Investing.com – US stock futures advance on Thursday, suggesting equities may be on track to add to gains logged in the previous session. Investors are gearing up for more economic data and bank earnings after sentiment was bolstered by cooler-than-projected core consumer price numbers and strong results from large US lenders. Meanwhile, TSMC reports better-than-anticipated fourth-quarter profit thanks to artificial intelligence-fueled demand for its chips.

1. Futures higher

US stock futures moved higher, pointing to an extension to a surge on Wall Street in the prior session that was sparked by a soft core inflation reading and solid earnings from big US banks.

By 03:30 ET (08:30 GMT), the Dow futures contract had added 61 points or 0.1%, S&P 500 futures had ticked up by 23 points or 0.4%, and Nasdaq 100 futures had gained 123 points or 0.6%.

The three averages all spiked on Wednesday, notching their biggest daily percentage climbs since November 6, as a cooler-than-anticipated measure of core consumer price growth in December bolstered hopes for more Federal Reserve interest rate cuts this year. Fed officials noted that while uncertainty swirls around the policies of the incoming Trump administration, the figure helped the outlook for inflation.

In the wake of the data, the benchmark US Treasury note yield — which had risen to multi-month highs in recent days, denting the attractiveness of equities — also dropped. Strong results from major US lenders supported sentiment as well (more below).

2. Retail sales due

Investors will have the chance to parse through a slew of fresh US economic data on Thursday, including gauges of retail sales and manufacturing activity.

Economists expect retail sales to grow by 0.6% month-on-month in December, slowing slightly from an increase of 0.7% in the prior month. In November, the reading rose by more than anticipated, as purchases of online items and motor vehicles indicated momentum in the US economy heading into the end of 2024.

Elsewhere, a monthly factory index from the Philadelphia Federal Reserve is tipped to come in at negative 5.2, an improvement from a prior level of negative 16.4. However, the mark would still be in negative territory, suggesting contraction in manufacturing activity. The outlook for the sector, which makes up more than 10% of the US economy, has been clouded by a lack of clarity around the Fed’s monetary policy trajectory as well as President-elect Trump’s plans to impose sweeping import tariffs.

A look at weekly initial jobless claims is also due out, with traders eyeing the prospects for labor demand following a blockbuster employment report last week.

3. More bank earnings ahead

On the earnings front, Bank of America (NYSE:BAC) and Morgan Stanley (NYSE:MS) are scheduled to be the latest big-name US lenders to report their latest quarterly results.

The numbers, which are set to be unveiled prior to the opening bell on Wall Street, will follow buoyant returns from several of their peers on Wednesday.

JPMorgan Chase (NYSE:JPM) posted an all-time high annual profit underpinned by a fourth-quarter recovery in markets, while Goldman Sachs (NYSE:GS) logged its best-ever quarterly income, Wells Fargo ‘s (NYSE:WFC) bottom-line figure topped estimates, and Citigroup (NYSE:C) swung to a profit. Shares in all of these companies closed higher.

Executives at these companies also noted a rise in confidence in the future operating environment, citing expectations that the Trump administration will roll out more business-friendly policies. In particular, Goldman Sachs CEO David Solomon told analysts that there has been an “overall increased appetite for dealmaking” as firms prepare for potentially looser regulations and tax cuts during Trump’s second term in the White House.

4. TSMC profit tops estimates

Taiwan Semiconductor Manufacturing Co, also known as TSMC, clocked a higher-than-expected fourth quarter profit on Thursday thanks to artificial intelligence-powered demand for its advanced chips.

The world’s biggest contract chipmaker forecast a substantial increase in capital spending for 2025, citing a pick-up in capacity utilization and increased production at its new facilities in the US and Japan.

TSMC’s net income surged 57% to T$374.68 billion ($11.60 billion) in the three months to December 31, the company said in a statement. The figure was higher than Bloomberg estimates of T$369.84 billion.

