On Friday, new data confirmed that euro-zone headline inflation experienced a slight increase from 2.2% in November to 2.4% in December, while the core rate remained steady at 2.7%.

Services inflation saw a marginal rise from 3.9% to 4.0%. Despite the recent uptick, analysts anticipate a significant decline in services inflation across the euro-zone in 2025.

The detailed analysis of December’s inflation data highlighted persistent inflation within three specific sectors: insurance, transport, and tourism, which have been influenced by unique factors. However, when excluding these sectors, services inflation has seen a notable decrease over the past two years.

The increase in December was primarily driven by the transport and package holiday categories, while other sectors collectively contributed less to the overall inflation figure.

Experts at Capital Economics point to several reasons supporting a broad-based reduction in services inflation for the current year. Transport and package holiday costs, which are partly dependent on oil prices, are projected to drop based on historical patterns in oil price movements. Despite a recent surge in oil markets, the anticipated decline in these sectors’ inflation rates appears unaffected.

Furthermore, with a sharp decline in goods inflation, inflation for vehicle and home insurance is also expected to decrease soon. A return to pre-pandemic averages in insurance, transport, and tourism could potentially reduce services inflation by 1.2 percentage points.

Other aspects of services inflation are also predicted to fall. For instance, catering services inflation, which was at 4.3% in December, is projected to drop to around 2.5% by mid-year, potentially reducing services inflation by another 0.4 percentage points.

A key factor contributing to the anticipated decline is the slowing economic growth and cooling labor market, which are leading to a reduction in wage growth. The historical correlation between wage growth and services inflation reinforces the expectation that services inflation will substantially decrease in 2025.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

(Reuters) – Truist Financial (NYSE:TFC) on Friday exceeded Wall Street estimates for fourth-quarter profit, helped by stronger investment banking and trading activity as capital markets strengthened.

A resilient economy, declining interest rates and expectations of relaxed regulations under the Trump administration have boosted corporate enthusiasm for mergers and acquisitions.

Equity and debt issuance also surged in the latter half of 2024.

Charlotte, North Carolina-based Truist’s shares rose nearly 3% in premarket trading on Friday.

The bank’s performance aligns with that of larger competitors such as JPMorgan Chase (NYSE:JPM), Morgan Stanley (NYSE:MS) and Wells Fargo (NYSE:WFC), which exceeded their quarterly profit forecasts on the back of investment banking gains.

Truist’s investment banking and trading income increased by 58.8% to $262 million in the fourth quarter from a year ago. However, it was down 21.1% from the previous quarter.

The bank’s net interest income, or the difference between what a bank earns on loans and pays out on deposits, rose nearly 2% to $3.64 billion.

Net interest margin, which measures lending profitability, expanded to 3.07%, compared with 2.95% a year earlier.

Truist’s quarterly adjusted net income available to common shareholders was $1.21 billion, or 91 cents per share, surpassing estimates of $1.18 billion, or 88 cents, according to estimates compiled by LSEG.

Provision for credit losses declined by nearly 18% in the quarter.

For fiscal 2025, Truist expects its adjusted revenue to rise between 3% and 3.5%, compared with 2024.

By Lewis (JO:LEWJ) Krauskopf

NEW YORK (Reuters) – As investors seek assets that will shine under a Donald Trump presidency, one corner of the U.S. stock market expected to benefit from the Republican’s policies has been stumbling.

Shares of smaller U.S. companies have been under pressure, with the small-cap Russell 2000 last week marking a 10% correction from its November highs. The S&P 500, the benchmark for large-cap companies, declined less than 3% in that time.

Trump, who will be inaugurated for his second term on Monday, is expected to back an agenda promoting domestic economic growth, increasing the appeal of small-cap stocks.

But the group encountered a severe headwind in recent weeks: the prospect of higher interest rates than previously expected, which stand to raise borrowing costs that hit smaller companies particularly hard.

“With more pro-growth policies, small caps tend to do better in theory when the economy is stronger,” said Keith Lerner, co-chief investment officer at Truist Advisory Services.

