Weekly Market Roundup: Kicking Off 2025 with a Mixed Bag of Returns
Introduction
Welcome to this week’s Market Roundup, your one-stop source for the latest trends in global markets, key economic insights, and top financial news. As we step into 2025, markets delivered mixed performances amid cautious investor sentiment, inflation concerns, and varied regional dynamics. Let’s break down the highlights.
U.S. Markets: A Soft Start to a Strong Year-End Finish
The U.S. markets saw modest gains last week, with the S&P 500 advancing 0.6% and the Nasdaq rising 0.7%. This capped a stellar 25% gain for 2024, marking the best two-year stretch since 1997-1998.
Economic highlights:
Manufacturing: The Chicago PMI fell to 36.9 in December, down from 40.2 in November. This sharp contraction signals ongoing challenges in the manufacturing sector, driven by weak demand and higher costs.
GDP Forecast: The Atlanta Federal Reserve revised Q4 GDP growth forecasts lower, from 3.1% to 2.6%, citing reduced private domestic investment growth.
Labor Market: Initial jobless claims dropped to 211,000, an eight-month low, reflecting continued labor market strength despite broader economic headwinds.
Treasury Yields: The 10-year yield dipped to 4.60%, providing some relief to fixed-income investors amid light economic data.
Europe: Inflation and Housing in Focus
The STOXX 600 edged up 0.2%, with mixed performances across major indices. Germany’s DAX fell 0.02%, and France’s CAC 40 declined 0.43%, while the UK’s FTSE 100 rose 0.91%, supported by a weaker pound.
Regional developments:
Inflation: Spain’s CPI rose to 2.8% in December, up from 2.4% in November, driven by higher fuel costs. Persistent price pressures may delay ECB rate cuts.
Housing Market: UK house prices increased by 0.7% in December, the fastest year-over-year growth since 2022. However, mortgage approvals fell to 65,700 in November, hinting at buyer caution amid high borrowing costs.
Japan: Profit-Taking After Record Highs
The Nikkei 225 closed at 39,894.54, marking its highest year-end level ever, with nearly 20% gains in 2024. However, the week saw thin trading volumes as investors engaged in profit-taking.
Economic highlights:
Manufacturing PMI: December’s PMI rose slightly to 49.6 from 49.0, signaling continued contraction but at a slower pace, possibly hinting at stabilization.
Yen Trends: The yen held steady around 157 per dollar after depreciating by 11% in 2024. While a weaker yen supports exporters, concerns about inflation persist.
China: Disappointing Data Dents Sentiment
Chinese equities struggled, with the Shanghai Composite falling 5.75% and the Hang Seng Index dropping 1.4%. Weak manufacturing data and sluggish domestic demand weighed on market sentiment.
Economic signals:
Manufacturing PMI: The official PMI slipped to 50.1 in December, barely signaling expansion, while the Caixin PMI, focusing on smaller firms, fell to 50.5 from 51.5.
Property Sector: Sales by the top 100 developers remained flat compared to December 2023, though a 24.2% month-over-month increase suggests early effects of Beijing’s rescue measures.
What to Watch This Week
United States:
December CPI (Wednesday): This critical inflation gauge will shape expectations for Federal Reserve policies in 2025.
Jobless Claims (Thursday): A key indicator of labor market health, with sustained low claims signaling resilience.
Consumer Sentiment (Friday): The University of Michigan’s report will provide insights into consumer confidence and inflation expectations.
Q4 Earnings Reports: Major banks like JPMorgan Chase, Citigroup, and Wells Fargo will set the tone for earnings season, offering clues about loan growth and economic health.
Eurozone and UK:
Inflation Data: Releases from Germany and other key economies will influence the ECB’s policy outlook, especially as higher inflation could delay rate cuts.
Services PMI: A strong reading in the UK could signal resilience, impacting Bank of England policy expectations.
Japan:
Services PMI (Today): This data will provide insights into domestic demand and potential adjustments in BoJ policies.
China:
CPI Data (Thursday): This will indicate whether China’s stimulus efforts are gaining traction. Weak inflation may prompt further easing by the People’s Bank of China.
Conclusion
As 2025 begins, markets remain cautious amid inflationary pressures and varied regional trends. Economic updates this week will be pivotal in shaping sentiment and central bank policy directions. Stay tuned for more insights in next week’s Market Roundup.
FAQs
What contributed to U.S. market gains last week?
Modest gains in the S&P 500 and Nasdaq were driven by a Friday rally, strong labor market data, and declining Treasury yields.Why are European markets seeing mixed performances?
Inflation concerns and housing market developments are influencing investor sentiment across major European economies.What’s behind Japan’s market activity?
Profit-taking after record highs in the Nikkei 225 and a steady yen contributed to last week’s movements.Why is China’s economic data underwhelming?
Weak manufacturing PMI figures and tepid domestic demand are dampening sentiment despite government stimulus efforts.What’s the significance of this week’s CPI data?
The CPI data will shape expectations for central bank policies in the U.S. and China, providing critical insights into inflation trends.
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