This week, financial markets are set to receive a mix of global and Canadian updates, shaping investor sentiment as the year-end approaches.
- The U.S. will release November CPI, wholesale inventories, and import price data.
- Wholesale inflation, small business optimism, and initial jobless claims are key economic updates.
- Federal Reserve officials remain in a blackout period with no policy-related comments.
- Earnings reports from GameStop, Oracle, Broadcom, and Adobe are due this week.
- The Canada Post strike enters its fourth week with no government intervention.
- The Bank of Canada will announce its final rate decision of the year on Wednesday.
- Statistics Canada will release household debt-to-income data on Thursday.
Bank of Canada Likely to Cut Rates as Jobless Rate Hits 7-Year High
The Bank of Canada is expected to cut its benchmark interest rate on December 11, with growing anticipation of a 50-basis-point (bps) reduction. This follows the release of data showing Canada’s unemployment rate rose to 6.8% in November, its highest level in nearly eight years, excluding the pandemic period.
The sharp rise in unemployment has shifted market expectations, with an 80% probability now placed on a 50-bps cut. Economists from the Bank of Nova Scotia and Bank of Montreal have revised their forecasts, joining others predicting the rate will drop to 3.25%.
While some argue for a smaller 25-bps cut, citing recovering consumer demand and inflation risks, the Bank of Canada’s recent dovish tone and concerns over economic slowdown may tilt its decision toward a larger reduction.
However, not all analysts agree. BofA Securities and Capital Economics point to strong job gains of 51,000 in November, suggesting underlying economic strength. These firms predict the central bank may opt for a smaller 25-bps cut, maintaining room for further adjustments in early 2025.
The final decision will reflect the Bank’s balancing of risks, including inflation trends, economic growth, and the impact of external factors like potential U.S. trade policies.
*The viewpoints are attributed by FP Posthaste
Canada Post Strike Reaches 25 Days
The Canada Post strike, involving over 55,000 workers, has entered its 25th day since beginning on November 14. Canada Post is awaiting a response from the Canadian Union of Postal Workers regarding a proposal submitted Friday. The union stated it is reviewing the offer and remains committed to resuming negotiations, though federal mediation has been paused for two weeks.
Calls for government intervention have grown, but officials have declined to step in. The federal government has previously used binding arbitration in other labour disputes, such as at the ports.
Bank of Canada Likely to Announce Large Rate Cut
The Bank of Canada is expected to announce another significant rate cut this week, potentially lowering its key interest rate by 50 basis points to 3.25%. Rising unemployment, which reached 6.8% in November, and slowing economic growth have strengthened calls for more aggressive monetary easing.
Economists note that inflation is steady at 2%, but the central bank faces pressure to stimulate an economy that has seen six consecutive quarters of per-capita contraction. Many anticipate further rate cuts in the coming months to support recovery.
Yuan and Euro Weakness Threatens Emerging-Market Currencies
The Chinese yuan and euro have experienced significant losses in recent months, dragging down emerging-market currencies in Asia and Europe due to their role as “currency anchors.” A surging dollar, concerns over China’s stimulus measures, and expectations of European Central Bank rate cuts have further pressured these key currencies. The yuan’s 30-day correlation with the Bloomberg Asia Dollar Index has reached 0.95, its highest in five years, reflecting the close trade ties between China and its regional peers. Similarly, the euro’s correlation with central and eastern European (CEE) currencies has risen sharply, highlighting its influence over the region’s economies. The prospect of higher US tariffs under President-elect Donald Trump, combined with a stronger dollar, poses additional risks for these currencies. Analysts warn of further declines, particularly for trade-dependent nations like Hungary and South Korea. Upcoming inflation data and China’s stimulus announcements will be closely watched for potential impacts.
Bitcoin Hits $100,000, Marking Historic Milestone for Cryptocurrency
Bitcoin surpassed the $100,000 mark this week, signaling its growing acceptance within mainstream finance. The milestone represents a 145% gain in 2024, driven by Wall Street’s embrace of digital assets and support from President-elect Donald Trump, who highlighted Bitcoin during his campaign. Spot-Bitcoin ETFs from giants like BlackRock and Fidelity further fueled institutional adoption. Industry leaders, including Mike Novogratz and Anthony Scaramucci, celebrated the achievement as validation of Bitcoin’s resilience following the crypto market’s downturn and scandals like FTX’s collapse. Despite lingering skepticism, major firms like Charles Schwab now plan to enter cryptocurrency trading as regulatory risks ease. Bitcoin’s integration into corporate and institutional portfolios underscores its transition from a niche asset to a global financial force. While experts view $100,000 as a significant milestone, many believe it’s just the beginning of further growth, bolstered by a pro-crypto administration and increasing global recognition.
