As the 61-year Baath regime in Syria comes to an end, Bashar al-Assad and his family have sought asylum in Russia and left the country. The Russian Foreign Ministry announced that Assad has resigned and left the country. The opposition forces led by Tahrir al-Sham (HTS) launched a counter-offensive on November 27, quickly capturing Aleppo, Hama, Homs and Damascus. The Syrian people enthusiastically celebrated the fall of the Assad regime in Damascus and other regions. How the new beginning will unfold will depend on how Syria’s multi-actor opposition comes together. With the collapse of the regime, opposition groups will either work together to form a federal civilian government or a new period of unrest will begin. The initial signs are promising. Despite the regime change, police and civilian authorities have been called on to remain on duty. A curfew has been imposed in Damascus to prevent looting. The opposition is trying to stay away from sectarian rhetoric by promising protection to the country’s various religious and ethnic minorities.
In line with market expectations, the European Central Bank (ECB) reduced the deposit rate by 25 basis points to 3%, the lowest rate since March 2023. This latest reduction was the fourth interest rate cut of 2024. The main refinancing rate was reduced from 3.40% to 3.15%, and the marginal funding rate from 3.65% to 3.40%. ECB President Christine Lagarde said in a statement following the interest rate decision that the disinflation process was continuing and that inflation was moving towards the 2% target. Lagarde stated that there was some easing in financing conditions, but that a tight stance was maintained in general. Lagarde reported that some board members had proposed a 50 basis point reduction, but a unanimous decision was made at 25 basis points. While Lagarde once again emphasized that interest rate decisions would be made in line with the data, it was observed that the statements that monetary policy would remain ‘sufficiently restrictive’ in the decision text were removed. Following the ECB’s decision, the euro/dollar parity was seen below 1.05. In swap markets, the ECB is pricing in a further five quarter point (25 basis point) reduction until September and a decrease in the deposit rate to 1.75%.
China has signaled a change in monetary policy for the first time since 2011. The Politburo’s economic meeting announced that monetary policy would be relaxed moderately, while fiscal policy would shift to a more proactive line in 2025. This development points to a serious transformation in China’s economic orientation. The meeting, led by Chinese President Xi Jinping, emphasized that steps to increase consumption would be accelerated and that real estate and financial markets would be stabilized. Chinese President Xi Jinping emphasized that the Chinese economy would achieve its ambitious 5% growth target for 2023 and continue to be the engine of global economic growth. Xi’s statements came immediately after the Communist Party decided to ease monetary policy after a 14-year hiatus.
The weakness in the Chinese yuan and euro in recent months paints a bleak picture for emerging market currencies in Asia and Europe. The yuan’s lack of stimulus measures has caused the yuan to lose value. Expectations of a rate cut by the European Central Bank have deepened the weakness in the euro. The yuan and euro’s role as “currency anchors” in these markets makes these currencies sensitive to these currencies. This anchor role has become even more pronounced recently. China and the eurozone are critical to regional trade. Countries such as South Korea and Malaysia export more than 20% of their exports to China, while this ratio exceeds 50% in the eurozone for countries such as Poland and the Czech Republic. Goldman Sachs predicts that the dollar will remain strong, which will further pressure the euro, yuan and emerging market currencies.
On Wall Street, investor appetite for complex financial products is experiencing the biggest movement since the 2008 global financial crisis. According to LSEG data, the global volume of structured finance transactions, excluding real estate and corporate loans, is set to reach $380 billion by 2024. That’s up more than 20% from last year and the highest since the financial crisis. Wall Street is making efforts to offer more sophisticated products to investors. For example, new sources of financing are coming into play, such as restaurant chain Wingstop franchise revenues, Tesla solar panels and the music catalogs of famous artists. Barclays’ recent transactions included loans based on the music catalogs of artists such as Shakira and Fleetwood Mac. The aging boomer generation’s interest in ‘annuities’ (payments made at equal intervals and amounts at the same interest rate) is further fueling this demand.
The theme of oil in 2025 seems to be high supply. In the oil market report of the International Energy Agency (IEA) for November, OPEC's total oil supply, including other unconventional production, was recorded as 32 million 830 thousand barrels per day. This means an increase of 170 thousand barrels per day compared to the previous month. Global oil supply is expected to reach 104 million 800 thousand barrels per day in 2025 with an increase of 1 million 900 thousand barrels, and 70% of the supply increase in 2025 is expected to come from non-OPEC+ countries such as the USA, Brazil, Guyana, Canada and Argentina. The decline in gasoline prices in the USA for eight weeks has pulled the national average to $2.97 per gallon. The average price of gasoline is 3.1 cents per gallon cheaper in a week, 8.7 cents per gallon cheaper than a month ago and 17.7 cents per gallon cheaper than a year ago.
It has been a week of following developments originating from China in commodity markets. The Chinese government’s announcement that it will determine its monetary stance as “moderately loose” for the first time in 14 years has given an upward momentum to global commodity markets, especially in base metals. While copper prices increased by 1% to $9,216 per ton on the London Metal Exchange, iron ore gained 1.5% to exceed $104. We will be following developments in two products in global 2025 commodity markets in more detail: Cocoa and coffee. The world’s largest coffee trading company, Volcafe, announced that the drought in Brazil has dealt a major blow to the arabica coffee bean production of the world’s largest coffee producer. According to a report seen by Bloomberg News, Brazil is expected to produce only 34.4 million bags of first-class arabica beans in the upcoming season. This figure means a decrease of approximately 11 million bags compared to the previous estimate. Cocoa futures prices also hit their highest in six months amid growing concerns about falling production in West Africa and tight global supplies.
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