“You almost have this tug of war,” Lerner said. “On one side, stronger growth should be good for small caps. On the other side, high interest rates are negative.”

Small caps and equities broadly won some relief this week from an encouraging inflation report that calmed surging Treasury yields.

The focus on small caps comes as investors look for “Trump trades” that have room to run.

The overall stock market has given up some gains since Trump’s Nov 5 victory, when investors were enthused about his pro-growth agenda benefiting equities broadly. The S&P 500 is up 3% since the election.

Some Trump trades continue to thrive. Shares of Tesla (NASDAQ:TSLA), led by Trump backer Elon Musk, have gained over 60% since Nov 5. Bitcoin, which is expected to benefit from a friendlier crypto regulatory environment, is up over 40%.

Small caps, however, have pulled back. The Russell 2000 index surged nearly 6% on the day after Trump’s win. Later in November, it hit its highest closing level in three years. Now the index is little changed since the election.

An expectation of fewer interest rate cuts this year has dampened sentiment for small caps, with the Federal Reserve in December projecting less easing as it raised its estimate for inflation in 2025.

Treasury yields have surged. This week, the benchmark 10-year yield hit a 14-month high.

Smaller companies “tend to have greater debt loads…so not getting the follow-through with lower interest rates is something that sort of poured a bit of cold water” on hopes for small-cap strength, said Yung-Yu Ma, chief investment officer at BMO Wealth Management.

The Russell 2000 surged following Trump’s 2016 election and the index kept outperforming the S&P 500 in the year following his first victory, rising 24% against a 21% for the large-cap index.

Under Trump, the prospect of reduced regulations and promotion of domestic business should benefit smaller companies, whose businesses tend to be more U.S.-focused than larger, multi-national corporations, said Sameer Samana, senior global market strategist at Wells Fargo (NYSE:WFC) Investment Institute.

But while the group’s outlook improves under Trump compared to his predecessor Joe Biden, the incoming president’s favoring of tariffs could cause problems for smaller companies if they disrupt supply chains, Samana said.

“There will be some things that are helpful under the Trump administration… but there will also be some negatives,” Samana said.

Small-cap bulls are counting on some catch-up. The S&P 500’s nearly 50% gain over the past two years is more than double the rise for the Russell 2000.

Still, small caps could face headwinds if interest rates keep rising. Small-cap indexes tend to be more highly weighted toward financials and industrials, sectors that are relatively more sensitive to higher rates and inflation, according to Truist’s Lerner.

The Russell 2000 held a 37% weight with those two sectors as of the end of 2024, compared to a roughly 22% for those groups in the large-cap S&P 500.

Trump’s arrival presents an opportunity for small caps, BMO’s Ma said, “but that thesis for outperforming probably hinges more on a favorable interest rate environment.”

(Reuters) – U.S. equity funds saw a spike in outflows for the week ending Jan. 15, as the outlook for Federal Reserve rate cuts this year had dimmed while investors were cautious about the ongoing quarterly earnings season.

According to LSEG Lipper data, investors withdrew a sharp $8.23 billion from U.S. equity funds during the week on top of a net $5.01 billion worth of sales in the prior week.

U.S. shares rose after a lower-than-expected core inflation reading and strong financial results from firms like JP Morgan and Goldman Sachs, but concerns linger that President-elect Donald Trump’s potential tariffs on Mexico, Canada, and increased tariffs on China could drive inflation higher and impede long-term growth.

By segment, investors divested large-cap, mid-cap, multi-cap and small-cap funds to the tune of $4.35 billion, $1.54 billion, $1.02 billion and $379 million, respectively.

Sectoral funds witnessed $428 million worth of outflows following a net $35 million of purchases a week ago. Still, the financial sector was in demand with about $752 million in net investments during the week.

U.S. bond funds, meanwhile, drew inflows for the second week in five, to the tune of $6.18 billion on a net basis.

