The Day at a Glance | December 30 2024

The Top

• Treasury Secretary Janet Yellen warned that the U.S. government could reach its new debt limit as early as January 14.
• The U.S. announced nearly $6 billion in additional military aid for Ukraine on Monday, as President Joe Biden uses his final weeks in office to ramp up support for Kyiv.
• The next interest rate cut by the European Central Bank could take longer than expected due to a recent uptick in inflation, said Robert Holzmann, a member of the ECB Governing Council, on Saturday.
• According to a Reuters survey, China’s manufacturing activity likely expanded for the third consecutive month in December, as officials brace for new U.S. trade tariffs under a second Trump administration.
• Japan’s manufacturing activity contracted at a slower pace in December as declines in production and new orders eased, moving closer to potential stabilization after recent drops.
• Oil prices edged up slightly on Monday in thin holiday trade, as traders await more economic data from China and the U.S. this week to assess growth in the world’s two largest oil consumers.

Economic Environment

U.S. Treasury Secretary Janet Yellen warned that the government could reach its new debt limit as early as January 14. In a letter to Congress, Yellen stated that the Treasury might need to take “extraordinary measures” between January 14 and 23 to avoid a debt default. She also noted that the debt will temporarily decrease by $54 billion on January 2 due to the scheduled redemption of certain Medicare-related securities, though this will provide only limited relief. While the 2023 budget deal suspended the debt ceiling until 2025, Congress must address this challenge next year to prevent severe economic repercussions. Since 1939, the debt ceiling has been raised 103 times, reflecting a persistent gap between public spending and fiscal revenues. Public debt now stands at 98% of U.S. GDP, a sharp increase from 32% in 2001. This situation underscores the growing pressure on Congress to tackle a recurring issue that could have dire economic consequences if neglected. Although the Treasury has some short-term flexibility, the consistent rise in debt as a percentage of GDP highlights the urgent need for sustainable long-term solutions to balance spending and revenues. Political dynamics will remain a key factor in shaping the economic stability of the United States in the coming months.

Markets and companies

U.S. futures traded lower in the second to last session of the year, highlighting a drop in Boeing shares following an order to inspect B737-800 aircraft in South Korea after a fatal crash. In Europe, markets retreated, with the health care, media, and technology sectors leading the losses. In Asia, markets closed mixed after the release of economic data in Japan, where the PMI index rose to 49.6 in December from 49.0 in November. Meanwhile, concerns persist in South Korea’s aviation sector following the recent Jeju Air accident.

In commodities, oil prices edged slightly higher, while precious metals posted declines, with gold settling at $2,613 per ounce.

In fixed income, the 10-year bond yield fell 6 basis points to 4.56%, while the 2-year bond yield stood at 4.27%.

Finally, in Mexico, the IPC futures advanced to 50,355 points. The exchange rate also showed slight movement, trading at 20.36 pesos per dollar compared to 20.33 in the previous close.

Corporate news

A Boeing B737-800 aircraft operated by Jeju Air crashed at Muan International Airport in South Korea, resulting in 179 fatalities. In response, the South Korean government ordered a safety inspection of the country’s aviation system.

Sundar Pichai, CEO of Google, emphasized that 2025 will be a critical year for the company amid growing competition in artificial intelligence and stricter regulations in the U.S. and Europe. Donald Trump requested the Supreme Court to delay the implementation of a law that would ban TikTok in the country starting January 19, unless ByteDance, its Chinese parent company, sells the platform to a U.S. company. The hearing is scheduled for January 10.