European Markets Suffered Their Worst Quarter Since 2022

Posted on January 1, 2025 by Ignacio Teson

The slowdown in economies, doubts about further interest rate cuts in the U.S., and the unstable political climate in France negatively impacted equities. The Paris stock market was the only one to end 2024 in the “red.”

Europe’s major stock markets closed the final trading day of 2024 with gains, but ended their worst quarter since 2022. Almost all markets recorded yearly gains, except for the French benchmark, which closed in the “red” due to a climate of deep political instability.

The downturn from September to December was linked to uncertainty around interest rates and policies announced by the newly elected U.S. president, Donald Trump, which halted a rally that had taken several markets to historic highs earlier in the year. The pan-European STOXX 600 index recorded a quarterly decline of around 3%, the biggest drop since July 2022.

[[DAX-graph]]

In 2024, the benchmark index rose only 5.9%, while the slowdown in European and Chinese economies, automotive industry struggles, and political turmoil in France weighed on market confidence.

European Performances

The best-performing index of the year was Germany’s [[DAX]], with an 18.9% increase, followed by Spain’s IBEX 35 (+14.8%) and Italy’s FTSE (+12.6%).

London’s FTSE saw a much smaller rise of 5.7%, while Paris’s CAC 40 fell by 2.2%. It is worth noting that recently, President Emmanuel Macron appointed his fourth government of the year to calm pressures from both the left and right in a context of significant legislative fragmentation and difficulties in approving the 2025 budget.

On Tuesday, December 31, the dynamics were reversed, with French stocks leading the gains (+0.9%) and German stocks being the only ones to close with a negative variation (-0.4%), indicating a reassessment of values.

Global Markets

In other international markets, during the Asian session, most stock markets fell as the year ended with caution. Investors reduced bets on strong interest rate cuts in the U.S. in 2025 and prepared for Trump’s incoming administration, with the dollar maintaining its strength against most other currencies.

It is also important to note that the Japanese stock market was closed for a holiday and will not resume activity until next Monday.

Wall Street Posted a Strong Year of Growth Driven by Tech and AI

Posted on January 1, 2025 by Ignacio Teson

Stock prices of companies like Palantir Technologies (the top performer of the year in the S&P 500) and Nvidia saw impressive increases.

Despite moderate declines, Wall Street closed the final trading day of an exceptional year. The performance of the three major indices stood out, along with various trends that have strengthened and continue to generate expectations for the upcoming year.

[[SPX-graph]]

The Dow Jones, consisting of 30 large-cap stocks, finished the year at 42,544.22 points, with a yearly gain of 12.88%. Meanwhile, the [[SPX]] 500 increased by 23.31% to 5,881.63, and the Nasdaq Composite rose by 28.64%, closing at 19,310.79 points.

Despite the moderate declines in the indices on the final trading day of 2024 (down 0.07%, 0.43%, and 0.9%, respectively), market expectations remain positive, with trends gaining strength, particularly artificial intelligence (AI) technology.

Top Market Performers of 2024

Among AI stocks, the best performer among the major companies in the S&P 500 was Palantir Technologies, which achieved an impressive 330% annual gain for its investors. The company, specializing in processing large data volumes, has lucrative contracts with the U.S. government, allowing it to outperform even market giants and AI leaders like Nvidia (+170%).

The AI trend has fueled growth in these companies, as well as chip manufacturers like Broadcom (+109%) and Taiwan Semiconductor Manufacturing (+90%). The growing demand for chips has powered these gains.

Stock valuations have surged with the increase in share prices, but we believe the growth of AI will continue and transition from hardware to software on a massive scale. Other notable trends include Bitcoin, which continued to boost stocks like Coinbase (+33.24%) thanks to the approval of Bitcoin exchange-traded funds, and weight loss treatments like Eli Lilly’s famous Tirzepatide (+33.78%).

Brent Crude Oil Lost 3.2% of Its Value in 2024

Posted on December 31, 2024 by Ignacio Teson

Brent crude oil dropped around 3.2% compared to its closing price in 2023 of $77.04, while WTI remained nearly stable.

Oil prices ended 2024 with a second consecutive annual loss on Tuesday, due to weak post-pandemic demand, economic challenges in China, and the fact that non-OPEC producers kept the market well-supplied.

Brent crude rose by $0.65, or 0.88%, to $74.64 per barrel, while U.S. light crude WTI gained $0.73, or 1.03%, to $71.72 per barrel.

[[USOIL-graph]]

Brent fell approximately 3.2% from its 2023 closing price of $77.04, while WTI remained practically unchanged compared to last year’s final price.

