The People’s Bank of China left interest rates unchanged. Davos hosts the annual meeting of leaders

At the end of Friday, the Dow Jones (US30) Index rose by 0.78% (up +3.73% for the week). The S&P 500 Index (US500) gained 1.00% (up +3.71% for the week). The Nasdaq Technology Index (US100) closed positive 1.66% (up +4.12% for the week). Strengthening chip company stocks contributed to the overall market’s gains. In addition, Friday’s better-than-expected economic news from the US bolstered optimism about the economy. In addition, stocks rose on the back of a possible easing of tensions between the US and China after Chinese President Xi Jinping held a phone conversation with President-elect Trump on Friday, during which Trump said: “This conversation was very good for both China and the United States.”

Investors are closely watching as Trump prepares to begin his second term on Monday, after the incoming president said he plans to sign a flurry of executive orders on his first day. Threatening to impose tariffs on friends and foes alike, displaying expansionist ambitions for Canada and Greenland, Trump has left investors and governments baffled. Politicians and investors are still trying to figure out exactly how Trump’s trade wars will unfold and how they will affect the economy. The potential tariffs are expected to further hit economies like Germany and China, which are already struggling with negative and weak growth respectively.

Davos is hosting world leaders this week for the World Economic Forum’s annual meeting. Nearly 3,000 leaders, including 60 heads of state and government, from more than 130 countries are expected. This year’s event comes on the heels of elections that have ousted incumbent governments in many countries or lost share of the vote. The war in Ukraine and the humanitarian situation in the Gaza Strip, the alarming regularity of extreme weather events and the unfolding artificial intelligence (AI) revolution are some of the key issues that delegates will discuss during the five-day meeting. Trump’s return to the White House will also dominate discussions at Davos.

The IMF estimates global growth in 2025 at 3.3%, up slightly from October’s projection of 3.2%, driven by an upward revision to the US expectations. The US economy is anticipated to grow at 2.7% in 2025 (vs. 2.2% in October), while China’s GDP growth has been revised up slightly to 4.6% (vs. 4.5%). In contrast, the Eurozone growth outlook was downgraded to 1% (vs. 1.2%), Japan’s was unchanged at 1.1%, and India’s GDP was maintained at 6.5%. For the UK, the IMF raised its projections to 1.6% (vs. 1.5%).

Equity markets in Europe were predominantly rising on Friday. The German DAX (DE40) rose by 1.20% (for the week +3.70%), the French CAC 40 (FR40) closed 0.98% higher (for the week +4.05%), the Spanish IBEX 35 (ES35) gained 0.64% (for the week +2.16%), the British FTSE 100 (UK100) closed positive 1.35% (for the week +3.11%).

Brent crude oil prices gained 1.3% last week, while US West Texas Intermediate (WTI) crude futures climbed 1.7% for the week as the latest round of US sanctions against Russian energy trade heightened concerns over potential supply disruptions. Oil is up 10% for the month amid concerns about the impact of new Western sanctions on Russian crude. Energy traders are also assessing the potential impact of Trump’s return to the White House on Monday. Trump’s pick for Treasury Secretary has said he is ready to impose tougher sanctions on Russian oil.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) added 0.09%, China’s FTSE China A50 (CHA50) rose by 2.18%, Hong Kong’s Hang Seng (HK50) gained 4.79%, and Australia’s ASX 200 (AU200) posted a positive 1.43% for the week. Asian stock markets found support on Friday amid signs China’s economy is strengthening, improving global growth prospects.

The People’s Bank of China (PBOC) kept key lending rates unchanged for the third consecutive month in January, matching market expectations. The one-year prime rate (LPR), which is the benchmark for most corporate and household loans, was left at 3.1%, while the five-year LPR, which serves as the benchmark for mortgages, was kept at 3.6%. Both rates are at record lows following rate cuts in October and July last year.