World shares failed to get impetus on Thursday following a nervous end to 2024, as the dollar fell as market mood waned ahead of Donald Trump’s return to the White House.
The start of the New Year was shaping up to be less favourable for equities, as uncertainty about incoming US President Donald Trump’s policies and a more hawkish Federal Reserve outlook appeared to dominate market talk for the time being.
Global shares, which had closed out 2024 with a healthy annual gain of about 16%, fell more than 2% in December and were 0.05% lower at the European start.
European equities fell during the first trading session of 2025, with the pan-European STOXX 600 index closing down 0.25%.
However, U.S. market futures headed higher, with the S& P 500 futures rising 0.6% and the Nasdaq futures up 0.8%.
Other major bourses remained flat, with France’s CAC 40 losing approximately 0.9%.
Higher crude futures boosted European oil and gas stocks, as Russian gas major Gazprom halted gas deliveries through Ukrainian pipelines after Kyiv declined to renew a transit arrangement.
Automobiles and luxury goods underperformed.
China equities closed significantly lower, marking their worst New Year start since 2016, as manufacturing data disappointed investors, who were also hoping for additional policy support.
China’s blue-chip CSI 300 Index closed down 2.9%, while the Shanghai Composite Index sank 2.7% and Hong Kong’s benchmark Hang Seng fell 2.2%.
According to Bruno Schneller, managing director of Erlen Capital Management in Zurich, global markets will begin 2025 with a strong focus on major economic and inflation data.
“The latest PMI release from China, falling short of expectations, underscores challenges in the manufacturing sector. However, President Xi’s announcement of more proactive policies to boost growth signals potential shifts in economic strategy for the region,” added Schneller.
China’s President Xi Jinping announced in his New Year’s address on Tuesday that the country will implement more proactive policies to support growth in 2025.
Investors are keeping a tight eye on China’s recovery, with Trump threatening tariffs of up to 60% on Chinese imports, which may be a substantial headwind.
“With Donald Trump’s return to the White House amplifying external risks and an already fragile domestic economy, a debt-deflation trap leading to a generational downturn could be perilously close if upcoming stimulus measures are delayed or misdirected,” said Yingrui Wang, China’s emerging market economist at AXA Investment Managers.
Levying Tariffs
Trump will be sworn in as president of the United States on January 20 for his second term. The new session of Congress will begin on Friday, with Republicans holding majorities in both the House of Representatives and the Senate.
“A big question will be how the new administration moves on new tariffs, and which countries they’re focused on,” Deutsche Bank analysts said in a note.
The dollar weakened against other major currencies, falling 0.1%. The euro rose 0.08% to $1.03615 but remained close to a more than one-month low.
Markets currently anticipate approximately 42 basis points of rate cuts from the Federal Reserve this year, compared to more than 100 basis points from the European Central Bank and 60 basis points from the Bank of England.
In London trade, US 10-year Treasury rates fell by 3 basis points to 4.22%.
Oil prices increased, with Brent oil futures up 32 cents to $74.96 per barrel. US West Texas Intermediate crude rose 31 cents to $72.02.
Spot gold rose 0.5% to $2,636 per ounce. The yellow metal enjoyed a golden year in 2024, rising by more than 27%, its largest yearly gain since 2010.
Russian gas shipments via Soviet-era pipelines running through Ukraine came to a standstill on New Year’s Day, signalling the end of Moscow’s decades-long domination over Europe’s energy markets.
The gas has continued to flow throughout nearly three years of war, but Russia’s Gazprom claimed it ceased at 0500 GMT on January 1 after Ukraine declined to renew the transit deal.
The benchmark front-month contract at the Dutch TTF hub reached a 14-month high of 50.85 euros per megawatt-hour (MWh) at 0913 GMT, according to LSEG data.
