U.S. stock index futures moved little in holiday-thinned trade, amid persistent caution over U.S. President Donald Trump’s plans for trade tariffs and signs of sticky inflation.

At the end of the trading session on Sunday, the New York Stock Exchange indices were on the downside. The DJIA slumped by -0.37 and closed at 44546.08. The S&P 500 broad market index  stood still and closed at 6114.63. The NASDAQ gained 0.41 and closed at 20026.77.

The precious metals traded bearish. Gold added 1.03 and closed at 2913.3. Silver traded sideways closing at 32.81. Platinum lost -0.5 and closed at 1004.8. Palladium dropped by -0.3 and closed at 1002.0. Copper lost -1.1 closing at 4.61.

Crude oil futures traded stable. Brent  was stable and closed at 74.67. WTI stood still and closed at 70.76. Oil prices were broadly steady, as investors monitored developments over a possible Russia-Ukraine peace deal that could ease the sanctions that have disrupted energy flows, while a weaker dollar and reduced Caspian supply curbed any selling.

US:
Patrick Harker, President of the Federal Reserve Bank of Philadelphia, stated that monetary policy is well-positioned as officials await further progress on inflation. 

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Eurozone:
European government bonds, particularly those with longer maturities, are experiencing declines, driven by speculation about a meeting in Paris between European leaders. This meeting could signal increased security spending across the continent, potentially leading to more debt sales. 

Asia:
Hawkish comments from the Bank of Japan (BOJ) and persistent inflation are driving bond yields to multi-year highs, altering long-standing expectations that Japan’s rates would remain low in its historically deflation-prone economy. 

China:
New bank loans in China surged to a record high of 5.13 trillion yuan ($706.4 billion) in January, exceeding expectations and quadrupling December’s figure, as the central bank worked to support the country’s uneven economic recovery. This jump in loans, driven by year-end seasonal lending patterns, surpassed analysts' forecast of 4.5 trillion yuan. 

EM:

The Israeli economy experienced a slowdown in its GDP growth in the fourth quarter, dropping to an annualized rate of 2.5%. This figure is down from the 5.3% growth reported in the third quarter, and it falls short of both the consensus forecast of 5.7%. Russia's economy is showing the first signs of cooling, with sales and orders falling in various sectors due to high interest rates and inflation, Economy Minister Maxim Reshetnikov was cited as saying on Monday by the Interfax news agency.

Infographics

The United States

US retail sales fell more than expected in January, partly due to cold weather and the LA wildfires.

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Business inventories shrank last month.

The Atlanta Fed’s Q2 GDPNow estimate dropped sharply last week 

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Opinions about the markets

Patrick Harker, President of the Federal Reserve Bank of Philadelphia, stated that monetary policy is well-positioned as officials await further progress on inflation. He emphasized that the policy remains restrictive following three rate cuts last year, with expectations for interest rates to continue falling over the long term. Speaking at an event in the Bahamas, Harker highlighted economic resilience and a balanced labor market, which support holding the policy rate steady.

While not providing a specific timeline, Harker expressed optimism that inflation will continue to decline, allowing for future rate reductions. He also noted that Consumer Price Index (CPI) inflation in January has exceeded expectations in 9 out of the past 10 years, suggesting seasonal adjustments may struggle with rapid economic changes. Harker endorsed the decision to maintain stable rates, noting that the current policy is well-suited to return inflation to the Fed's 2% target within the next two years if economic conditions align.

Eurozone

Euro-area GDP growth was revised slightly upward, reflecting modest expansion in Q4. 

Germany’s wholesale price inflation is back in positive territory.

Euro-area employment growth continues to slow. 

‍Opinions about the markets

European government bonds, particularly those with longer maturities, are experiencing declines, driven by speculation about a meeting in Paris between European leaders. This meeting could signal increased security spending across the continent, potentially leading to more debt sales. German 30-year bond yields rose 8 basis points to 2.76%, with France and the UK following similar trends. Meanwhile, the Stoxx 600 index increased by 0.3%, driven by bank stocks benefiting from steeper yield curves, and industrial stocks performing well due to potential defense spending boosts.