For the first quarter of 2025, TSMC CFO Wendell Huang forecast revenue between $25 billion and $28 billion, citing some softer seasonal trends in smartphone demand and AI investment.

TSMC is also set to ramp up capital spending in the face of more AI demand in the year, with Huang pegging 2025 capital expenditures at between $38 billion-$42 billion, up from $29.8 billion in 2024. About 70% of this will be for advanced processes technologies, TSMC’s biggest revenue earner.

5. Crude muted

Oil prices hovered around the flatline on Thursday, adding to recent highs, driven by a combination of softer US inflation data, new sanctions on Russian oil, and significant drawdowns in US crude inventories.

By 03:31 ET, the US crude futures (WTI) were mostly flat, while the Brent contract traded down by 0.1% at $81.94 a barrel.

Oil prices rose more than 2% on Wednesday, to their highest levels since July, as a benign US inflation report brought expectations of softer monetary policy back into play, potentially boosting economic growth.

Supporting the bullish sentiment, the US Energy Information Administration reported a drawdown in crude oil inventories of 2 million barrels, indicating a tightening of supply.

COPENHAGEN (Reuters) – Denmark’s Prime Minister Mette Frederiksen has called the country’s business leaders to a meeting on Thursday after U.S. President-elect Donald Trump last week threatened military or economic action such as tariffs to take control of Greenland.

Trump said it was an “absolute necessity” for the United States to take control of the vast Arctic island, which is a semi-autonomous territory of Denmark.

Frederiksen told Trump in a 45-minute phone conversation on Wednesday that it was up to Greenland to decide its future and that Denmark is willing to do more to strengthen security in the Arctic.

She also emphasized that Danish companies contribute to growth and jobs in the United States and that the EU and the U.S. have a common interest in increased trade.

Denmark is home to companies such as drugmaker Novo Nordisk (NYSE:NVO), shipping group Maersk, brewer Carlsberg (CSE:CARLb), toymaker Lego, jewellery maker Pandora (OTC:PANDY) and wind turbine maker Vestas.

“It’s important that we have a good and constructive dialogue with the Danish business community. In a time of geopolitical tensions, we must seek dialogue and cooperation,” Minister for Trade and Industry Morten Bodskov said in a statement.

The ministry declined to give any detail on the time for the meeting or who was invited.

Following Frederiksen’s conversation with Trump, foreign minister Lars Lokke Rasmussen also called members of the foreign policy committee to a meeting on Thursday.

BEIJING (Reuters) – China said on Thursday it would apply provisional duties on imports of industrial plastics from the United States, European Union, Japan and Taiwan after a months-long anti-dumping investigation.

The provisional anti-dumping levies on polyacetal copolymers will start from January 24 and range from 3.8% to 74.9% depending on the country and company, the commerce ministry said in a statement.

The plastics in question can partially replace metals such as copper and zinc and have various applications including in auto parts, electronics, and medical equipment, the ministry said.

LONDON (Reuters) – Britain’s finance minister Rachel Reeves said on Thursday she would press regulators on what more her government can do to deliver growth after data showed the country’s economic output inched up by a lower-than-expected 0.1% in November.

“I am determined to go further and faster to kickstart economic growth,” Reeves said in a statement. “Today I will be pressing regulators on what more they can do to deliver growth.”

Investing.com – The UK economy returned to growth in November, after the contraction seen in the prior month, but economic activity in the fourth quarter remains subdued, piling the pressure on the Bank of England to ease monetary policy further in 2025.

Data released earlier Friday by the Office for National Statistics showed that the UK economy grew by 0.1% in November, below the 0.2% expected, after contracting by 0.1% in October. This resulted in an annual growth rate of 1.0%, a drop from the revised lower 1.1% the prior month..

This sombre start to the fourth quarter marks a significant slowdown in growth momentum and output activity compared to the robust performance in the first half of the year.

Additionally, consumer and business confidence across major industries has declined significantly, compounding the existing headwinds, while the forthcoming increase in employers’ National Insurance Contributions, announced in the Autumn Budget, is expected to weigh on the labor market and dampen growth.

