A look at the day ahead in European and global markets from Rae Wee
An air of caution lingered over markets on Thursday as Donald Trump's impending return to the White House - and his plans for hefty import tariffs, tax cuts and immigration restrictions - set the tone for the new year.
With just over two weeks until the U.S. President-elect's Jan. 20 inauguration, investors were bracing for unpredictability in Trump's economic agenda and what that would mean for the global economy.
That uncertainty left shares in Asia vulnerable to a selloff on Thursday, though those in Europe looked set to fare better with futures pointing to a positive open.
Chinese stocks in particular fell heavily, as did the yuan which weakened to its lowest level against the U.S. dollar in almost 14 months.
Trump's talk of tariffs in excess of 60% on imports of Chinese goods has coincided with central government pledges of proactive policies to promote growth this year, muddying the outlook for an economy that has struggled for momentum.
China and other Asian factory powerhouses ended 2024 on a soft note, data on Thursday showed, as expectations for the new year were tainted by growing trade risk from a second Trump presidency and persistently weak Chinese demand.
Also plaguing investors was concern that Trump's administration would run the U.S. economy red hot again, with policies market watchers expect will stoke inflation and add to government debt, limiting the scope for the Federal Reserve to ease interest rates.
Markets now price in about 42 basis points worth of Fed cuts this year, which is likely to keep the dollar strongly supported well into 2025.
In Europe, market focus will likely be on energy shares after Russian gas exports via Soviet-era pipelines running through Ukraine stopped on New Year's Day, ending decades of Russian dominance over European energy markets.
Still, the impact is likely to be muted given the long-scheduled stoppage will have limited influence on prices in the European Union - unlike in 2022, when falling Russian supplies sent prices to record highs, worsened a cost-of-living crisis and hit the bloc's competitiveness.
Key developments that could influence markets on Thursday:
- UK nationwide house prices (December)
- France, Germany HCOB manufacturing PMI (December)
- U.S. weekly jobless claims
(By Rae Wee; Editing by Christopher Cushing)
