Weekly market report: January 10, 2025

USA

The U.S. market experienced a strong start to the new year, driven by positive economic data and resilient market sentiment. Inflation concerns persisted, with the Federal Reserve signaling a cautious approach toward future rate cuts. The labor market showed strength as initial jobless claims declined, underscoring robust employment conditions. However, the ISM Manufacturing PMI of 48.3 for December reflected contraction in manufacturing activity. This mixed data contributed to gains in the major indices, with the S&P 500 rallying 1.3%, the NASDAQ surging 1.8%, and the Dow Jones gaining 0.8% in the first week of January, as investor optimism prevailed despite potential headwinds.

Europe

In Europe, markets were subdued amid ongoing inflationary concerns and stagnating economic growth prospects. The ECB hinted at potential rate cuts to address inflation, while GDP projections for the eurozone remained modest. Manufacturing activity showed mixed results across the region, with PMI data indicating contractions in certain areas. Major indices reflected investor caution, with the STOXX Europe 600 inching down by 0.2% for the week, while the FTSE 100 and DAX 40 exhibited minor fluctuations. France's CAC 40 and Spain's IBEX 35 also posted slight declines, highlighting a cautious trading environment as the region grappled with economic and geopolitical uncertainties.

Japan

Japanese markets saw a slight pullback as investors locked in profits after a strong 2024 performance. The Nikkei 225 and TOPIX indices both declined, with the Nikkei falling by 1.15% during the week ending January 4. Economic data painted a mixed picture, as the Jibun Bank Manufacturing PMI for December indicated a slight contraction at 49.5. While inflation concerns lingered due to imported price pressures, GDP growth for 2024 was expected to slow to 1.2%, reflecting broader global challenges. Investor sentiment remained cautious as Japan continued navigating a complex economic and geopolitical landscape.

China

Chinese markets faced headwinds in the first week of 2025, driven by concerns over potential U.S. tariffs and ongoing economic challenges. The Shanghai Composite and Hang Seng indices dropped significantly, falling by 2.36% and 2.65%, respectively, as investor anxiety heightened. Inflation concerns shifted toward deflation risks, with 10-year bond yields dropping below 1.6%, reflecting waning investor confidence. Economic growth for 2025 was projected to moderate at 4.8%, weighed down by a slowdown in consumption and persistent property-sector issues. The NBS Manufacturing PMI for December stood at 50.3, barely indicating expansion, as uncertainty clouded the near-term outlook for China's economy.

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