Throw in the potential for new tariff policies from the upcoming Trump administration and the possibility of a cut to government spending as the new Labour government contends with rising bond yields and significant downside risks to growth exist. 

The International Monetary Fund forecasts that the UK will grow by 1.1% in 2024, which is slower than previous periods but would put the UK in the middle of the pack of the world’s leading nations. 

The BoE has reduced its benchmark Bank Rate twice since August – less than other central banks – and it has stressed it is likely to move gradually on further interest rate cuts, given persistent inflation pressures in Britain’s economy.

It next meets in early February, and the pressure is mounting on the central bank to cut interest rates again, having last moved in November, reducing its base rate then to 4.75% from 5%. 

Investing.com– China’s economy shows resilience but faces potential challenges due to limited policy support and external headwinds, according to Morgan Stanley (NYSE:MS) analysts.

While recent export and consumption figures provide reasons for optimism, underlying concerns over fiscal and housing policy measures highlight a more cautious outlook, analysts said in a note.

In its latest research note, Morgan Stanley outlines “bull” and “bear” scenarios for the world’s second-largest economy.

On the positive side, Chinese export growth surged 10% in Q4 2024, up from 5.4% in the third quarter, driven by front-loaded shipments to the U.S. ahead of potential tariff changes under the incoming Trump administration, analysts wrote.

Consumption also showed strong momentum, with December sales of autos and home appliances benefiting from Beijing’s expanded consumer trade-in programs, potentially keeping GDP growth at 5% in annualized terms through Q1 2025.

However, Morgan Stanley analysts warn that these growth drivers might be short-lived.

Export front-loading and stimulus-induced consumer spending have reduced Beijing’s urgency for broader policy easing. In the housing market, softening prices and increasing discounts offered by sellers highlight weak buyer demand, according to Morgan Stanley.

Progress on reducing housing inventories remains limited, and local government bond issuance—key to infrastructure spending—continues at a sluggish pace despite measures to streamline approvals, analysts said.

Monetary policy space also appears constrained as Beijing prioritizes yuan stability amid global inflation risks, the analysts added. The potential for broader U.S. tariffs or evolving domestic social dynamics could change the outlook in later quarters, but current conditions suggest only moderate economic momentum.

By David Lawder

WASHINGTON (Reuters) – President-elect Donald Trump’s pick for Treasury secretary, hedge fund manager Scott Bessent, vowed to maintain the dollar’s status as the world’s reserve currency as he prepared to face questions from U.S. senators on Thursday on how he will implement Trump’s tax cut, tariff and deregulation plans.

Bessent’s testimony at a Senate Finance Committee confirmation hearing at 10:30 a.m. EST (1530 GMT) will have financial markets on edge amid worries – reflected in rising bond yields – that Trump’s policy plans could stoke inflation and spark a new global trade war that threatens financial stability.

The 62-year-old founder of Key Square Capital Management will need to present himself as a moderating influence on Trump’s “more extreme” plans, said David Wessel, director of the Brookings Institution’s Hutchins Center on Fiscal and Monetary Policy.

“What the markets and the business community want is to know that there’s a grown-up at the table who doesn’t think that cutting taxes excessively and running up the debt is a good idea,” Wessel said. “And someone who doesn’t think that all of Trump’s tariff campaign promises are good ideas.”

In prepared remarks released on Wednesday night, Bessent laid out a vision for “a new economic golden age” that included prioritizing strategic investments that grow the U.S. economy and making permanent Trump’s 2017 individual and small business tax cuts that are due to expire on Dec. 31, 2025.

“We must secure supply chains that are vulnerable to strategic competitors, and we must carefully deploy sanctions as part of a whole-of-government approach to address our national security requirements,” Bessent also said in the remarks.

“And critically, we must ensure that the U.S. dollar remains the world’s reserve currency.”

