Wall Street stocks bounce higher as trading at European markets retreats
- 03 Jan 2025
Wall Street stocks bounced higher at the start of trading on Friday, but European stock markets retreated as traders booked profits from a positive start to 2025.
Asia’s main equity indices closed mostly higher, Seoul jumping nearly two per cent despite deepening political uncertainty in Asia’s fourth-largest economy.
There were also gains for Hong Kong, Sydney and Taipei, although Shanghai slumped for a second session running.
Wall Street ended lower Thursday on the first US trading day of 2025 despite having started the day higher.
“The futures for the major indices are indicating a modestly higher open, but based on yesterday’s trade, we’re not sure that is bringing much comfort to market participants,” said Briefing.com analyst Patrick O’Hare.
Instead of enjoying a so-called Santa Claus rally of rising prices during the year-end holiday period, Wall Street limped into 2025 as investors banked their healthy 2024 gains and worried about what the future holds.
“The post-Christmas malaise in US stocks continued as investors await the inauguration of president-elect Donald Trump who could prove a wildcard for markets this year,” noted Russ Mould, investment director at AJ Bell, said of Thursday trading. Departing President Joe Biden blocked early Friday the proposed $14.9-billion purchase of US Steel by Japan’s Nippon Steel, saying it would “create risk for our national security and our critical supply chains”.
Nippon Steel has described the transaction as a lifeline to Pennsylvania’s much-diminished steel industry.
US Steel’s share price slumped nearly seven per cent at the start of trading. Nippon Steel shares had closed higher in Asian trading ahead of Biden’s announcement.
The dollar dipped Friday against the euro, pound and yen.
The US currency had Thursday reached multi-year highs against some of its main rivals, reflecting expectations that the world’s biggest economy would outpace others in 2025. The yuan on Friday hit the lowest dollar level since late 2023.
“The very negative performance of China equities provides a better indication of the weakening sentiment around China assets at the start of 2025, and ahead of Trump’s return to the White House,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
Investors are gearing up for Trump’s inauguration on January 20, set to be followed by the formal announcement of deep tariffs, especially on Chinese goods, that could rattle international trade.
US jobless claims released Thursday fell more than expected, highlighting a robust labour market and leaving the Federal Reserve with less reason to support fresh rate cuts.
Other significant economic releases ahead include data on inflation and retail sales during the holiday shopping season.
The dollar was on track for its strongest weekly performance since early December on Friday, propped up by expectations that the US economy will continue to outperform its peers globally this year and US interest rates will stay elevated for longer.
The greenback began the new year on a strong note, reaching a more than two-year high of 109.54 against a basket of currencies on Thursday as it extended a stellar rally from last year. A more hawkish Fed and a resilient US economy have led US Treasury yields to rise, prompting the dollar to charge higher.
Coupled with expectations that policies by US President-elect Donald Trump will boost growth this year and potentially add to price pressures, the dollar now looks relentless.
“Looks like dollar strength is here to stay for now in early 2025 given the US exceptionalism story is here to stay, and it still comes with high US yields,” said Charu Chanana, chief investment strategist at Saxo.
“Add to that the uncertainty from policies of the incoming (Donald) Trump administration, and you also get the safety aspect of the dollar looking attractive.” Uncertainties over how Trump’s plans for hefty import tariffs, tax cuts and immigration restrictions will affect global markets has in turn given the greenback additional safe haven support. Jobless claims data on Thursday confirmed a resilient US labour market, with the number of Americans filing new applications for unemployment benefits dropping to an eight-month low last week. The dollar index last stood at 109, down 0.2% on the day, but on track for a weekly gain of just under 1%, its strongest since early December.
Other currencies attempted to rebound against the firm dollar on Friday, still tracking steep losses on the week. The euro was last up 0.28% at $1.02950 but was headed for a 1.3% weekly decline, its worst since November.
The common currency was among the biggest losers against a towering dollar, having tumbled 0.86% in the previous session to a more than two-year low of $1.022475.