Donald Trump threatens the BRICS bloc with high tariffs. The Canadian dollar fell after weak GDP data

The Dow Jones Index (US30) was up 0.42% on Friday (+2.37% for the week). The S&P 500 Index (US500) added 0.56% (for the week +1.48%). The Nasdaq Technology Index (US100) increased by 0.90% (for the week +0.93%). Stocks rose moderately on Friday, with the S&P 500 and Dow Jones Industrials hitting new all-time highs. The gains were driven by lower inflation expectations in the US.

Airbnb (ABNB) shares closed down more than 1% on signs of insider selling after CEO Chesky sold more than $15 million worth of stock on Monday. Boeing (BA) closed up nearly 2% after BOA Aviation agreed to buy 14 Boeing 737-8 airplanes.

On Saturday, US President-elect Donald Trump threatened a bloc of nine countries with 100% tariffs if they acted to the detriment of the US dollar. His threat was aimed at countries in the so-called BRICS alliance, which includes Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran and the United Arab Emirates. Turkey, Azerbaijan, and Malaysia have applied to join, and several other countries have expressed interest in joining. According to the IMF, the dollar accounts for about 58% of the world’s foreign exchange reserves, and basic commodities such as oil are still bought and sold mostly in dollars. But the dollar’s dominance is threatened by the BRICS countries’ growing share of GDP and the alliance’s intention to trade in non-dollar currencies, a process known as de-dollarization.

Canada’s third-quarter GDP grew at a 1% annualized rate after an upwardly revised 2.2% in the second quarter, which was in line with market expectations but short of the Central Bank’s estimate of 1.5%. Nevertheless, the Bank of Canada is expected to cut rates further next month, although the likelihood of a 50bp cut was reduced after core inflation rose to 2.6% in October from 2.4% in September. The Canadian dollar fell above 1.4 per US dollar after the report.

Equity markets in Europe rallied on Friday. Germany’s DAX (DE40) rose by 1.03% (for the week +0.84%), France’s CAC 40 (FR40) closed higher by 0.78% (for the week -1.29%), Spain’s IBEX 35 (ES35) gained 0.26% (for the week -0.73%), and the UK’s FTSE 100 (UK100) closed up 0.07% (for the week +0.31%). Eurozone CPI came in at 2.3% y/y in November, matching expectations. Core CPI (excluding food and energy prices) for November came in at 2.7% yoy, weaker than expectations of 2.8% yoy. ECB expectations for 1-year inflation unexpectedly rose to 2.5% in October from 2.4% in September, stronger than expectations for a decline to 2.3% y/y. Expectations for 3-year inflation for October were unchanged from September at 2.1%, in line with expectations. German retail sales for October fell by 1.5% m/m, weaker than expectations of 0.5% m/m and the largest decline in 2 years. German unemployment rose by 7,000 in November, indicating a stronger labor market than expectations of 20,000. The unemployment rate in November was unchanged at 6.1%, matching expectations.

ECB Governing Council spokesman Stournaras said the ECB is likely to pursue a more aggressive interest rate cut policy if evidence emerges that US tariffs will lead Europe into recession.

In Switzerland, markets currently give a 72% probability of a 25 basis point rate cut and a 28% probability of a 50 basis point rate cut at the SNB’s next monetary policy meeting on December 12. The rate cut comes amid slowing inflation, which has been within the SNB’s 0–2% target range for almost 18 months. Switzerland’s annual inflation rate fell to 0.6% in October, the lowest level in more than three years.

Oil prices fell about 3% last week amid easing concerns over supply risks from the Israel-Hezbollah conflict and the prospect of more supply in 2025, even as OPEC+ is expected to extend production cuts.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) fell by 1.22%, China’s FTSE China A50 (CHA50) rose by 1.02%, Hong Kong’s Hang Seng (HK50) gained 0.60%, and Australia’s ASX 200 (AU200) posted a positive 0.51%.

Indonesia’s annual inflation rate fell to 1.55% in November 2024 from 1.71% in the previous month, the lowest since July 2021, but slightly above market projections of 1.5%. The latest result remains within the Central Bank’s target range of 1.5% to 3.5%. The core inflation rate hit a 16-month high of 2.26%, above estimates of 2.20%.