In September, [[UKOIL]] futures closed below $70 per barrel for the first time since December 2021, and overall, prices in 2024 stayed below the highs of recent years as the post-pandemic demand rebound and the price shocks from Russia’s invasion of Ukraine in 2022 began to fade.

The highest closing price of 2024 was $91.17 per barrel, marking the lowest annual high since 2021.

Oil Price Outlook and Projections

Oil prices are expected to remain limited near $70 per barrel in 2025, as weak demand from China and rising supply are expected to overshadow OPEC+ efforts to stabilize the market, according to a Reuters monthly survey on Tuesday.

Weakened demand from China forced both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) to revise down their oil demand growth forecasts for 2024 and 2025.

Oil Market Surplus

As non-OPEC supply also increases, the IEA forecasts that the oil market will enter a surplus in 2025, despite OPEC and its allies delaying their plan to start increasing production until April 2025.

U.S. oil production rose by 259,000 barrels per day (bpd) to a record 13.46 million bpd in October, while demand surged to its highest levels since the pandemic, according to data from the U.S. Energy Information Administration (EIA).

The EIA predicts that production will reach another record of 13.52 million bpd next year.

Mexican Peso Loses 23% Against the Dollar in Its Worst Year Since 2008

Posted on December 31, 2024 by Ignacio Teson

After a year of significant fluctuations and without key indicators to absorb, investors remain cautious in the face of an uncertain outlook.

The Mexican peso closed 2024 with a sharp accumulated loss against the dollar, its largest since 2008. Following a year of wide movements and no relevant indicators to interpret, investors maintained the exchange rate above 20.80 amid an uncertain landscape.

[[USD/MXN-graph]]

The [[USD/MXN]] ended the day at 20.8829 units per dollar, compared to 16.9666 units at the close of 2023. The Mexican currency saw a decline of 3 pesos and 91 cents, or 23.08%, based on data from the Bank of Mexico.

Mexican Peso Performance

It is worth noting that this year, the dollar reached a high of 20.9080 on Tuesday, surpassing the previous record of 20.83 set after Donald Trump’s electoral victory. The peso had fluctuated between highs and lows, but at the start of the year, it had the best global performance against the dollar among major currencies. However, many of the factors that supported the trend of the so-called “super peso” faded, and the currency has since been fluctuating freely.

The favorable conditions that allowed the peso to outperform have gradually dissipated, pushing the local currency from 16.26 to 20.80 in the interbank market.

Mexican Peso Projections and Outlook

2025 will be a year of significant challenges, especially due to geopolitical escalations, and decisions made at the beginning of Donald Trump’s second term could exert a strong influence. Caution will prevail as expectations either materialize or deviate.

The Bank of Mexico’s high interest rate, which reached a record 11.25%, had supported the peso’s strength against the dollar. However, following a series of rate cuts, the rate has now dropped to 10%, with the central bank forecasting further reductions.

Xi Jinping Affirms China Will Achieve 5% GDP Growth

Posted on December 31, 2024 by Ignacio Teson

Looking ahead to 2025, Chinese President Xi Jinping has announced that Beijing will maintain its stimulus measures and emphasized the need for more proactive policies.

Speaking to the nation’s top political advisory body, Xi stressed the importance of preparing for potential challenges, including the possibility of increased tariffs from the United States under the incoming administration of Republican President Donald Trump.

On Tuesday, Xi reaffirmed that China is on track to achieve its 5% GDP growth target for 2024, describing the world’s second-largest economy as moving toward “stability.” While final growth figures for 2024 won’t be released until late January, Xi’s remarks aim to quell market uncertainty regarding the country’s macroeconomic outlook.

Chinese Economic Slowdown

This uncertainty has lingered over recent months as China faced sluggish domestic consumption and a trade crisis impacting both exports and imports. In response, the government rolled out new stimulus measures in late summer to revive internal demand and stabilize trade flows. Analysts currently estimate that China’s economy will close 2024 with a growth rate of approximately 4.8%.

The official growth target for 2025 will not be set until March during the annual legislative sessions, but Chinese officials anticipate the rate will again hover around 5%, exceeding most analyst forecasts. Xi’s commitment to sustained economic support underscores Beijing’s determination to counter external and domestic pressures while fostering long-term growth and stability.

Perfect Storm Drives Gold’s Best Annual Performance in 14 Years

Posted on December 31, 2024 by Ignacio Teson

Gold prices soared over 26% in 2024, marking their largest annual gain since 2010. This remarkable rally, driven by robust central bank purchases, geopolitical uncertainties, and monetary easing, culminated in an all-time high of $2,790.15 per ounce on October 31.

