Stocks are moving higher this morning while the U.S. dollar retreated following reports that Donald Trump’s team may favour a gradual tariff strategy to minimize inflation spikes. Bond markets steadied following the news, with the U.S. Treasury yields dipping after recent highs. It may be too soon to celebrate though, as we have seen in recent weeks that Trump has a tendency to refute these reports. Investors are also taking some relief from the latest U.S. inflation print which showed wholesale inflation unexpectedly easing in December as food prices declined and services prices remained flat. The producer price index rose 0.2% from November, below the expected 0.4%, while the core PPI excluding food and energy was unchanged. On an annual basis, the overall PPI increased by 3.3%, with the core measure up 3.5%. The report may temper inflation concerns amid resilient demand and looming tariff threats from the incoming Trump administration.
China’s stock market has started this year with its worst performance since 2016, weighed down by policy uncertainty, trade tensions, and weak economic conditions. The CSI 300 Index dropped over 5% in the year’s first seven trading days, while the MSCI China Index entered a bear market. Geopolitical risks, including U.S. sanctions and potential tariff increases under Trump’s administration, compound domestic challenges such as sluggish consumer confidence, a struggling property sector, and mounting debt issues. Many investors remain cautious, favouring bonds and the dollar over equities. Policymakers face pressure to introduce stronger fiscal measures, with March’s parliamentary meetings seen as a critical juncture for restoring market confidence.
Bitcoin fell to its lowest point in nearly two months yesterday, briefly dropping below $90k amid a broader sell-off in riskier assets driven by rising bond yields. Other cryptocurrencies also faced declines, with Ether down 6.6%. Strong U.S. jobs data fueled concerns the Fed may delay rate cuts, amplifying market volatility. Analysts pointed to bearish signals, including a head-and-shoulders chart pattern and Bitcoin breaching a critical support level, suggesting a potential further drop. Optimism surrounding Bitcoin’s record high in late 2024, driven by the launch of Bitcoin ETFs and Donald Trump’s support for digital assets seem to have diminished, or at least until policy clarity post-inauguration.
The U.S. IPO market’s anticipated rebound in 2025 is facing challenges due to rising Treasury yields and increased market volatility. Elevated bond yields and a cautious Fed are pressuring valuations for high-growth companies, making IPOs less attractive. Historically, the IPO market has been resilient to interest rates at these levels. If we look back to 2004-2007, when Treasury yields were around the same levels as they are today, IPO activity remained strong. Firms in urgent need of capital may proceed with lower valuations, while others could delay offerings. The recent volatility, fueled by economic uncertainty and policy changes under President-elect Donald Trump is posing a distinct obstacle for dealmakers. Despite these headwinds, some companies are pushing forward, though broader recovery hinges on stability in rates and reduced market turbulence.
The federal government announced a pause in its zero-emission vehicle incentive program, which offered up to $5,000 rebates on eligible EVs and plug-in hybrids since 2019, describing it as a huge success with over 546,000 incentives issued. The program, initially set to pause in March 2025 or when funds were depleted, has $71.8 million remaining as of January 10. While Transport Minister Anita Anand praised its role in transitioning to net-zero emissions, critics argue that the pause undermines efforts to make EVs accessible during financial hardship and support Canada’s growing EV industry. The program’s suspension coincides with reduced EV incentives in British Columbia and Quebec, raising concerns about its potential impact on Canada’s goal of 100% zero-emission vehicle sales by 2035.
Buy a coffee first. In a bid to improve staff and guest safety and make its stores more welcoming, Starbucks will be rolling out a new code of conduct across its North American stores this month that will include signage that bans harassment, outside alcohol, and panhandling to name a few. The new code will also include a requirement for guests to make a purchase should they want to stick around the store or use the bathroom. This is a reversal of a 2018 policy that allowed guests to loiter and use the facilities irrespective of whether they purchased an item. In a letter, Starbucks said they want to “reset expectations for how (their) space should be used, and who uses them.” Maybe it’s Canadian courtesy but wasn’t there always a requirement to buy something if you’re going to use their facilities or linger.
Diversion: Threading the needle…