U.S. general domestic taxable fixed income funds, short-to-intermediate government and treasury funds, and loan participation funds witnessed a notable $2.33 billion, $2.15 billion and $1.42 billion worth of inflows, respectively.

In parallel, investors divested a net $60.07 billion worth of money market funds, ending a three-week-long trend of net purchases.

By Saqib Iqbal Ahmed

NEW YORK (Reuters) – Investors will closely monitor stock markets on Tuesday, the day after Donald Trump is inaugurated for his second term in the White House, to see if U.S. equities can continue their recent trend of posting gains after a president is sworn in.

Historically, the benchmark S&P 500 stock index has not performed well on average on inauguration day, or the day after if the inauguration falls on a market holiday. However, the last three inaugurations have all resulted in market gains.

Trump’s first inauguration in 2017 was met with a 0.34% gain for the index. The S&P 500 rose 1.39% on the day Joe Biden was sworn in as president, the largest inauguration gain for the index since Ronald Reagan’s second inauguration in 1985.

Longer term, the index has logged an average decline of 0.27%, according to data going back to 1949.

For the Dow Jones Industrial Average, the average decline is 0.24%. The Nasdaq Composite, which was launched more recently, has logged an average decline of 0.35%.

The following table shows percentage changes for inaugurations from President Harry Truman on.

President S&P 500 change Nasdaq (%) Dow Jones (%)

(%)

Joe Biden 1.39 1.97 0.83

(1/20/2021)

Donald Trump 0.34 0.28 0.48

(1/20/2017)

Barack Obama 2* 0.44 0.27 0.46

(1/21/2013)

Barack Obama 1 -5.28 -5.79 -4.01

(1/20/2009)

George W Bush 2 -0.78 -1.34 -0.65

(1/20/2005)

George W Bush 0.03 -0.45 -0.09

1* (1/20/2001)

Bill Clinton 2 0.07 1.13 0.16

(1/20/1997)

Bill Clinton 1 -0.4 0.09 -0.43

(1/20/1993)

George HW Bush -0.09 0.15 -0.17

(1/20/1989)

Ronald Reagan 2.28 1.28 2.77

2* (1/20/1985)

Ronald Reagan 1 -2.02 -1.42 -2.09

(1/20/1981)

Jimmy Carter -0.85 na -1.00

(1/20/1977)

Richard Nixon -0.48 na -0.72

2* (1/20/1973)

Richard Nixon 1 -0.33 na -0.46

(1/20/1969)

Lyndon B. -0.035 na -0.11

Johnson

(1/20/1965)

John F. Kennedy 0.32 na 0.31

(1/20/1961)

Dwight D. -0.54 na -0.33

Eisenhower 2*

(1/20/1957)

Dwight D. 0.5 na 0.36

Eisenhower 1**

(1/20/1953)

Harry S. Truman 0.39 na 0.17

(1/20/1949)

Mean -0.27 -0.35 -0.24

Median -0.04 0.15 -0.11

* Market closed, market reaction from first trading day after inauguration.

** The S&P 500 was launched in March 1957, but S&P Dow Jones Indices provides back-tested data for dates that precede its launch

*** Performance for Gerald Ford (NYSE:F), who was sworn in on Aug. 9, 1974, following Nixon’s resignation, not included.

**** Performance for initial swearing-in of Lyndon B Johnson, which occurred on Nov. 22, 1963, following Kennedy’s death, not included.

(Reuters) – U.S. stock index futures edged up on Friday, with the S&P 500 and the Dow looking set to log their biggest weekly advances since November, while investors awaited a wave of policy changes under the incoming Trump administration.

At 5:33 a.m. ET, Dow E-minis were up 127 points, or 0.29%, S&P 500 E-minis were up 19.75 points, or 0.33%, and Nasdaq 100 E-minis were up 90 points, or 0.42%.

Better-than-expected earnings from major banks and signs that underlying inflation was cooling have prompted risk taking on Wall Street this week, putting the benchmark S&P 500 and the blue-chip Dow on track to log their steepest weekly rises since the U.S. election week.

