Daily summary: dollar wipes out tariff-related gains, supporting the equity market 📄

U.S. indices extended their gains during the cash session and by the end of the day were up approximately 0.50-1.00%. The leader of the gains was the small-cap index US2000, which rose by 0.76%. Meanwhile, the technology index gained 0.53% despite Alphabet's nearly 7.5% loss. Nvidia shares rose by over 3.5%.

Stock market gains were supported by a sharply weakening dollar, which has now practically erased all of the gains from the beginning of the week caused by the sudden introduction of tariffs on Canada, Mexico, and China.

Vishay Intertechnology shares rose by 7% despite mixed quarterly results after the company announced that it was seeing stronger demand for infrastructure investments related to smart grid networks and AI data centers.

Along with the dollar, U.S. bond yields are also declining. The 10-year bonds fell to 4.41%, while the 2-year bonds dropped to 4.17%.

The biggest focus of investors today was on gold, which is breaking new all-time highs, gaining 1.00% to $2,870 per ounce.

Such positive sentiment in the metals market can be attributed to several factors, including the weakness of the dollar, the decline in U.S. bond yields, dovish comments from Fed officials, and easing inflationary pressures following the ISM services sector data.

Today, we also received the first key labor market report from the U.S. – ADP (January): 183K vs. 150K forecast and 122K previous (revised to 176K). The data indicate still very strong sentiment among private U.S. companies. Interestingly, no major reaction was observed in the dollar after the data release, and investors' attention is now shifting to the NFP report on Friday.

U.S. ISM Services Data for January indicated 52.8 versus a forecast of 54 and a previous reading of 54.1. The price subindex dropped significantly.

• Price index fell to 60.1 versus 65.1 forecast and 64.4 previous.
• Employment index rose to 52.3 versus 51.4 previous.
• New orders index fell to 51.3 versus 54.2 previous.

The previously published PMI Services Index for January came in at 52.9, in line with forecasts and slightly above December's 52.8. The final Composite PMI for January was 52.7 versus 52.5 expected and 52.4 previous.

European stock markets have mostly had a successful session; the DAX and FTSE indices rose by 0.37% and 0.6%, respectively. Final PMI readings from Germany and the Eurozone for January turned out to be practically in line with previous figures, indicating a still relatively strong services sector and a slight rebound in the composite index.

Germany - January PMI Report:

• Composite PMI in Germany: 50.5; forecast 50.1; previous 48.0;
• Services PMI in Germany: 52.5; forecast 52.5; previous 51.2;

Eurozone - January PMI Report:

• Composite PMI according to S&P Global: 50.2; forecast 50.2; previous 49.6;
• Services PMI: 51.3; forecast 51.4; previous 51.6;

In the cryptocurrency market, sentiment is clearly weaker. Investors are disappointed by the lack of clear support from the Trump administration. On the other hand, it is evident that the integration of cryptocurrencies and blockchain technology into the financial world will not happen overnight, but many of the steps taken so far indicate a very promising direction.

Bitcoin is down 0.60% today to $97,200, while Ethereum is showing exceptional strength, gaining 0.55% to $2,750. Smaller cryptocurrencies have managed to recover some of Monday’s losses but are still under significant pressure.

Fed’s Barkin expects a further significant decline in inflation over the next 12 months; he also stated that only an overheating U.S. economy could lead to interest rate hikes, which he does not currently see and does not expect the Fed to pursue.

Brent crude oil (OIL) is down nearly 2% today after U.S. crude inventories, according to the EIA, increased by over 8.66 million barrels versus a forecast of 1.9 million barrels and a previous reading of 3.46 million barrels. Gasoline inventories also rose sharply by 2.23 million barrels, compared to a 210K forecast and 2.95 million previously.

Additionally, demand for gold shipments from London to the U.S. (COMEX) continues to rise due to concerns about tariffs between the U.S. and European countries. Riding on this trend, silver is also gaining.