(Reuters) – Global investors are about to get a taste of what Donald Trump’s return to the White House might mean for markets, global trade and international relations.
Trump’s inauguration on Jan. 20 as the 47th U.S. president will likely bring with it a Day One-barrage of executive orders on anything from taxes to tariffs, just as the fourth-quarter earnings season gets underway in earnest.
Here’s a look at what’s going to matter for markets in the coming week from Rae Wee in Singapore, Lewis Krauskopf in New York, Alun John, Karin Strohecker and Amanda Cooper in London.
1/ WELCOME BACK, MR TRUMP
Investors everywhere are waiting for Trump to begin his second term as U.S. president on Monday.
He has pledged to sign a flurry of executive orders on his first day in office, and some speculate he could begin right after his inauguration, before even the ceremonial parade.
U.S. markets are closed Monday for Martin Luther King Jr. day, so it may not be until Tuesday that investors can fully react.
Any early moves on tariffs will be a particular focus, after the leaks, counterleaks and denials that have already riled currencies and shares in big global manufacturers.
Long-dated bond yields have risen ahead of Trump’s inauguration, as traders expect his proposed tax cuts and tariffs to be inflationary and to stimulate domestic growth.
But as the U.S. debt-to-GDP ratio is pushing 100%, former policymakers are wondering whether bond vigilantes are lying in wait.
2/ QUARTERLY CHECK UP Investors counting on a solid 2025 for U.S. corporate profits to boost stocks will get a fuller picture of the outlook in the coming week. A wide swathe of Corporate America is set to post results for the last quarter of 2024 and give a view into the year ahead. The coming week includes earnings from streaming firm Netflix, healthcare giant Johnson & Johnson, consumer products maker Procter & Gamble and credit card company American Express. Major banks kicked off quarterly earnings season on Jan. 15, with profits at some of the biggest U.S. lenders rising, as deal-making picked up and trading was boosted by strong equity markets. Overall, S&P 500 companies are expected to post an increase of 10.4% in the fourth-quarter earnings from the same period the previous year, according to LSEG IBES data as of Jan. 15.
3/ WAR & PEACE (AND DAVOS)
Trump is expected to continue to shape momentum in wars raging in Ukraine and the Middle East.
The Israel-Hamas ceasefire to end the deadly 15-month old Gaza conflict is still expected to start on Sunday, though loose ends are still being ironed out. Hopes for stabilisation have lifted the region’s bonds and stocks, and could shape oil markets.
Bringing peace to Ukraine – nearing its third year of war – might take longer than the ‘day one’ fix Trump pledged, but markets are gearing up for how this will reshape the region.
Trump is set to virtually address leaders and CEOs, including Ukraine President Volodymyr Zelenskiy and Israeli officials, who are scheduled to gather in Davos from Monday. A pre-summit survey has identified war as the main risk of 2025.
4/ ENERGY BOOST
European policymakers are getting exactly what they don’t want right now – higher borrowing costs and soaring energy prices.
Oil has risen by 10% this month alone, egged on by concern about the impact of more Western sanctions on Russian crude, while, right in the middle of winter, natural gas prices have roared higher.
More worryingly for Europe, the euro has hit 14-month lows against the dollar, just a whisker above the $1.0 mark.
Since Russia’s invasion of Ukraine in February 2022, the United States has become Europe’s biggest supplier of natural gas in liquefied form (LNG) and a major source of crude oil, meaning the weakness in the currency is a double headache. The upcoming December final inflation numbers for the euro zone are unlikely to capture those price increases, meaning a possible nasty surprise later on.
5/ WILL THEY, WON’T THEY?
The Bank of Japan (BOJ) heads into its first policy meeting of the year. The yen is languishing near six-month lows, though a rate hike could be the panacea for the currency’s pain against a towering dollar, even if only temporarily.
And it seems policymakers at the central bank are priming markets for such a move, after both Governor Kazuo Ueda and his colleague Ryozo Himino said the decision would be up for debate at the BOJ’s Jan. 23-24 policy meeting.
It helps that U.S. President-elect Trump’s inauguration occurs just a few days before, which gives the BOJ some time to weigh up how his policies could ripple through financial markets.
Regardless, traders have reacted to BOJ officials’ remarks by raising their bets on a January rate hike. Futures now point to a 70% chance of a 25-basis-point increase.
(Compiled by Amanda Cooper; Graphics by Sumanta Sen, Vineet Sachdev, Pasit Kongkunakornkul and Kripa Jayaram; Editing by Gareth Jones)
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