Spot gold ended the year at $2,624.44 per ounce, up 0.7% on Tuesday, while U.S. gold futures rose 0.8% to $2,638.90 per ounce.

[[XAU/USD-graph]]

Gold Drivers and Outlook 2025

Central bank purchases were a key factor in gold’s strong performance, as global financial institutions sought to diversify reserves amidst geopolitical tensions and a shifting monetary landscape. Falling interest rates further supported gold as a safe-haven asset during a period of economic uncertainty.

Although gold’s momentum slowed in November due to a stronger dollar following the “Trump euphoria,” analysts believe the factors that fueled its 2024 rise will persist into 2025. Central banks are expected to continue buying at a similar pace, though potential tariffs from the Trump administration targeting countries perceived as “de-dollarizing” could weigh on flows.

[[XAU/USD]] remains well-positioned to thrive in a low-interest-rate environment, serving as a hedge against economic and geopolitical risks. A renewed rally is anticipated in 2025, bolstered by a weakening U.S. labor market, persistently high interest rates that constrain growth, and increased demand for gold ETFs.

Other Metals

Silver also had an impressive year, with prices rising 22%, the best performance since 2020, despite a slight dip to $28.83 per ounce on Tuesday. In contrast, palladium and platinum struggled, with annual losses exceeding 17% and 8%, respectively, even as palladium rose to $910.45 per ounce and platinum edged up to $904.65 per ounce on Tuesday.

While gold led the safe-haven rally in 2024, silver stood out as a strong performer, while palladium and platinum faced sector-specific challenges. The metals market remains dynamic as investors assess economic developments and policy shifts heading into 2025.

Montenegro Extradites Crypto Magnate Do Kwon

Posted on December 31, 2024 by Ignacio Teson

Kwon Do-Hyeong, the South Korean entrepreneur behind Terraform Labs, has been extradited to the United States by Montenegro, nearly two years after his arrest in Podgorica.

Officials from Montenegro announced the transfer on Tuesday, citing accusations of multi-billion-dollar fraud tied to the collapse of Terraform Labs.

Terraform Labs, founded in 2018, developed the cryptocurrencies TerraUSD and Luna. Their downfall wiped out an estimated $40 billion in investor funds, triggering widespread disruption in global cryptocurrency markets.

FBI Role and Terra – Luna

Montenegro’s Ministry of the Interior confirmed in a statement that Do Kwon was handed over to U.S. authorities, including agents from the Federal Bureau of Investigation (FBI). The statement highlighted that he faces criminal charges in the U.S., including conspiracy to commit fraud.

Kwon’s extradition follows a lengthy legal process. His lawyers announced plans to appeal the decision before Montenegro’s Constitutional Court and the European Court of Human Rights.

The cryptocurrency mogul was arrested in March 2023 at Podgorica Airport while attempting to board a flight to Dubai using a falsified Costa Rican passport.

Once hailed as a “genius” by South Korean media, Kwon rose to prominence for his rapid success in the cryptocurrency industry, attracting billions in investments. Before launching Terraform Labs, he worked at Apple and Microsoft.

The TerraUSD Affaire

TerraUSD was marketed as a stablecoin, maintaining a fixed value of one U.S. dollar per coin, ostensibly less volatile than traditional cryptocurrencies like Bitcoin. However, its stability relied on an algorithm rather than tangible reserves such as foreign currency or assets.

Experts allege that Kwon orchestrated a Ponzi scheme, using funds from new investors to pay returns to existing ones. The collapse of Terraform Labs has intensified global scrutiny of cryptocurrency regulation and stablecoin practices.

Boeing’s Stock Drops Following Plane Crash in South Korea

Posted on December 31, 2024 by Ignacio Teson

Last quarter, Boeing reported a larger-than-expected loss for the third quarter of this year.

Boeing’s stock dropped 2.16% on Wall Street at pre-market operations on Tuesday following an announcement from South Korea’s Ministry of Transport about an investigation into the country’s fleet of Boeing 737-800 aircraft. The probe was initiated after a domestic plane crash over the weekend.

A Jeju Air flight traveling from Thailand to South Korea landed without its landing gear and burst into flames at Muan International Airport on Sunday.

Authorities, who have yet to determine the cause of the crash, are investigating factors such as a bird strike and a potential malfunction in the aircraft’s control system.

