As we usher in 2025, the financial markets are tiptoeing around the unpredictable policies soon to be unveiled by Donald Trump. Investors are cautiously optimistic, yet there's a lingering fear that a cocktail of deregulation, authoritarianism, and trade barriers could spell trouble. Welcome to the new year, where uncertainty is the only certainty. It's January 2nd, and if you're weary of last year's highlights and retrospectives, brace yourself for one more. I'll keep it brief to spare you the indigestion.
Today, we dissect the stock market indices of 2024, offering insights into the year's defining moments. Most equity markets enjoyed a prosperous 2024, though a few notable exceptions lagged behind. Wall Street led the charge, with the Nasdaq and S&P 500 soaring 23% to 25%, fueled by artificial intelligence and anticipated interest rate cuts. Trump's return to power added momentum, despite investor jitters over impending policy changes. The New York Stock Exchange ended the year on a subdued note, but Wall Street's gains still outpaced the European average by nearly threefold. Japan and Germany were close contenders, each posting gains of around 19%. Germany navigated economic and political turmoil with a surprising mix of resurgent companies like SAP and Siemens Energy, a burgeoning defense sector, and a general upswing in financial stocks. Meanwhile, Japan's exporters thrived on a weak yen, drawing investors away from a disgraced China. Despite a hiccup in July due to carry trade disruptions, the Nikkei 225 delivered a robust annual performance.
Beyond Japan and Germany, Belgium captured investors' affection with a 15% rise, driven by biotech star ArgenX and the venerable UCB. Hong Kong also saw an 18% uptick, marking its first annual gain since 2019. On the downside, Brazil, Denmark, and France were the year's underperformers. Brazil ended 2024 with a 10% decline, grappling with fiscal challenges, high inflation, and soaring interest rates. Yet, considering its past decade of growth, this setback is a mere blip. Denmark's fortunes took a nosedive in December, with Novo Nordisk's struggles against Eli Lilly dragging the OMX Copenhagen down 8% for the year. France's CAC 40 slipped 2.15%, hit by a slump in luxury goods due to dwindling Chinese consumer spending and political chaos following President Macron's dissolution of the National Assembly.
On a brighter note, factoring in dividends, the CAC 40 technically rose 0.9%, though that's still nine times less than the European average. As 2025 begins, two macroeconomic tensions loom large. First, Russian natural gas no longer flows through Ukraine, causing European gas prices to spike despite prior anticipation. Austria and Slovakia have found alternatives, while Hungary receives Russian gas via Turkey. Second, American dockworkers are threatening a mid-January strike over port automation, echoing last year's wage-related supply chain disruptions.
In other news, China's December manufacturing stats were lackluster, casting doubt on recent economic promises. President Xi Jinping claims a 5% GDP growth for 2024, though skeptics question the reliability of Chinese data. In the U.S., a tragic New Year's Eve car attack in New Orleans claimed at least 15 lives, with authorities suspecting terrorism.
In Asia Pacific this morning, China kicked off 2025 with a 2.3% drop in the MSCI China index. South Korea limited its losses to 0.1%, while India and Australia saw gains of 1.45% and 0.5%, respectively. Japan remains closed until tomorrow.
Today's economic highlights:
The second reading of global manufacturing PMIs for December will take place today, notably in the Eurozone and the USA. We also have weekly jobless claims, construction spending and crude oil inventories will also be on the agenda. The full calendar is here.
- Dollar: EUR 0.9702 GBP 0.8063
- Ounce of gold: USD 2604
- Brent crude: USD 75.71 WTI: USD 72.65
- 10-year US bond: 4.55
- Bitcoin: USD 96,360
In corporate news:
- S&P Global, Inc. In December 2024, manufacturing activity varied globally, with Indonesia, Taiwan, and Thailand experiencing growth, while India, Australia, the Eurozone, Germany, Turkey, and Malaysia saw declines, and France reached a 55-month low in its manufacturing sector.
- Alibaba Group Holding has agreed to sell its 73.7% stake in Sun Art Retail Group to Paragon Shine for up to $1.58 billion, while its grocery chain, Freshippo, reported profitability for nine consecutive months in 2024.
