A global market rally is underway, indicating a potential shift in investor sentiment.
This evening, the three major U.S. stock indices opened higher, with Chinese assets seeing significant gains across the boardBy 11 PM, the Nasdaq Golden Dragon China Index surged over 2%, the triple leveraged FTSE China ETF rose more than 6%, and the double leveraged ETF for Chinese internet stocks climbed close to 5%. Moreover, European markets also posted strong gains, with the Euro Stoxx 50 index increasing by 0.83%, the German DAX rising by 0.78%, and Italy's FTSE MIB rising by over 1%.
In terms of news, the U.SBureau of Labor Statistics released PPI data for December 2024, which came in below expectationsThis could alleviate some concerns regarding inflationary pressures in the U.S. marketAnalysts suggest the overall rally in global assets could be linked to uncertainties surrounding the tariff plans of the recently elected U.S. president.
Currently, Wall Street traders are preparing for the upcoming U.SConsumer Price Index (CPI) report due on Wednesday, which is expected to spark new market volatilityTraders believe this CPI data will provide clearer guidance for the Federal Reserve's interest rate cut trajectory for this year.
Stocks Soar
On the evening of January 14, U.S. stock indices collectively opened higher
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By 11 PM, the Dow rose by 0.31%, the Nasdaq was up by 0.38%, and the S&P 500 saw an increase of 0.27%.
Among these, Chinese assets experienced a significant rally, with the Nasdaq Golden Dragon China Index up over 2%, the triple leveraged FTSE China ETF (YINN) gaining more than 6%, and the double leveraged internet stock ETF (CWEB) up nearly 5%.
In terms of popular Chinese stocks, XPeng Motors saw an increase of over 8%, BeiGene was up over 6%, and Tiger Brokers rose over 5%. Li Auto, JD, Bilibili, and Kingsoft Cloud all gained more than 4%, while Pinduoduo, Futu Holdings, and Miniso advanced by over 3%. Alibaba, Baidu, and Tencent Music rose by higher than 1%.
European markets also strengthened across the board, with the Euro Stoxx 50 index rising by 0.83%, France’s CAC40 increasing by 0.69%, Germany’s DAX up by 0.78%, and Italy’s FTSE MIB gaining over 1%.
During the Asian trading session, the A-shares and Hong Kong markets also saw significant gainsBy the close, the Shanghai Composite Index was up 2.54%, surpassing the 3200 mark; the Shenzhen Component rose by 3.77%, and the ChiNext Index increased by 4.71%. In Hong Kong, the Hang Seng Index rose 1.83%, while the Hang Seng Tech Index was up 3.08%.
In news, the U.SBureau of Labor Statistics reported that the PPI for December 2024 increased by 3.3% year-over-year, higher than November's figure of 3%, but below the expected value of 3.5%. Core PPI, which excludes food and energy, saw a year-on-year rise of 3.5%, also below the anticipated 3.8%. Analysts on Wall Street opine that this could help ease concerns regarding persistent inflationary pressures.
Additionally, some analysts suggest that the global asset rally may be connected to uncertainties around the tariffs proposed by the incoming U.S. president.
Bloomberg reports that insiders claim that members of the incoming U.S. president's economic team are discussing a gradual increase in tariffs on a monthly basis
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This incremental approach aims to enhance bargaining power while helping to mitigate inflation spikes.
One of the proposals being floated involves a progressive tariff plan, potentially increasing tariffs by about 2% to 5% each month, relying on administrative powers under the International Emergency Economic Powers ActAccording to sources, this proposal is still in its early stages and has not yet been presented to the president-elect, indicating that the phased approach is still under consideration.
Uncertainties within the Incoming US President's Plans
Analysts indicate that the current tariff plans from the president-elect are facing pressure from the U.S. stock marketRecently, the stock market has seen significant declines, with the S&P 500 briefly falling below its closing levels from November 5 of the previous year.
Wall Street professionals believe that if markets react negatively, the president-elect may be compelled to reverse course on these tariffsConsidering that the president-elect has historically viewed stock market performance as a benchmark for his presidency, traders speculate that if policies prove detrimental to the stock market, timely adjustments will be made.
David Bahnsen, Chief Investment Officer at Bahnsen Group, asserts that adverse reactions in the stock market would likely force the president-elect to reconsider policy direction.
It is noteworthy that current investor selling in U.S. stocks is also accompanied by a rise in U.S
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Treasury yields, driven by heightened concerns about persistent inflationAs a result, the Federal Reserve may need to adjust its interest rate cut plans.
An increase in U.STreasury yields raises borrowing costs across the economy, resulting in higher risk-free returns for investors holding Treasuries to maturity, which adds pressure on the stock marketAs these safe returns increase, riskier assets like stocks become relatively more expensive.
Risk warnings from Wall Street suggest that the uncertainty surrounding the Federal Reserve's monetary policy may continue for several months due to the tariff policies implemented by the incoming president.
Michael O'Rourke, Chief Market Strategist at JonesTrading, states, "The honeymoon may be over," pointing out that there is a growing realization that tariffs will be a cornerstone policy for the new administration, which is often unpopular with investors, as they typically impede economic growth.
Crucial Data on the Horizon
Currently, Wall Street traders are bracing for the U.SConsumer Price Index (CPI) report to be released on Wednesday, which is likely to provoke a new wave of market volatility.
The U.SDecember CPI report is set for release at 9:30 PM Beijing time on January 15, with market expectations indicating a 0.2% month-on-month increase in core CPI, which excludes food and energy, down from 0.3% in November.
Expectations also include a year-on-year rise of 3.3% for core CPI, above the Federal Reserve's 2% target, yet consistent with the prior three months' figures.
As strong employment data has curtailed interest rate cut expectations, the CPI report has become the center of market focus.
Stuart Kaiser, Head of U.S
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