China manufacturing grows at softer pace

General market commentary

US benchmark equity indexes closed lower on the final trading day of the year, though all three major indices posted solid double-digit percentage gains for 2024. The Nasdaq Composite fell by 0.9%, the S&P 500 dropped 0.4%, and the Dow Jones Industrial Average edged down by 0.1%. Despite these declines, investor sentiment remains positive as 2025 begins, with expectations of continued economic growth and strong corporate earnings. Technology shares were the weakest performers, while energy stocks benefited from rising oil prices. The US 10-year Treasury yield rose to 4.57%, suggesting a higher rate environment for the foreseeable future.

Looking ahead, equity markets are set up for potential further gains, provided the economy continues to grow and earnings remain strong. Bonds also performed well in 2024, with US investment-grade bonds showing positive returns, and high-yield and international bonds performing even better. The outlook for both equities and bonds remains constructive as investors remain focused on growth and income opportunities.

Latest market update

Most Asian equities fell on Thursday, tracking a subdued end to the year on Wall Street, with Chinese shares sharply lower after weaker-than-expected manufacturing data. Markets were also weighed down by global uncertainty, including the potential for a US-China trade dispute and a less dovish outlook from the US Federal Reserve.

U.S. equity index futures fell cautiously at the start of 2025, following a strong year in 2024, as concerns over slower interest rate cuts by the Federal Reserve and uncertainty around President-elect Trump's policies weighed on sentiment. Trading volumes remain low due to the year-end holidays, with markets expected to pick up pace in the coming week.

European markets closed higher on the final trading day of the year, with the CAC 40 and FTSE 100 posting gains, although trading volumes were thin due to the holiday season. Despite these gains, European indices have underperformed their U.S. counterparts, with political uncertainties and a slowing economy weighing on performance in the final quarter of 2024.

The US dollar remained strong at the start of 2025, bolstered by expectations of higher U.S. interest rates and safe-haven demand amid global uncertainties. The euro traded at $1.0362, continuing its weakness after falling over 6% in 2024, with markets anticipating further rate cuts from the European Central Bank in the year ahead.

Oil prices edged higher on the first trading day of 2025, supported by expectations of a recovery in China's economy and fuel demand following President Xi Jinping's pledge to boost growth. However, concerns over geopolitical risks and potential US-China trade tensions, alongside a focus on upcoming US economic data, kept investors cautious.

Chinese manufacturing activity grew less than expected in December, with the Caixin PMI slowing to 50.5 from 51.5, below the forecast of 51.6. The weaker-than-anticipated growth was attributed to falling export orders and reduced business optimism.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

A Tesla Cybertruck exploded outside the Trump International Hotel in Las Vegas on Wednesday, killing the driver and injuring seven others, with the FBI investigating whether it was an act of terrorism. Tesla CEO Elon Musk confirmed the explosion was caused by fireworks or a bomb in the vehicle, not a fault with the Cybertruck itself.

Apple is offering discounts of up to 500 yuan on its latest iPhone models in China as it battles declining market share amid rising competition from local brands like Huawei. In the meantime, UBS analysts have lowered their December sales estimates, citing weaker demand and a decline in iPhone's global market share, particularly in China.

Siemens is reviewing its majority stake in Siemens Healthineers, valued at €45 billion, due to limited synergies between the two businesses. The company will assess the economic opportunities in healthcare and present its conclusions at a capital markets day in late 2025.

Wedbush analysts predict a 25% rise in tech equities in 2025, driven by reduced regulatory pressures and the ongoing AI revolution, with over $2 trillion in AI capital expenditure expected in the next three years. Key tech shares for this growth include Nvidia, Microsoft, Palantir, and Salesforce, with software and cloud companies seen as essential to the AI landscape.

Upcoming data and events

Today, key economic data includes the December manufacturing PMI for both France and Germany. Additionally, the U.S. will release its weekly jobless claims report, which could offer further insights into the labour market.

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