European stock futures saw a slight decline, while Asian equities and US futures posted gains ahead of crucial American manufacturing data, expected to offer more insight into the economy’s health. The rise in Asian stocks stood in contrast to the global downtrend observed earlier in the week, as markets in South Korea, Hong Kong, and Australia all recorded gains.
Despite the positive signs in Asia, Euro Stoxx 50 futures dropped by 0.1%, and Chinese stocks continued to face pressure amid ongoing economic uncertainty.
Investors are closely monitoring the current economic landscape and preparing to implement asset-allocation strategies for the year ahead after a tumultuous close to 2024. US stocks, which had dropped for a fifth consecutive session on Thursday, experienced a rally in the US dollar, which reached a new two-year high before retreating on Friday.
US Economic Outlook and Inflation Concerns
Jung In Yun, CEO of Fibonacci Asset Management Global, discussed inflationary pressures driven by US President-elect Donald Trump’s policies, particularly on tariffs, during an appearance on Bloomberg Television. Yun emphasized that persistent inflation could result in mid-level interest rates persisting for an extended period.
US Treasury yields remained stable for the week, with trading activity in Asia paused on Friday due to Japan’s national holiday. The benchmark 10-year yield remained nearly 20 basis points higher than before Federal Reserve Chairman Jerome Powell’s hawkish stance following the December 18 Fed meeting.
China’s Economic Struggles
Chinese stocks are off to their worst start to the year since 2016. The country’s 10-year government bond yield fell below 1.6% for the first time, raising further concerns about the health of the Chinese economy. Ed Yardeni, president of Yardeni Research, suggested that China’s bond yield might approach zero by the end of the year, commenting that policymakers appear to be running out of effective stimulus measures to boost consumer spending.
US Unemployment and Corporate Earnings Outlook
On the economic front, US unemployment applications dropped to an eight-month low, signaling that job cuts remain limited in a surprisingly resilient labor market. However, economic data from Thursday offered little indication of any momentum toward rate cuts by the Federal Reserve.
Looking ahead to corporate earnings, Lisa Shalett of Morgan Stanley Wealth Management warned that 2025 may be a “show-me year” for investors. Shalett cautioned that the dominance of the “Magnificent Seven” tech stocks, which drove much of last year’s gains, could falter. Despite recent declines in the market, Shalett added that it was too early to label the year-end drop as a negative trend.
US Stocks and Political Uncertainty
US stocks continue to struggle to recover from a losing streak that has diminished the shine of the S&P 500’s strong performance over the past two years. The index had surged more than 50% since early 2023, largely driven by gains in technology megacaps and optimism surrounding artificial intelligence.
Investors are also awaiting the results of Friday’s US House Speaker vote, which could have implications for President Trump’s political agenda. Republican infighting over Speaker Mike Johnson’s reelection could add to the political uncertainty.
US Steel Deal Blocked
In a significant political move, President Joe Biden has reportedly blocked the $14.1 billion sale of United States Steel Corp. to Japan’s Nippon Steel Corp. Sources familiar with the matter stated that the decision marks the end of a months-long dispute, raising questions about the future of the US steel industry.
Commodities and Cryptocurrencies
On the commodities front, gold was on track for its largest weekly gain since November, driven by risk-averse sentiment as investors flocked to haven assets. Meanwhile, Bitcoin dropped for the first time in four days.
Market Movements and Key Events
Key market movements included:
Stocks:
- S&P 500 futures rose by 0.2%
- S&P/ASX 200 futures climbed by 0.5%
- Hong Kong’s Hang Seng index increased by 0.4%
- The Shanghai Composite fell by 1.4%
- Euro Stoxx 50 futures dropped by 0.1%
- Nasdaq 100 futures rose by 0.4%
Currencies:
- The Bloomberg Dollar Spot Index fell by 0.2%
- The euro remained stable at $1.0273
- The Japanese yen rose by 0.2% to 157.23 per dollar
- The offshore yuan remained unchanged at 7.3334 per dollar
- The Australian dollar gained 0.2% to $0.6218
- The British pound rose 0.2% to $1.2399
Cryptocurrencies:
- Bitcoin decreased by 0.5% to $96,616.76
- Ether remained stable at $3,447.93
Bonds:
- The yield on 10-year US Treasuries dropped by 1 basis point to 4.56%
- Australia’s 10-year yield declined by 5 basis points to 4.38%
Commodities:
- West Texas Intermediate crude showed little change
- Spot gold remained stable
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