European markets closed slightly higher on Monday, supported by gains in mining stocks and positive economic data from Germany, while currencies like the euro and British pound saw significant rallies against the US dollar. Thin trading volumes, owing to the Martin Luther King Jr. Day holiday in the US, kept overall market activity subdued. Investors remained focused on the inauguration of Donald Trump as the new US president, with markets reacting to expectations of sweeping executive orders on energy, cryptocurrencies, and trade. Meanwhile, Asian markets also showed mixed performance, led by a strong rally in Hong Kong stocks, as global investors weighed the implications of new US policies under the incoming administration.

Key Takeaways:

  • European Markets Close Mixed Amid Thin Trading Volumes: European stocks ended Monday with mixed performances as investors digested economic data and Donald Trump’s inauguration. The pan-European Stoxx 600 closed just 0.05% higher, lifted by a 1.2% rally in mining stocks. The FTSE 100 gained 0.18% to finish at 8,520.54, while France’s CAC 40 climbed 0.3% to 7,734, driven by banking stocks, including gains in BNP Paribas and Credit Agricole, which rose between 1.1% and 2.5%. Italy’s FTSE MIB reversed course to close 0.3% lower at 36,144, weighed down by declining oil companies and utilities, although banks such as UniCredit (+1.5%) provided some support. Germany’s DAX outperformed, rising 0.49% to close at 20,990.31, supported by a 0.8% year-over-year increase in producer prices for December. However, the annual average for German producer prices fell by 1.8% in 2024, reflecting a challenging economic backdrop.
  • Asian Markets Rally Led by Hong Kong and China: Asian markets saw a mixed but largely positive session on Monday, led by Hong Kong’s Hang Seng Index, which surged 1.76%, reaching its highest level since December 31, 2024, driven by gains in consumer cyclicals and healthcare stocks. Mainland China’s CSI 300 index added 0.45% to close at 3,829.68, boosted by the People’s Bank of China’s decision to maintain its benchmark lending rates at 3.1% for the 1-year LPR and 3.6% for the 5-year LPR. Data showed China’s December youth unemployment rate fell to 15.7% from 16.1% in November, while the nationwide jobless rate held steady at 5.1%. Japan’s Nikkei 225 rose 1.17% to close at 38,902.50, supported by gains in key sectors, while South Korea’s Kospi fell 0.14% to 2,520.05. Malaysia reported a 16.9% year-over-year surge in exports for December. Australia’s S&P/ASX 200 advanced 0.45% to finish at 8,347.40, benefiting from upbeat investor sentiment.
  • Bitcoin Hits All-Time High Before Pullback: Bitcoin reached a record high of $109,350.72 early Monday before retreating down nearly 4% in what appeared to be a “buy the rumour, sell the news” reaction to Donald Trump’s inauguration. Speculation about potential executive orders on cryptocurrencies, including the establishment of a bitcoin reserve, had fuelled last week’s rally. Although Bitcoin pulled back, it remains on track for significant gains, with analysts eyeing an upside target of $130,000. The broader cryptocurrency market was mixed, with the CoinDesk 20 index slipping 1%, while Solana’s token fell 7% but remained up 15% since Saturday.
  • Oil Prices Decline as Trump Softens Trade Stance: Oil prices slipped during Monday’s session after Donald Trump indicated he would not impose steep tariffs on imports from China, Canada, and Mexico. West Texas Intermediate (WTI) crude for February delivery fell $0.90 to settle at $76.98 per barrel, while March Brent crude dropped $0.83 to close at $79.96. 

FX Today:

