Take two: Markets up on Trump’s return; Japan raises rates to highest in 17 years
- 27 January 2025 (3 min read)
What do you need to know?
Donald Trump’s return to the White House as the 47th President of the US has been largely welcomed by markets. Over the past week (to Thursday’s close) the MSCI World and the US blue-chip index, the S&P 500, were each ahead by 3%. The technology-heavy Nasdaq was up 4% and in Europe, the Eurostoxx 600 and the UK’s FTSE 100 were also up 3%.1 Trump used his second inaugural speech to reinforce plenty of expected issues, including migration control, tariffs and looser environmental regulation to encourage fossil fuel use. But he also spoke of renaming the Gulf of Mexico to the Gulf of America and taking back the Panama Canal.
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Around the world
The Bank of Japan (BoJ) raised interest rates by 25 basis points to 0.5% – its highest level in 17 years - as inflation accelerated to its fastest pace in nearly two years. Headline inflation rose to 3.6% year-on-year in December, its highest since January 2023, and a sharp increase from November’s 2.9%. Core consumer prices, excluding food, increased 3%, a 16-month high. The BoJ voted 8-1 in favour of the hike. If the spring wage negotiations result in base pay increases of around 3% as expected and global pressures remain relatively modest, we think the BoJ will hike once more in the second half of the year to 0.75%.
Figure in focus: €123bn
In the coming weeks, European and UK banks are expected to return some €123bn to shareholders according to the Financial Times, citing UBS estimates. As lenders raise dividends above pre-financial crisis levels, it is anticipated banks will deliver around €74.4bn in dividends and €49bn of buybacks as they announce their 2024 full-year earnings figures, following a period of higher interest rates post-pandemic. Meanwhile the six largest US banks returned more than $100bn to shareholders via dividends and buybacks in 2024, Bloomberg reported. The Trump administration is expected to ease regulations on US banks, which could allow them to return more cash to shareholders.
Words of wisdom
Coral bleaching: When ocean temperatures rise above normal levels, corals experience stress and expel the algae that gives them their colour and their food supply, causing them to turn white and sometimes die. More than 40% of corals monitored around one island in Australia’s Great Barrier Reef were killed last year in the most widespread coral bleaching to hit the area, a new scientific study found. The findings underline the impact of climate change on oceans and the organisms that inhabit it. Coral reefs help protect coastlines from tidal waves and erosion and are a vital part of underwater ecosystems.
What's coming up?
Central bank activity dominates the week ahead. On Wednesday, the Federal Reserve (Fed) and the Bank of Canada each hold their respective monetary policy meetings to decide on interest rates. At December's meeting Fed policymakers cut rates by 25 basis points (bp) to a range of 4.25%-4.5%. The European Central Bank convenes on Thursday; at its previous meeting officials cut rates by 25bp to 3.00%. Thursday also sees the US and Eurozone publish flash estimates for fourth quarter GDP growth – the bloc also issues its latest unemployment numbers that day. Japan follows with its own unemployment data on Friday.
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