The S&P 500 banking index and regional banks have outperformed the main indexes this week, logging advances of about 5.8% and 6.4%, respectively.

Quarterly reports from Truist Financial (NYSE:TFC), SLB, Fastneal and State Street (NYSE:STT) are on tap before markets open.

Of the 28 companies in the S&P 500 that have reported fourth-quarter earnings as of Wednesday, 82.1% have surpassed estimates, according to data compiled by LSEG.

Also aiding risk sentiment was a dip in yields on longer-dated bonds that had touched more than 10-month highs earlier in the week. Yield on the benchmark 10-year note is now at a more than one-week low at 4.6%. [US/]

President-elect Donald Trump is expected to take over the White House on Monday and investors will be on edge for any insights into his plans on tax cuts, tariffs, loose regulations and immigration at his inauguration speech, that analysts widely expect could boost the economy.

The S&P 500 has gained nearly 3% to date since Election Day.

However, concerns prevail that his plans on tariffs and immigration could spark a trade war and fresh price pressures at a time when the economy is already strong, which could force the Federal Reserve to stave off further monetary policy easing.

According to data compiled by LSEG, traders are expecting the central bank to leave interest rates on hold at its meeting later this month and see the first cut coming in June. They had all but priced out any rate cuts for 2025 earlier in the week.

Before markets open, investors will assess data on building permits, housing starts and industrial production for the month of December, that could help gauge the health of the world’s largest economy.

Eyes are also on developments around the ceasefire deal to the Middle East conflict, with the Israeli cabinet due to give final approval, following concerns the accord may be delayed.

Among others, Salesforce (NYSE:CRM) rose 1.9% after brokerage TD Cowen upgraded the software provider to “buy” from “hold”.

J.B. Hunt Transport Services lost 9.8% after the trucking firm missed Street estimates for fourth-quarter profit, as high expenses and a lower truck count weighed on revenue.

By Shankar Ramakrishnan and Davide Barbuscia

(Reuters) – A sell-off in U.S. Treasury markets in recent weeks was likely made worse by corporate plans to borrow nearly $190 billion in the bond market this month, bankers and analysts said, highlighting a risk for markets that is likely to persist this year.

The spillover from the corporate to the government bond market happened as many companies bought protection against future interest rate increases, called a pre-issuance hedge, by short selling Treasuries in advance of their bond offerings, these people said.

The pressure on Treasury yields from corporate borrowing adds a new dimension to an intense market focus on the likely trajectory of bond yields this year. Rising bond yields can have a dampening effect on economic growth and spill over into other assets, such as stocks and currencies.

These hedges are essentially a bet against U.S. government bonds, or a short trade that profits if Treasury yields rise. Yields move inversely to bond prices. Corporate bonds are priced as a spread, or additional interest rate, over the yield on Treasury bonds. 

So, if yields rise by the time the company issues its bond, the hedge would pay out and offset its interest costs. The company can also lose money on the hedge if yields fall. 

Yields have been rising in the $28 trillion Treasury market since September, as the market factored in expectations of growth, inflation, the supply of bonds and the potential impact of President-elect Donald Trump’s policies. That gave them reason to expect yields would keep going up.

Amol Dhargalkar, managing partner of advisory firm Chatham Financial, said “hedging these future bond issuances was intense in the last few weeks.” Typically, companies hedge close to half the size of a future bond issuance, he said. 

The first 16 days of January saw new corporate bonds worth $127 billion. Another $63 billion on average are expected to be priced over the remainder of the month, according to Informa (LON:INF) Global Markets data.

Overall, syndicate bankers, on average, are expecting around $1.65 trillion of new investment-grade bonds in 2025, making it the second-most prolific year ever for such offerings, according to Informa Global Markets.     

Pre-issuance hedges tend to be used more frequently during periods of volatility in Treasury markets, something that many market experts expect would also be a feature this year, in part due to the uncertainty around Trump’s policies.

