hold as widely anticipated, while 40-year Japanese bond yields rose above 4% for the first time after Prime Minister Takaichi called a snap election for February.  Japanese bond market weakening bled into other developed markets, while uncertainty around the Greenland situation also helped to push yields higher.

Equity markets opened the week sharply lower on renewed trade war fears and failed to fully regain losses by close on Friday. Gold benefitted again from heightened volatility and rose 6.4% in EUR terms. 

Equities

Global stocks finished down -1.6% in euro terms and down -0.2% in local terms last week. Year-to-date global markets are up by 1.6% in euro terms and up by 1.7% in local terms. The US market, the largest in the world, finished down at -1.8% in euro terms and down at -0.4% in local terms.

Fixed Income & FX

The US 10-year yield finished at 4.2% last week. The German equivalent finished at 2.9%. The Irish 10-year bond yield finished at 3.3%. The Euro/US Dollar exchange rate finished at 1.18, whilst Euro/GBP finished at 0.87.

Commodities

Oil finished the week at $61 per barrel and is up 5.6% year-to-date in euro terms. Gold finished the week at $4,988 per troy ounce and is up 14.7% year-to-date in euro terms. Copper finished the week at $13,049 per tonne and is up 4.1% year-to-date in euro terms.

The week ahead

Tuesday 27^th January

US consumer confidence report for January goes to print.

Wednesday 28^th January

US Federal Reserve rate decision is announced.

Friday 30^th January

German Q4 GDP and January inflation data is reported.