South Korean President Yoon Declares Martial Law in Controversial Move
South Korean President Yoon Suk Yeol declared martial law on Tuesday, citing a need to protect freedom and constitutional order amid political deadlock in parliament. This is the first declaration of martial law since South Korea’s democratization in 1987. The move bans political activities, strikes, and imposes media control, sparking domestic and international backlash. Parliament voted overwhelmingly to demand the lifting of martial law, though its binding nature is unclear. Opposition leaders declared the move unconstitutional, urging military and police to disregard the order. Yoon’s own party also condemned the decision, calling it unlawful. The announcement triggered economic turmoil, with the won dropping sharply and shares of major companies like Samsung falling. Critics say the decision is politically motivated, undermining Yoon’s leadership. The US and allies expressed concern, viewing it as destabilizing for a key democratic partner. Market uncertainty deepens as South Korea faces global trade pressures and regional security challenges.
US Appeals Court Upholds TikTok Ban, Parent Company Faces Deadline
A US federal appeals court upheld a law banning TikTok unless its Chinese parent company, ByteDance, sells the app by Jan. 19. The three-judge panel ruled the ban does not violate First Amendment rights. TikTok plans to appeal to the Supreme Court, arguing the ban is based on flawed and hypothetical concerns. The US government claims the ban is necessary to protect national security, citing risks of Chinese espionage and data misuse. Civil liberties groups oppose the ruling, calling it a dangerous precedent that curtails free speech. The decision complicates President-elect Donald Trump’s potential efforts to reverse the ban, despite his campaign opposition to it. TikTok, with over 170 million US users, is a popular platform for entertainment and business. Critics highlight a lack of evidence showing direct harm, while competitors like Meta and Google may benefit from the ban. The case raises debates about balancing security and free speech.
Historic $105 Trillion Wealth Transfer Set to Reshape US Economy
A record $105 trillion is expected to be passed down from older Americans over the next 25 years, according to Cerulli Associates. Rising stock markets and home prices have bolstered estates, making this the largest intergenerational wealth transfer in US history. However, inheritance will remain concentrated among the wealthiest households, with over half of the transfers coming from families with $5 million or more in assets. Only one in five US households have received inheritances in recent decades, highlighting wealth concentration. Millennials are projected to inherit over $45 trillion by 2048, surpassing Generation X. Women, often surviving spouses, will receive nearly half of the transferred wealth. Critics argue the wealth transfer exacerbates inequality, with tax policies favoring the affluent. In 2023, estate taxes accounted for just 1% of projected inheritances. Meanwhile, many older Americans are prioritizing “giving while living,” supporting heirs during their lifetimes to witness the impact of their wealth.
Trump’s Intelligence Nominee Tulsi Gabbard Faces GOP Scrutiny
President-elect Donald Trump’s nominee for director of national intelligence, Tulsi Gabbard, is set to face tough questioning during Senate confirmation hearings. A former Democratic congresswoman from Hawaii who switched parties, Gabbard is under scrutiny for her 2017 meeting with Syrian President Bashar al-Assad and comments perceived as sympathetic to Russia. GOP Senator James Lankford raised concerns about her past statements and actions, including her doubts over US intelligence claims about Assad’s chemical weapon use. Gabbard’s nomination comes amid controversy surrounding other Trump picks, including defense secretary nominee Pete Hegseth, who denies sexual assault allegations, and former attorney general nominee Matt Gaetz, who withdrew amid bipartisan concerns. Critics have labeled Gabbard a “Russian sympathizer,” a claim some GOP senators, like Eric Schmitt, dismiss as unfounded. Trump’s incoming administration signals a potential shift in US foreign policy, with national security adviser nominee Mike Waltz emphasizing a need to deter adversaries and address the Ukraine war. GOP senators remain divided on Gabbard’s nomination.
Trump Declares No Plan to Replace Fed Chair Powell, Defends Tariff Threats
President-elect Donald Trump stated he has no intention of removing Federal Reserve Chair Jerome Powell, whose term ends in May 2026. Speaking on NBC’s Meet the Press, Trump said, “I don’t see it,” while maintaining he has the right to comment on interest rates. Powell has repeatedly emphasized the Fed’s independence, vowing not to resign under political pressure. Trump reiterated tariff threats against Mexico, Canada, and China, suggesting they subsidize their economies at the US’s expense. He proposed 25% tariffs on Canadian and Mexican imports, raising concerns over trade relations. When asked if tariffs would increase prices for Americans, Trump said, “I can’t guarantee anything.” Trump also renewed his stance on NATO allies “paying their bills” and vowed to end birthright citizenship through executive action. While taking credit for overturning Roe v. Wade, he assured he wouldn’t restrict abortion medication but noted “things do change.”