HEDGING ACTIVITY 

Pre-issuance hedges are done as trades between companies and their banks and are typically disclosed later, making it impossible to know the extent of the activity. 

But bankers and analysts said the hedges were a noticeable factor in recent weeks. 

“Corporate deal flow remains topical as issuers continue to bring deals to market and hedging needs provide incremental activity and trading direction,” BMO Capital Markets strategists wrote in a note this week. 

In a sign pre-issuance hedging activity was having an impact, the yield on the benchmark 10-year Treasury bond climbed to 4.8% on Jan. 13 from 4.38% on Dec. 17, coinciding with corporate issuance activity.

At the same time, net short positions of dealers on 10-year Treasury futures increased over the past few weeks, hitting a record high in the week ending on Jan. 7, data from the Commodity Futures Trading Commission shows.    

The influence of the hedging activity was also magnified as the Treasury competed for investor dollars, some of the market experts said. 

In the first eight days of 2025, U.S. Treasury sold 3-year, 10-year and 30-year bonds in back-to-back auctions to raise over $100 billion, at the same time as companies offered some $79 billion in investment-grade bonds.

“The Treasury bond markets were primed up for a sell off,” said Guneet Dhingra, head of U.S. rates strategy at BNP Paribas (OTC:BNPQY).

FRANKFURT (Reuters) – The European Central Bank should not rush to lower interest rates because inflation remains high and uncertainty great, ECB policymaker Joachim Nagel said in an interview published on Friday.

The Bundesbank president also told German financial newsletter Platow Brief that he still expected the Basel III global banking rules to be implemented both in the United States and in Europe, while he dismissed a proposal from a German politician to include bitcoin in official reserves.

The ECB has cut interest rates four times since June and is expected to continue doing so in the next six months, having seen inflation fall from double digits in late 2022 to just above its 2% target.

But Nagel called for a cautious approach given still high services inflation and a “high level of uncertainty” – a possible reference to questions hanging over global trade once Donald Trump returns to the White House next week.

“We should therefore not rush into anything on the path to monetary policy normalisation,” he said.

Still, Nagel said there had been nothing wrong with the ECB discussing a bigger, 50-basis-point rate cut at its last meeting in December, adding: “That’s part of it.”

Nagel gave short shrift to an election proposal by Christian Lindner, former German finance minister and leader of the pro-business Free Democratic Party (FDP), to add bitcoin to Bundesbank and ECB reserves.

“This worries me because it gives the impression that an asset is being given some kind of government seal of approval,” he said. “A currency reserve must be safe, liquid and transparent. None of this applies to bitcoin.”

Nagel also said global rules designed to make banks safer would be applied “on both sides of the Atlantic” even after they were watered down by the U.S. Federal Reserve and might even be scrapped under Trump’s incoming administration.

“I assume that Basel III will be finalised on both sides of the Atlantic,” he said. “It is important that we in Europe speak with one voice.”

Earlier on Friday, the Bank of England said it would delay its implementation of the rules, which include tougher bank capital requirements, by one year until January 2027.

By Dawn Chmielewski

LOS ANGELES (Reuters) – Jay Gilberg bought a five-bedroom, 4,800-square-foot (446-sq-meter) home in the Los Angeles neighborhood of Pacific Palisades in June to merge two households, bringing his two daughters, his girlfriend, and her teenager together under one roof in what he described as “a very happy home.”

Six months later, that home is gone, one of an estimated 5,000 damaged or destroyed in the Palisades Fire. As he and his real estate agent began searching for a temporary home large enough to accommodate a family of five, they encountered another shock — a sudden spike in rental prices.

One Beverly Hills rental home that had been listed for $14,000 a month suddenly increased by $4,000 overnight — a nearly 29% price hike that the listing agent told Gilberg’s realtor reflected “supply and demand.”

“There are really good people who are compassionate, sympathetic, empathetic, and they want to do something to help,” Gilberg said of the disaster and its aftermath. “And then there are others who … smell an opportunity to profit, and that’s what I encountered.”