  • EUR/USD Climbs Above 1.0400 Amid Renewed Optimism: The EUR/USD pair surged 1.43% on Monday, closing at 1.0414, as the euro strengthened significantly against the US dollar. The rally also forced the pair above its 50-day Simple Moving Average (SMA) at 1.0462, signalling improving sentiment. Immediate resistance is seen at 1.0500, aligning with December 2024 highs, while further gains could target the 100-day SMA at 1.0761. On the downside, support remains at 1.0300, followed by the critical level of 1.0200. Momentum indicators turned bullish, with the RSI exiting oversold conditions and the MACD showing early signs of a crossover. However, the pair remains below the 200-day SMA at 1.0777, maintaining a cautious long-term outlook. 
  • GBP/USD Rallies Beyond 1.2300 on Improved Sentiment: GBP/USD advanced 1.30% on Monday, closing at 1.2326 as the British pound capitalised on renewed buying interest against the US dollar. Immediate resistance lies at 1.2400, which aligns with the 50-day SMA at 1.2566, and further gains could target the 100-day SMA at 1.2838. On the downside, support is seen at 1.2200, followed by the critical level of 1.2100. Momentum indicators are showing improving conditions, with the RSI exiting oversold territory and the MACD approaching a bullish crossover. However, GBP/USD remains below the 200-day SMA at 1.2791, indicating that the longer-term trend remains downward. 
  • AUD/USD Recovers Amid US Dollar Weakness: AUD/USD rose 1.36% on Monday, closing at 0.6271 as the pair rebounded from its multi-month downtrend. The recent rally follows a test of support at 0.6100, a level last seen in October 2022. Immediate resistance is at 0.6353, marked by the 50-day SMA, with a sustained break above this level potentially pushing the pair toward the 100-day SMA at 0.6537. Conversely, failure to extend gains may see AUD/USD retreat toward 0.6200, with key support remaining at 0.6100. Momentum indicators are mixed, with RSI rebounding from oversold levels, suggesting room for further upside, while the MACD remains in negative territory, reflecting broader bearish sentiment.
  • USD/CAD Retreats from Recent Highs: USD/CAD fell 1.17% on Monday, closing at 1.4308 as the pair consolidated after reaching highs near 1.4480. Immediate support lies at 1.4200, close to the 50-day SMA at 1.4203. A break below this level could expose the 100-day SMA at 1.3938, while resistance is seen at 1.4400, with a more significant hurdle at the recent high of 1.4480. Momentum indicators are signalling mixed trends, with RSI cooling off from overbought conditions, suggesting further consolidation. However, the pair remains above the 200-day SMA at 1.3816, keeping the broader bullish trend intact.
  • Gold Holds Near 2710 Amid Renewed Upside Momentum: Gold prices rose 0.31% on Monday, closing at $2,710 as the precious metal continued its recovery from recent lows near $2,650. The rally comes amid growing uncertainty surrounding global markets and the US dollar. Immediate resistance is seen at $2,720, just below the recent high of $2,750. A break above this level could target $2,780, signalling a continuation of the broader uptrend. On the downside, support lies at $2,680, with stronger support at $2,650, where the 50-day SMA at $2,643 also converges. Momentum indicators remain bullish, with RSI in positive territory and the MACD showing signs of resuming upward momentum. Sustained trading above $2,720 would confirm further upside, while a move below $2,680 could lead to near-term consolidation.

Market Movers:

  • French Banks Lead Gainers on CAC 40: French banking stocks drove gains on the CAC 40, with BNP Paribas, Credit Agricole, and Societe Generale rising between 1.1% and 2.5%. Meanwhile, Airbus, Stellantis, Kering, and Legrand posted gains ranging from 1.6% to 2.3%. Losses in mega-cap stocks LVMH, L’Oréal, and TotalEnergies, which fell between 0.5% and 1%, limited the overall index’s advance.
  • J.B. Hunt Falls on Earnings Miss: Shares of J.B. Hunt tumbled 7.4% after the transport company reported fourth-quarter earnings of $1.53 per share, missing analysts’ expectations of $1.61. Revenue also declined year-over-year across all major business segments, amplifying investor concerns about slowing demand.
  • SLB Rallies on Strong Earnings and Share Buybacks: SLB (formerly Schlumberger) surged 6.1% after reporting better-than-expected fourth-quarter profits. The company also announced an increased dividend and expanded share repurchase plans. Despite caution over limited revenue growth in 2025 due to high oil supply levels, the strong results buoyed investor sentiment.
  • Truist Financial Jumps on Strong Results: Shares of Truist Financial rose 5.9% after the bank reported quarterly earnings that exceeded expectations. Higher net interest and non-interest income, along with an increase in average deposit balances, contributed to the better-than-expected performance.
  • Eli Lilly Declines on Medicare Concerns: Eli Lilly slid 4.2% as the company extended losses following the Centers for Medicare and Medicaid Services’ announcement of potential price negotiations for Novo Nordisk’s weight-loss and diabetes treatments. Investors fear similar scrutiny could affect Eli Lilly’s products, pressuring the stock further.
  • Fair Isaac Corp. Sinks on Slow Mortgage Originations: Fair Isaac Corp. (FICO) fell 3.5%, reversing gains from earlier in the week despite a price target increase by Jefferies. Analysts pointed to concerns about slower mortgage originations in a high-interest-rate environment as a headwind for the company’s credit score and analytics business.

As global markets navigate the first trading session under Donald Trump’s presidency, investors remain cautious amid mixed economic data and policy uncertainty. European stocks closed with modest gains, led by mining and banking sectors, while the FTSE MIB struggled due to pressure on utilities and oil companies. Asian markets reflected optimism, with strong rallies in Hong Kong and Japan, though South Korea’s Kospi lagged. In the cryptocurrency space, Bitcoin’s brief surge to a new record highlighted speculative enthusiasm but was followed by profit-taking. Meanwhile, the US dollar’s retreat boosted major currencies, and gold’s steady climb underscored ongoing risk aversion.