Bourstad stock market simulations - Summary of the markets for the week ended on January 10, 2025

Stocks and bonds down this week

Two of the five financial asset classes we track finished higher this week: the US dollar and commodities. Note that these assets usually move in opposite directions, as commodities are generally traded in US dollars. In Canada, we noted strong job growth in December, with the creation of 91,000 jobs; however, this growth was particularly noticeable in the public sector, which raises concerns when we consider the state of public finances. There was also strong growth in Canadian exports in November, which reduced the trade deficit. In the U.S., strong employment growth in December (256,000 jobs) triggered the week's biggest jump in the interest rate on the 10-year U.S. government bond on Friday. The Purchasing Managers' Index for the services sector was measured at 54.1 in December, well above the 50 threshold that demarcates recession and expansion situations; however, the sub-index measuring input prices jumped, heralding a possible reappearance of inflation in service prices. Over the coming week, we'll be watching: in Canada, November manufacturing sales (Tuesday), December home resales (Wednesday) and December housing starts (Thursday); in the U.S., December industrial prices (Tuesday), December consumer price index (Wednesday) and December retail sales (Thursday).

Five of the six stock markets we follow ended the week down. Only the Paris Bourse ended the week up, with a gain of 2.0%. The Toronto Stock Exchange retreats -1.2%, buoyed by the good performance of commodities despite threats from the new Trump administration to impose 25% tariffs on Canadian exports to the US. The Shanghai Stock Exchange followed with a -1.3% decline; the Chinese stock market is already down -5.5% since the start of 2025. The Tokyo Stock Exchange is down -1.8%. U.S. stock markets fell the most, with the New York Stock Exchange down -1.9% and the NASDAQ 100 down -2.2%.

Yields on 10-year government bonds are rising for the four highly rated countries we track. Higher yields mean lower bond prices, given the inverse relationship between yields and bond prices. U.S. bond yields, the market's main benchmark, rose 17 bps (1 basis point or bps = 0.01%) to 4.77%. The Canadian bond rate jumps 22 bps, leaving the Canadian rate 133 bps below the U.S. rate. Germany's bond yield rises 15 bps to 2.57%. Japan's bond yield jumps 12 bps to 1.21%.

On the commodities market, the four commodities we follow are up. Copper jumped 5.7% as markets worried about the impact of tariffs on the price of US imports. Corn prices are up 4.4% as the US Department of Agriculture cuts yields per acre by -2% for the 2024 harvest. The commodities most closely followed by the financial press are also up, with US oil up 3.5% and gold up 1.9%.

In the crypto-currency sector, the two cryptos we follow are down: bitcoin by -3.7% and ethereum by -9.6%.

On January 10, it cost 0.2¢ CAD less to buy one US dollar than on January 3. At the reverse end of the scale, the euro and yen are trading lower against Uncle Sam's dollar: the European single currency down -0.6% and the Japanese currency down -0.3%.

See the detailed table by following this link:

https://iclf.ca/DL/BTTT_sommaire_marches_250110.pdf

Paul Bourget
Project Director, Bourstad
CIRANO
paul.bourget@cirano.qc.ca

About CIRANO (www.cirano.qc.ca )

The Center for Interuniversity Research and Analysis of Organizations (CIRANO) is a multidisciplinary, liaison and transfer research center, whose mission is to accelerate the transfer of knowledge between the research community and users in industry and public services.

About BOURSTAD (www.bourstad.ca )

The Bourstad program is an activity of the Center for Interuniversity Research and Analysis of Organizations (CIRANO) which receives support from many partners for this financial education project: the Autorité des marchés financiers, its main partner, TD Bank, CFA Montreal , the Canadian Investment Regulatory Organization (CIRO), Les Affaires, Finance Montreal, TMX Group, Hyprasoft, Groupe Investissement responsable and QuoteMedia.