TARIFF ADVOCATE

Bessent did not mention China in his prepared remarks, but he has been a strong advocate for Trump’s plans for sweeping tariffs that range between 10% on all imports and 60% on Chinese goods.

In a Fox News opinion piece published a week before he emerged as the winner of a high-drama contest for Trump’s Treasury choice in November, Bessent lauded tariffs as “a means to finally stand up for Americans” after decades of job losses to rising imports.

“Used strategically, tariffs can increase revenue to the Treasury, encourage businesses to restore production and reduce our reliance on industrial production from strategic rivals,” especially China, Bessent wrote.

TAX QUESTIONS

Finance Committee Democrats are expected to hammer Bessent on his plans for extending the 2017 tax cuts for individuals and small businesses that expire at the end of this year. Budget forecasters estimate this would add at least $4 trillion to the federal debt over a decade without savings elsewhere.

Bessent in his remarks called for the Trump administration and Congress to implement “pro-growth policies to reduce the tax burden on American manufacturers service workers and seniors.”

The latter policies refer to Trump’s campaign promises to lower the corporate tax rate to 15% from 21% for companies manufacturing products in the United States, and to exempt income from tips and Social Security from taxation.

Senate Finance Committee Democrat Elizabeth Warren released a list of 180 questions for Bessent to answer, including some challenging his past assertions that tax cuts could pay for themselves by generating higher growth.

“Your expertise has been in making already-rich investors even richer, not cutting costs for families or making the economy stronger for all Americans,” Warren wrote in her letter to Bessent.

The Senate panel’s Republican chairman, Mike Crapo, called Bessent “one of the sharpest minds in the global finance industry.”

Crapo added in his own prepared remarks that Bessent would “have to work with Congress to preserve and build on pro-growth Republican tax policies that have greatly benefited all Americans.”

FED INDEPENDENCE QUESTIONS

Bessent grew up in South Carolina and went to Yale University before starting work on Wall Street, where he helped famed investor George Soros earn over $1 billion by betting against the British pound in 1992.

He started Key Square in 2015, quickly raising $4.5 billion in assets, which peaked at $5.1 billion at the end of 2017 but dropped to $477 million six years later. Bessent has pledged to divest his Key Square investments to avoid conflicts of interest.

Markets also will parse Bessent’s comments on Federal Reserve independence, given his past advocacy of appointing a “shadow” chair to the Fed board who would offer alternative policy guidance. Trump has recently complained about interest rates being too high, despite three Fed cuts last year.

SEOUL (Reuters) – South Korea’s central bank governor said on Thursday that the most important factor determining the health of Asia’s fourth-largest economy in the next few months was whether recent political turmoil would stabilise.

“Previously, the biggest variable was U.S. monetary and trade policy. Now, more than that, the biggest factor determining the economy is whether the political process proceeds stably, as we all want, in the next few months,” Bank of Korea Governor Rhee Chang-yong told a news conference.

“That is why a normalisation of the political process is way more important than lowering interest rates a month earlier or later,” said Rhee, speaking after the Bank of Korea unexpectedly held policy interest rates steady at 3.00% on Thursday.

The policy decision is the first since President Yoon Suk Yeol’s attempt to impose martial law in early December triggered the country’s biggest political crisis in decades. The turmoil prompted the government to cut its 2025 economic growth forecast to 1.8% from 2.2%.

Rhee also said the decision not to cut rates reflected a need to support the won “which in part has been weakening due to political reasons.”

The central bank governor said, however, that the political event that took place on Wednesday provided support to the won, apparently referring to the arrest of impeached President Yoon.

Yoon’s arrest – the first of a sitting president – was fairly orderly amid fears violence could flare as more than 3,000 police officers marched on his residence. A previous attempt to arrest him on Jan. 3 failed after an hours-long standoff between investigators and Yoon’s personal security.

“The dollar-won exchange rate fell today, thanks to the U.S. inflation report, but what happened yesterday also affected it in a comprehensive manner,” Rhee said, when asked about movements of the won in relation to domestic political turmoil.