Throughout the region, thousands of people like Gilberg, who have been displaced by the wildfires, are encountering sticker shock.

The Los Angeles Tenants Union, a volunteer group that advocates for affordable housing, identified more than 500 property listings where the monthly rental fee abruptly jumped — in some cases, more than doubling.

California Governor Gavin Newsom signed an executive order on Sunday that seeks to curb predatory pricing on essential consumer goods and services, including housing. The order makes it illegal to hike prices by more than 10% above the rates charged immediately before the emergency declaration.

“Though it’s illegal, we know many landlords will try to profit off people’s desperation and get away with it anyway,” said Tony Carfello, an organizer with the Tenants Union, adding that even a 10% increase in rent can be “an impossibility, both for people who lost everything and for the rest of tenants in the city who were already struggling to get by.”

‘EXPLOITED, VICTIMIZED’

California Attorney General Rob Bonta said his office had received hundreds of reports of price gouging and had opened multiple investigations.

“This is just unimaginable conduct during this time when people need the exact opposite of being preyed on, exploited, victimized. They need support and healing and help,” Bonta said on Thursday at a news conference.

He urged the public to send in screenshots, text messages, e-mails or any other evidence to help prosecutors build a case.

Gilberg’s real estate agent, Lori Goldsmith, criticized the gouging, saying she walked away from one longtime client who sought to capitalize on other people’s misfortune.

“It is so wrong,” Goldsmith said. “These people have lost every memory. These people with small children have lost their favorite lovies that they went to sleep with every night that made them feel like they had a security blanket wrapped around them.”

County Supervisor Lindsey Horvath, whose district includes the entirety of the Palisades Fire, said she takes the issue of price gouging on rents and housing “very seriously.”

“People are suffering and they need the security of knowing that we are going to protect them from anyone who would prey on them in a moment like this,” Horvath told Reuters outside a FEMA disaster recovery center in Los Angeles on Wednesday.

Those displaced by the wildfires are struggling.

Renee Weitzer, an 87-year-old Holocaust survivor, lost the Sunset Mesa home she shared with her 88-year-old husband, Ed. They escaped the approaching wildfire with their medication, some important papers, their dog and a single change of clothing, thinking they would quickly return home.

Instead, they have spent more than a week living out of a hotel room, trying to find a home to rent. The competition with other renters has been fierce, she said. The Weitzers offered to pay $14,000 a month rent for a home listed at $8,000 — with a year’s rental payments upfront — but still lost out.

“We’ve lost every house,” said Renee Weitzer. “And not only that, when you have to apply with the application, you have to pay for your credit check.”

The Weitzers plan to move into a nephew’s single-bedroom apartment in West Hollywood on Friday, while they work through the insurance claim process and decide their next move.

“It’s gonna take a while,” Weitzer said. “Whether we could ever rebuild, it’s questionable at our age, because it’s gonna take years to be able to do this right …. I don’t think we’ll be able to rebuild.”

Investing.com — Hungarian Prime Minister Viktor Orban has called on the European Union to end its sanctions against Russia. His call comes as the incoming U.S. administration under Donald Trump is expected to herald a “new era” starting next week.

Orban expressed his views on state radio on Friday, suggesting that it’s time to discard the sanctions and establish a sanctions-free relationship with Russia, although he acknowledged that this might take some time.

The EU has imposed 15 rounds of sanctions on Russia in response to its full-scale invasion of Ukraine. These sanctions need to be renewed every six months. The next renewal, which requires a unanimous decision among the 27 member states, is due by the end of January. This is 11 days after Trump is set to be inaugurated.

Last month, Orban surprised other EU leaders at a summit in Brussels by stating he was not prepared to proceed with an extension of the sanctions, as reported on December 19. During the radio interview, however, Orban did not confirm if he would veto the extensions.

The Hungarian leader also suggested that the EU might need a “couple of months” to change its stance on Russian sanctions. He stated that the bloc “should be in the phase of getting sober,” but instead, it is doubling down on sanctions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.