- Nvidia invested $1 billion in AI companies and saw its market value surge to $3.28 trillion due to an AI rally, while U.S. ETFs faced potential challenges in 2025 after a record inflow year, and technology stocks, including Nvidia, advanced in the premarket ahead of the first trading session of 2025.
- Equinor has secured over $3 billion in financing for its Empire Wind 1 offshore wind power project in New York, USA.
- Morgan Stanley has withdrawn from the Net-Zero Banking Alliance but reaffirmed its commitment to achieving net-zero carbon emissions, impacting financial stocks and ETFs, though no specific reason for the exit was provided.
- Synaptics collaborates with Google to enhance AI-driven IoT technologies, while technology stocks, including Synaptics, see gains in premarket trading, amidst Alphabet's YouTube and Elon Musk's X not yet securing a social media license in Malaysia under new regulations.
- Apple is launching a four-day promotional discount on iPhones and other products in China to protect its market share against increasing competition from Huawei and other domestic brands.
- NIO and Li Auto are offering discounts on their electric vehicles in China to compete with Tesla and BYD, with Li Auto also reporting a 19% increase in December sales to 48,740 vehicles and a 16% rise in vehicle deliveries for December 2024 compared to the previous year.
- Meta Platforms, Inc. Malaysia's Communications and Multimedia Commission has granted WeChat and TikTok licenses to operate under the country's new social media regulations.
Analyst recommendations:
- Alphabet Inc.: JMP Securities downgrades to market perform from market outperform.
- Boston Properties, Inc.: Wedbush downgrades to underperform from neutral with a price target reduced from USD 81 to USD 70.
- Caci International Inc: Raymond James upgrades to outperform from market perform with a target price of USD 475.
- Cbre Group, Inc.: Jefferies upgrades to buy from hold with a target price raised from USD 133 to USD 152.
- Cloudflare, Inc.: Goldman Sachs upgrades to buy from sell with a price target raised from USD 77 to USD 140.
- Cousins Properties Incorporated: Jefferies upgrades to buy from hold with a target price raised from USD 33 to USD 36.
- Edison International: Barclays upgrades to overweight from equalweight with a target price reduced from USD 91 to USD 84.
- Encompass Health Corporation: Baptista Research upgrades to buy from hold with a price target raised from USD 105.40 to USD 115.30.
- Healthcare Realty Trust: Wedbush downgrades to underperform from neutral with a target price reduced from USD 18 to USD 16.
- Inspire Medical Systems, Inc.: Baptista Research downgrades to buy from outperform with a price target reduced from USD 244.90 to USD 235.
- Kilroy Realty Corporation: Jefferies downgrades to hold from buy with a target price reduced from USD 45 to USD 41.
- L3Harris Technologies, Inc.: Raymond James downgrades to market perform from outperform.
- Lockheed Martin Corporation: Deutsche Bank downgrades to hold from buy with a target price reduced from USD 611 to USD 523.
- Maximus, Inc.: Raymond James upgrades to outperform from market perform with a target price of USD 90.
- Parsons Corporation: Raymond James downgrades to market perform from outperform.
- Reynolds Consumer Products Inc.: Baptista Research downgrades to outperform from hold with a price target reduced from USD 33.40 to USD 31.70.
- Rtx Corporation: Deutsche Bank upgrades to buy from hold with a price target raised from USD 131 to USD 140.
- Siteone Landscape Supply, Inc.: Baptista Research upgrades to outperform from hold with a target price reduced from USD 163 to USD 161.40.
- Sofi Technologies, Inc.: Keefe Bruyette & Woods downgrades to underperform from market perform with a target price raised from USD 7 to USD 8.
- Transdigm Group Inc.: Deutsche Bank downgrades to hold from buy with a target price reduced from USD 1444 to USD 1348.
- Uber Technologies, Inc.: JMP Securities downgrades to market perform from market outperform.
- Vici Properties, Inc.: Wedbush upgrades to outperform from neutral with a target price reduced from USD 34 to USD 33.
- Wec Energy Group, Inc.: Barclays upgrades to equalweight from underweight with a target price raised from USD 89 to USD 93.
- Ibstock Plc: Davy maintains its outperform recommendation and reduces the target price from 2.15 to GBP 2.15.