On Wednesday, the won briefly strengthened after news of Yoon’s arrest broke.

The currency extended gains on Thursday to hit its strongest level since Jan. 8 at 1,449.6 per dollar.

Yoon’s arrest may have ended one chapter in South Korea’s political crisis, but is unlikely to mark the end.

Yoon did not intend to take part in a second day of questioning on Thursday, his lawyer said, further stonewalling a criminal probe into whether he committed insurrection with his martial law bid as he fights for his political survival.

A look at the day ahead in European and global markets from Ankur Banerjee

Global stocks and non-dollar currencies found some respite from their inflation-related anxieties, buoyed by a strong start to the earnings season and a softish U.S. core inflation reading that revived hopes for Fed rate cuts this year.

But the relief rally may be short-lived, with U.S. inflation still looking a bit too warm for comfort – and potentially facing upward pressure if the incoming Trump administration pursues aggressive policies on tariffs and taxes.

Cartier-owner Richemont (SIX:CFR)’s sales report on Thursday will be the main event during European hours, giving the first insight into the health of high-end demand as luxury firms pin their hopes on U.S. consumers, while weakness persists in China.

Investors will also keep a wary eye on developments in the Middle East after Israel intensified strikes on Gaza hours after a ceasefire and hostage release deal was announced to end fighting that began 15 months ago.

While the just-about-soft U.S. core inflation figure for December lifted sentiment, dragging Treasury yields lower and boosting stocks, analysts cautioned that the annual rate of 3.2% was still a bit on the high side, with the Fed likely to stay on hold for a while longer.

Also boosting sentiment were strong earnings from U.S. banks Goldman Sachs, JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C). Wall Street CEOs voiced confidence that the incoming U.S. administration would be business-friendly and good for banks.

Bank of America and Morgan Stanley (NYSE:MS) will report results on Thursday.

European chipmakers may also take cues from an earnings report by Taiwan Semiconductor Manufacturing Co, which showed profits broadly met estimates. TSMC, whose customers include Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA), is closely watched for indications of AI-related chip demand.

The yen was the biggest mover in the currency market on Thursday, surging to a one-month high in Asian hours following comments by Bank of Japan Governor Kazuo Ueda that encouraged market bets on a rate hike next week.

An overwhelming majority of economists surveyed by Reuters expect the BOJ to raise interest rates at one of the two meetings this quarter, with most leaning towards a January move.

A BOJ hike would be contingent on markets staying calm when Donald Trump returns to the White House next Monday. His inauguration speech will be a focus for politicians and policymakers across the world to gauge his likely policy steps.

Analysts expect Trump’s actions to boost growth but add to inflationary pressures, keeping the dollar well-supported. So much so, in fact, that the dollar index has risen 5% in the two months since the U.S. election on expectations that the Fed will keep rates higher for longer.

Scott Bessent, Trump’s choice to head the Treasury Department, vowed to ensure that the dollar remains the world’s reserve currency as he laid out a vision for a “new economic golden age” in prepared testimony for the U.S. Senate Finance Committee.

Elsewhere, South Korea’s central bank unexpectedly left its policy interest rate unchanged and signalled it needs to wait for the domestic political turmoil weighing on the currency to stabilise before it can make further rate cuts.

Key developments that could influence markets on Thursday:

– Germany inflation data for Dec

– UK GDP estimate for Nov

– Euro zone trade balance for Nov

(By Ankur Banerjee; Editing by Edmund Klamann)

By Leika Kihara

(Reuters) -The Bank of Japan holds its first policy meeting of the year next week and the outcome will be announced days after the inauguration of U.S. President-elect Donald Trump.

Here is a guide on what to expect and why the BOJ’s rate review matters:

WHEN DOES THE BOJ MEETING TAKE PLACE?

The BOJ board that sets monetary policy is due to meet on Jan. 23-24. It will announce its decisions at the end of its deliberations.

