Better-than-expected core inflation in the US is fueling optimism. The indexes performed at their best since the week Trump was elected. There are important developments in geopolitics. Oil made a strong start to the year. Trump 2.0 starts on Monday. Uncertainty will now be our new normal.
TikTok is facing a potential access ban that will affect its 170 million users in the US. The Supreme Court has approved a law that would require its China-based parent company ByteDance to sell the app or face a nationwide ban. According to the law, ByteDance must sell TikTok by January 19 or the app will be banned. The Supreme Court's decision cited national security concerns due to TikTok's data collection practices and ties to the Chinese government. The Biden administration announced in the final days of its term that it would not implement the ban and said it would hand the responsibility over to the Donald Trump administration. Trump, on the other hand, said he would make a final decision on TikTok "very soon." In response to the Supreme Court’s decision, TikTok CEO Shou Zi Chew thanked Trump and praised his commitment to keeping the platform accessible in the US. Chew said Trump defended freedom of expression and stood against arbitrary censorship.
US indices had their best week since Trump was elected on November 4, the week of his election, following upbeat inflation data. The S&P 500 rose 2.91% on a weekly basis, while the Nasdaq rose 2.85%. The rise was not just driven by inflation data. The US earnings season has begun. Banks such as JPMorgan Chase, Goldman Sachs and Citigroup reported strong earnings growth. We are talking about the highest bank profits in history after 2021. Inflation is now less of a concern. Signs of a slowdown in inflation have revived hopes that the US Federal Reserve (Fed) will continue to cut interest rates in the coming months. These expectations may become clearer at the meeting to be held at the end of January. Although the weather suddenly became better, we were not saying such positive things about the first 15 days of January. Strong employment data released the previous week had led some market participants to demand that the Fed end its interest rate cut cycle or raise interest rates to balance inflationary pressures in the world's largest economy. Stocks have been under pressure recently due to a wave of bond sales centered in the US. However, this week, the two-year Treasury bond yield, which closely follows interest rate expectations, fell from 4.42% to 4.26%, halting this trend.
Despite some last-minute complications, the Israeli cabinet approved the ceasefire. The ceasefire will last for 6 weeks starting tomorrow. The ceasefire includes a mutual hostage exchange. With the hostage exchange, Israel will withdraw from densely populated areas of Gaza. The toll of the war is quite heavy. More than 46,000 Palestinians have been killed since October 7, 2023. 90% of Gaza is displaced. Gaza’s infrastructure has been largely destroyed, access to basic services is limited, and hunger is a constant threat to the people. Hamas aims to force Israel to withdraw from Gaza completely and maintain its own ruling power. Israel aims to completely eliminate Hamas and establish a new order in Gaza. US Secretary of State Antony Blinken has emphasized that the parties must make political concessions for a long-term solution. In this context, he stated that Israel must ultimately accept an independent Palestinian state.
Oil prices have risen above $80 per barrel, trading at their highest level since August, due to new sanctions against Russia and the decline in US oil stocks. The most aggressive sanctions imposed by the US have begun to affect the global flow of Russian oil. India announced that they will ban sanctioned ships. US oil stocks have fallen for eight consecutive weeks, reaching their lowest level since April. Instead of the expected surplus in the global oil market, a tighter supply balance has emerged. The International Energy Agency (IEA) revised down its expectation of a surplus in the global oil market yesterday. The agency predicts that stocks will increase by 725,000 barrels per day instead of 1 million barrels. Iranian oil, in particular, is under intense US pressure. China’s oil shipments from Iran have decreased by a quarter as a result of these sanctions, falling to 1.3 million barrels per day. The amount of Iranian oil currently waiting at sea has quadrupled to 20 million barrels. Most of this oil is sitting off the coast of Malaysia and Singapore. In addition to sanctions against Iran, the US has also targeted Russia’s oil exports by sea. In a statement made on January 10, it was announced that sanctions were imposed on 143 Russian tankers. These tankers accounted for 42% of Russia’s oil exports by sea last year. The US’s sanctions policy is seriously shaking global energy markets and increasing geopolitical risks.
We are observing some movement on the Chinese side in iron ore futures. The May-term iron ore contract, which is the most traded on the China Dalian Commodity Exchange, increased by 1.57% to 778 yuan/ton, reaching its highest level since January 3. The February-term iron ore contract on the Singapore Exchange also increased by 1.43% to $100.15/ton, and peaked at $100.35/ton yesterday. One of the main reasons for this increase is the 9% weekly decline in iron ore shipments from Australia and Brazil to 23.88 million tons. During the same period, China’s steel exports increased by 25.9% annually in December 2024, reaching 110.72 million tons, the highest level in the last nine years. Commodity analysts predict that this growth will continue due to the weak yuan and competitive pricing. We also see the movement in iron ore in the Baltic Dry Index (BDI) data, which tracks dry bulk transportation. The BDI increased by 0.84% in the last month and reached its level on December 11. This increase is due to the strong demand, especially for capesize ships (giant ships carrying large cargoes such as iron ore and coal). The average daily earnings of these ships increased by $1,381 to $13,391. We do not see a similar movement in Panamax and Supramax. Demand for capesize ships reflects global commodity movements. China's economic incentives may continue to support this trend.
The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.