Reeves to Attend Eurogroup Meeting in Push to Deepen UK-EU Ties
UK Chancellor Rachel Reeves will attend the Eurogroup finance ministers’ meeting on Dec. 9, the first such appearance by a UK chancellor since Brexit. Invited by Eurogroup President Paschal Donohoe, Reeves aims to foster economic collaboration between the UK and the EU. The agenda includes global macroeconomic issues, support for Ukraine, and G7 priorities. This follows Prime Minister Keir Starmer’s meeting with EU Commission President Ursula von der Leyen, signaling improved UK-EU relations, with formal negotiations slated for early 2025. The Labour government is pushing for agreements on border checks, defense cooperation, and professional qualifications, though it rules out rejoining the single market. Reeves faces pressure to boost UK growth, as her recent £100 billion investment package is forecast to have modest long-term effects. This move aligns with Labour’s strategy to reset relations with the EU and host a UK-EU summit next year.
Milei’s Approval Rises as Argentina’s Economy Shows Recovery Signs
Argentine President Javier Milei’s approval rating climbed to 47% in November, up from 43% in October, as inflation dropped to its lowest level in three years and economic conditions improved. The LatAm Pulse survey by AtlasIntel indicates positive sentiment toward Milei as he completes his first year in office, with supporters outnumbering detractors. Key factors driving this recovery include economic stabilization, with wages consistently outpacing inflation since April and consumer prices rising only 2.7% in October. This follows a period of unrest, including protests against public university spending cuts. Milei also benefits from optimism surrounding Donald Trump’s US presidential win, with nearly half of Argentines believing it will boost their economy. Milei hopes to renegotiate Argentina’s $44 billion IMF loan with US support, bolstered by Trump’s presidency.
Intel CEO Pat Gelsinger Ousted Amid Stalled Turnaround Efforts
Intel CEO Pat Gelsinger has been forced to step down after the board lost confidence in his efforts to revive the struggling chipmaker. Gelsinger, once seen as the savior of Intel, opted to retire after being given the choice to step down or be removed. Intel CFO David Zinsner and EVP Michelle Johnston Holthaus will serve as interim co-CEOs during the search for a replacement. Gelsinger’s ambitious strategy to regain market leadership, including costly factory expansions and a pivot to contract manufacturing, failed to close the gap with competitors like Nvidia. The board cited concerns over Intel’s lack of competitive products and its struggles in the AI market. His departure may open the door for a new strategic direction. Intel faces mounting challenges, including declining revenue, workforce cuts, and $50 billion in debt. The company’s reliance on government subsidies through the Chips Act adds pressure for success in rebuilding its dominance.
*The viewpoints are attributed by Wallis Zeng.
This week, Canadian highlights include the ongoing postal strike, the Bank of Canada’s final rate decision, and household debt data. Globally, key events include the U.S. CPI report, Fed policy updates, the ECB meeting, and trends in Bitcoin and oil prices, offering vital insights as the year ends.
This Week’s Global Financial News Brief
Canada Post Strike Enters Fourth Week
The strike by approximately 55,000 workers at Canada Post has reached its fourth week. Business leaders are urging government intervention in the contract talks, but officials have so far declined to step in. Key union concerns include wages and the company’s plans to expand weekend delivery.
Bank of Canada Rate Decision
The Bank of Canada will announce its final interest rate decision for the year on Wednesday. The central bank has already cut its policy interest rate four times in 2024, including a 50-basis-point cut in October, bringing the rate down to 3.75%.
Household Debt Figures from Canada
Statistics Canada will release third-quarter data on household debt relative to income on Thursday, providing an updated view of Canadians’ financial health through its national balance sheet and financial flow accounts.
U.S. CPI Report and Fed Policy Outlook
The U.S. will release November’s Consumer Price Index (CPI) on Wednesday, a key inflation indicator ahead of the Federal Reserve’s policy meeting next week. Markets anticipate another 25-basis-point rate cut, but stalled progress on inflation could prompt adjustments to these expectations.
U.S. Stocks Face Inflation Test
The S&P 500 and Nasdaq reached record highs last week, but this week’s CPI data will test the strength of the rally. Higher-than-expected inflation could temper the Fed’s future rate-cut trajectory, impacting market sentiment.
ECB Expected to Cut Rates Again
The European Central Bank (ECB) will hold its final policy meeting of the year on Thursday, with a 25-basis-point rate cut widely expected. Analysts also anticipate downgrades to next year’s economic growth and inflation forecasts.
Bitcoin Faces Uncertainty After Record High
Bitcoin surpassed the $100,000 milestone last week, drawing significant market attention. However, its future remains divisive, with regulatory changes expected to play a pivotal role in shaping the cryptocurrency’s trajectory.
Oil Prices Decline Amid Demand Concerns
Brent crude dropped over 2.5% last week, while WTI crude fell 1.2%. Despite OPEC+ extending production cuts to 2026, weak global growth and sluggish demand from China continue to weigh on oil prices.
The most anticipated earnings releases for the week of December 9, 2024 are Broadcom #AVGO, GameStop #GME, C3.ai #AI, Adobe #ADBE, Oracle #ORCL, Macy’s #M, MongoDB #MDB, Costco Wholesale #COST, AutoZone #AZO, and Planet Labs #PL.
Published by Vikki Zhao
December 09, 2024, 13:00 PM EST. 10 min read
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