The BOJ ended years of negative interest rates in March and raised its short-term policy target to 0.25% in July. It has signalled a readiness to hike again if wages and prices move as projected.

IS THE BOJ GOING TO RAISE INTEREST RATES?

There is growing conviction within the BOJ that conditions for another increase are coming into place. The economy continues to expand moderately and inflation has held above its 2% target for nearly three years.

Companies continue to pass on rising raw material and labour costs to buyers, suggesting the BOJ board is likely to revise up its inflation forecasts in a quarterly outlook report due next week.

More importantly, there have been increasing signs that firms will offer bumper pay hikes for a third straight year in annual wage negotiations with unions kicking off in March.

The BOJ’s regional branch managers said wage hikes are spreading to companies of all sizes and sectors, meeting a key prerequisite for raising interest rates.

As such, the central bank is likely to raise rates to 0.5% next week, barring a Trump-induced market shock.

WHAT HAVE BOJ POLICYMAKERS SAID SO FAR?

The BOJ’s views on wages and the U.S. policy outlook have been closely watched by markets, after Governor Kazuo Ueda cited uncertainty over the domestic wage outlook and Trump’s policies as reasons to hold off raising rates last month.

In a speech on Tuesday, Deputy Governor Ryozo Himino said wage growth will likely remain strong this year. A day later, Ueda echoed the optimism in a sign of the BOJ’s conviction that Japan was progressing towards durably hitting its inflation target.

Both Himino and Ueda said the BOJ will debate whether to raise rates next week, indicating a strong chance of a hike.

WHAT COULD HOLD POLICYMAKERS BACK?

With increased prospects of sustained wage gains, the only remaining hurdle for raising rates next week would be the risk of Trump dropping a bombshell and upending financial markets.

Aside from his inaugural speech, Trump is expected to issue a number of executive orders when he begins his second term in the White House on Monday.

Deputy governor Himino said he would look for clues on the “balance and schedule” of the new president’s policy steps, as well as anything that had not been flagged by Trump so far.

If Trump’s comments shock markets and cause a plunge in global stocks, the BOJ may prefer to stand pat until markets have priced in the news.

HOW COULD MARKETS REACT TO A JAPAN RATE INCREASE?

Receding bets of further rate cuts by the U.S. Federal Reserve mean the U.S.-Japan interest rate differential will remain wide, keeping the yen under downward pressure.

A rate hike by the BOJ will likely nudge up the yen. But the currency’s gains may be short-lived unless Ueda delivers hawkish comments on the outlook in his post-meeting news briefing.

WHAT ELSE SHOULD MARKETS LOOK OUT FOR?

The BOJ will release a quarterly outlook report with revised growth and inflation forecasts, which will show how optimistic the board is on Japan’s prospects for sustainably hitting 2% inflation. That will affect the pace of future rate increases.

Ueda may also give clues on the timing and pace of further hikes at his post-meeting briefing.

The key would be the governor’s view on Japan’s neutral rate. BOJ staff estimates show the inflation-adjusted real neutral rate to be in a range of around -1% to +0.5%. That means if inflation were to hit the BOJ’s 2% target, it could raise its short-term rate at least to around 1% without cooling growth.

Based on forecasts in October, the BOJ expects short-term rates to approach what it considers neutral “in the latter half of the three-year projection period” through March 2027, which suggests some time after October 2025.

While hawkish board member Naoki Tamura projects the neutral rate to be around 1%, Ueda has said it was too hard to come up with credible estimates due to a lack of data.

WHAT’S NEXT?

Many analysts expect the BOJ to keep raising rates at a pace of roughly twice a year. If the BOJ increased rates next week, it may stay in a holding pattern until the latter half of this year when there is more clarity on the impact of Trump’s policies.

Domestic politics also complicate the BOJ’s rate-hike timing with an upper house election slated for July, where Prime Minister Shigeru Ishiba’s minority coalition could struggle to garner votes. The BOJ may prefer to avoid shifting policy until the political dust settles.