Markets End 2024 on a Cautious Note, Set the Stage for 2025 Opportunities | Daily Market Analysis

Key events:

• USA - Initial Jobless Claims
• USA - S&P Global US Manufacturing PMI (Dec)
• USA - Crude Oil Inventories

The S&P 500 wrapped up 2024 on a cautious note, slipping 0.4% during the final trading session of the year. Despite the dip, the index posted an impressive annual gain of approximately 23%, marking one of its strongest performances in recent years.

The Dow Jones Industrial Average edged down 0.1%, while the NASDAQ Composite fell 0.9% amid profit-taking as investors closed their books for the year. US markets remained closed on Wednesday in observance of New Year’s Day.

Tesla (NASDAQ: TSLA) saw its stock decline by 3.2% on Tuesday, erasing earlier gains. This followed reports from China’s Xinhua News Agency that its energy storage gigafactory in Shanghai had entered trial production. The facility, completed in just seven months, is expected to achieve full-scale production in early 2025, signaling ambitious growth plans for the electric vehicle manufacturer.

Meanwhile, Boeing (NYSE: BA) shares experienced marginal losses. This comes after a devastating air crash in South Korea on Sunday claimed 179 lives when a passenger plane crash-landed at Muan International Airport. The incident has raised renewed concerns over aviation safety and its potential impact on Boeing's reputation and business operations.

The Australian Dollar strengthened against the US Dollar following the release of China’s Caixin Manufacturing Purchasing Managers’ Index (PMI). The index unexpectedly dropped to 50.5 in December, down from 51.5 in November and below the anticipated 51.7. Despite the dip, the data highlighted continued expansion in China’s manufacturing sector, with output and new orders growing for the third consecutive month. Given Australia’s strong trade ties with China, the AUD often reacts closely to Chinese economic indicators.

Oil markets started 2025 on a positive note, with West Texas Intermediate (WTI) crude extending its gains for the fifth consecutive session. WTI was trading around $71.70 per barrel as investors remained optimistic about China’s economic recovery. President Xi Jinping’s recent commitment to implementing proactive growth policies further fueled hopes of rising fuel demand in the coming months.

USD/JPY rose to 157.30 during early Asian trading hours on Thursday. The strength of the US Dollar reflects market expectations that the Federal Reserve will maintain elevated interest rates for an extended period. Meanwhile, Japan’s Finance Minister Katsunobu Kato reiterated the government’s readiness to intervene against excessive foreign exchange volatility. Investors await the Bank of Japan’s quarterly regional economic report, due next week, which could offer insights into the central bank’s policy direction ahead of its January 24 meeting.

In Europe, the EUR/USD pair continued its decline, trading near 1.0350. The Euro remains under pressure as the European Central Bank maintains a dovish stance. The ECB recently reduced its deposit facility rate to 3% and is expected to lower it further to 2% by mid-2025. ECB President Christine Lagarde expressed optimism about achieving a 2% inflation target by 2025, reaffirming the bank’s commitment to monetary stability.

USD/CAD reversed its two-day gains, trading near 1.4370 as a softer US Dollar weighed on the pair. The Canadian Dollar found support from improving crude oil prices, reflecting Canada’s position as a major oil exporter.

As markets transition into the new year, key economic data releases will take center stage. US Initial Jobless Claims and December's S&P Global Manufacturing PMI are due later this week and are expected to provide crucial insights into the economic outlook. Investors will also closely watch updates from central banks, particularly the Federal Reserve and the European Central Bank, for clues about monetary policy shifts.

With 2024 behind us, the focus now shifts to how geopolitical developments, economic recovery efforts, and central bank policies will shape global markets in 2025. The resilience shown by equities, currencies, and commodities in 2024 suggests that markets are better prepared to navigate uncertainties in the year ahead.

This new year offers opportunities for traders and investors to adapt to changing dynamics, making it a pivotal time to refine strategies and capitalize on evolving market trends.