Germany, facing the impact of U.S. trade tariffs, is vulnerable to prolonged economic contraction, according to Bundesbank President Joachim Nagel. The tariffs, coupled with rising energy costs and subsidized Chinese output, could reduce Germany's GDP growth by 1.5 percentage points by 2027. The Bundesbank forecasts minimal growth in 2024 and 2026.

Meanwhile, French Minister Benjamin Haddad suggests discussing joint European bonds to fund defense, as Europe's security remains a critical concern amid the Ukraine conflict.

Asia

The Japanese Q4 GDP growth topped expectations 

JGB yields continue to surge. 

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USD/JPY is breaking below its 200-day moving average 

Opinions about the markets

New bank loans in China surged to a record high of 5.13 trillion yuan ($706.4 billion) in January, exceeding expectations and quadrupling December’s figure, as the central bank worked to support the country’s uneven economic recovery. This jump in loans, driven by year-end seasonal lending patterns, surpassed analysts' forecast of 4.5 trillion yuan. However, analysts caution that lingering economic uncertainty continues to affect credit demand. Despite the record-high figure, the growth in bank loans was offset by a decline in loan growth in previous months.

Household loans, including mortgages, rose to 443.8 billion yuan, while corporate loans reached 4.78 trillion yuan. Total new bank lending for 2024 fell to 18.09 trillion yuan, the lowest since 2019. The economy grew by 5% last year, meeting government targets, but weak domestic consumption remains a concern. As U.S. tariffs add pressure, China is expected to pursue further fiscal stimulus, including interest rate cuts and reserve requirement ratio adjustments.

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China

Loan growth was strong in January. 

However, on a year-over-year basis, loan growth continues to decline. 

China’s broad money supply expansion eased. 

Emerging Markets

Russian core inflation surpassed 9% last month, though government data should be viewed with caution.

Thailand’s GDP growth fell short of estimates but remained strong. 

Mathematical Model Report

The overboughtness level of the U.S. stock market is 100.2%. The state of the financial markets and economy is pressured by sticky high inflation rates. In their mass, traders are less prone to take heavy risks as the market sentiment has become more cautious in the light of the possible breakdown of either the economy or the markets. We advise staying cautious and not taking any excessive risks. We are approaching a very dangerous level of overboughtness. We think it is prudent to cut/close positions on the SP 500 Index and wait. Recall that the major banks are predicting a recession in the near future.

The macroeconomic environment is conducive to growth. However, you should be careful in such an overheated market and allocate assets wisely (go to the section on investment ideas).

The appropriateness of investing over the five-year horizon. It is worth keeping in mind the overbought levels and the levels where the index is likely to come. Buying bonds will remain attractive for the near-term investments.

The indicator is trending more towards the bullish zone; As before, we advise in favor of taking short positions, in the long-term run. We recommend staying away from buying and staying on the sidelines, because local strong moves in both directions could be possible. However, in the long run we might see a recession.

The markets are not expected to recover anytime soon until 10 years from now. Until then, all odds are stacked against a 30% decline over the next year and a drop to 10% over the next 5 years. Let's stick with that prediction.

Current Market Situation

*Snapshots are made at the moment of report creation.

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The Global State of the Global Market

Investment Ideas

IN FILE
17.02.2025. Prepared by Quantillion Team¹

Not For Retail Use Or Distribution.

_{DISCLAIMER. The information contained in this document is of a general nature and is not intended for any specific individual or entity, nor does it address particular investment objectives, legal, accounting, regulatory, taxation, or financial situations. The document's preparation did not take into consideration your goals, financial standing, or needs. For matters relating to investment, it is strongly advised that you seek guidance from qualified financial or other professionals tailored to your specific circumstances. None of the content within this document should be construed as financial, investment, or professional advice. No information presented herein should be regarded as a financial recommendation or expert opinion on any matter. The potential revenues associated with foreign currencies may fluctuate due to changes in exchange rates. Past performance is not indicative of future results. Estimates, forecasts, and examples provided in this document are solely for illustrative purposes and do not guarantee investment results or return on capital. This general summary is not an exhaustive list of the risks and other essential disclosures linked to investing in the fund. More comprehensive and specific details can be found in the fund's respective documents.}

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