South Korea’s Ministry of Land, Infrastructure, and Transport stated that the aircraft’s pilot reported a “bird strike” shortly after receiving a warning about bird activity.

Investigation Outlook

Acting South Korean President Choi Sang-mok reportedly instructed the Transport Ministry to conduct an emergency inspection of the operational systems of all airlines in the country.

The ministry plans to inspect all 101 Boeing 737-800 planes operated by South Korean airlines.

“We will transparently disclose the progress of the crash investigation, even before the final results are published, and keep the victims’ families informed,” Choi said.

Boeing 737-Max Scrutiny

Earlier this year, a Boeing 737-9 Max operated by Alaska Air experienced a structural failure mid-flight.

The incident led to the temporary grounding of the aircraft model and an investigation by the Federal Aviation Administration (FAA).

In July, Boeing agreed to plead guilty to a charge of conspiracy to commit fraud related to the 2018 Lion Air crash and the 2019 Ethiopian Air crash, according to a BBC report at the time.

The Brazilian Real Experienced Its Worst Depreciation Since 2020

Posted on December 30, 2024 by Ignacio Teson

The Brazilian real experienced its sharpest depreciation against the dollar in 2024, driven by investor concerns over the government’s ability to address Brazil’s growing fiscal deficit and public debt.

The most significant depreciation occurred in November and December, amid doubts about President Lula’s government’s capacity to manage the country’s economic challenges.

On the final trading day of 2024, the real saw a slight appreciation of 0.22% against the dollar, thanks to an intervention by Brazil’s Central Bank, which sold $1.815 billion to defend the currency.

[[USD/BRL-graph]]

However, the [[USD/BRL]] ended the year with a 27.35% depreciation, marking its largest drop since 2020, when the economy was heavily impacted by the pandemic.

The Brazilian Real Compared

At the close of the final trading session, the exchange rate was 6.1787 reais per dollar, both for buying and selling, reflecting a slight gain compared to Friday. The depreciation in 2024 was the most significant since 2020, when the real fell 29.33% due to the pandemic-induced economic slowdown.

It was also the second-largest drop since 2015, when the real lost 48.3% during Brazil’s political crisis that led to the impeachment of President Dilma Rousseff and a two-year recession.

Among the G20 countries, the Brazilian real was the worst-performing currency of 2024 and the sixth-worst globally, surpassed only by the currencies of South Sudan (-72%), Ethiopia (-56.5%), Nigeria (-41.7%), Egypt (-39.2%), and Venezuela (-30.8%).

Currency Auctions and Lower Reserves

The real started the year at 4.85 reais per dollar, maintaining that level for much of 2024, but the most substantial depreciation occurred in the last two months due to growing uncertainty over the government’s fiscal policies. Despite promises from President Lula’s administration to eliminate Brazil’s primary fiscal deficit, it has yet to achieve this goal.

With the $1.815 billion auctioned on Monday, the total reserves auctioned by the Central Bank in December reached nearly $33 billion in an attempt to stem the currency’s decline. The fall in the real is attributed to investor mistrust in Lula’s fiscal policies, which have struggled to make significant progress since he took office in January 2023.

Oil Barrel Price Rises Driven by Increased Diesel Demand

Posted on December 30, 2024 by Ignacio Teson

Oil prices rose on Monday in a day of low trading activity, with markets awaiting economic data from China and the U.S. later this week to assess the growth outlook for the world’s two largest oil consumers.

Brent crude futures gained 29 cents, or 0.4%, to $74.46 per barrel. The most active contract for March delivery rose 49 cents, or 0.7%, to $74.29 per barrel. U.S. West Texas Intermediate, the [[USOIL]], added 69 cents, or 1%, to $71.29 per barrel.

[[USOIL-graph]]

Diesel is Replacing Gas this Winter

Diesel prices led the energy complex, with concerns over colder weather in the coming weeks driving demand for diesel as a substitute for natural gas in heating.

U.S. natural gas futures surged 17%, reaching their highest level since January 2023, driven by weather forecasts and increased export demand.

Oil prices were also supported by optimism about China’s economic growth next year, which could boost demand from the world’s largest oil importer.

Chinese Growth Policy Incentives

To stimulate growth, Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) in special Treasury bonds in 2025, according to Reuters last week.

China has also allocated at least 152.49 million metric tons of crude import quotas to independent refiners in a second batch for 2025 so far.

Meanwhile, the World Bank has raised its growth forecast for China in 2024 and 2025 but warned that weak consumer and business confidence, along with challenges in the real estate sector, will continue to weigh on the economy next year.