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What’s happening: European stock markets settled higher on Tuesday, amid thin volumes ahead of the New Year holiday.
What happened: Most equity markets in Europe remained open for a half day of trading, while stock markets in Italy and Germany were closed.
European stocks rose on the last day of trading of the year after remaining under pressure through the fourth quarter.
Why it matters: Major European indices had struggled to post gains during the last quarter of the year, due to political turmoil and a slowdown in the European economy.
European indices significantly underperformed their US peers. The Stoxx 600 added around 6% last year, while the US S&P 500 surging around 24%.
In Europe, banking stocks were the highest gainers, up by about 25% in 2024. Telecoms and financial services stocks jumped approximately 16% and 15%, respectively, last year. However, food and beverages, basic resources and autos were among the weakest performers of 2024.
The European Central Bank announced an interest rate cut last month, while signalling further rate cuts ahead, with growth stagnating in the bloc. The latest rate cut was the fourth in the current monetary tightening cycle.
The STOXX Europe 600 Index gained 0.55% to close at 507.62 on Tuesday. Canal+ and Neste were among the top performing stocks on the pan-European Stoxx 600 index.
Equity markets in London and France both opened lower but rebounded later during the session. London’s FTSE 100 added 0.64% to close at 8,173.02, recording its fourth yearly gain in a row. France’s CAC 40 climbed 0.92% to settle at 7,380.74.
What to watch: Investors await the release of economic data on HCOB manufacturing PMI (1300 UAE Time), loans to households (1300 UAE Time), loans to companies (1300 UAE Time) and M3 money supply (1300 UAE Time) today.
The HCOB Eurozone manufacturing PMI is expected to remain at 45.2 in December, unchanged from the previous month. Bank lending to households in the Eurozone, which grew by 0.8% year-over-year to €6.907 trillion in October, is projected to rise by 0.9% in November. M3 money supply in the Eurozone, which increased by 3.4% year-over-year to €16.577 trillion in October, is expected to rise by 3.5% in November.
Context: The US dollar index moved lower this morning as investors returned after the New Year’s holiday.
Details: Data released on Tuesday showed the S&P CoreLogic Case-Shiller home price index in the US rose 4.2% year-over-year in October. This was higher than market projections of a 4.1% gain but was lower than the 4.6% surge in the previous month. New York reported the strongest annual rise among the 20 cities, recording a 7.3% gain in October. The FHFA house price index gained by 0.4% in October, compared to market expectations of a 0.5% increase.
Investors are gearing up for US President-elect Donald Trump to return to the White House on January 20. Markets expecting inflationary pressures to return due to his policies, which could result in the Federal Reserve slowing its monetary policy tightening next year.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.2% to 108.33 this morning. The EUR/USD forex pair gained 0.1% to 1.0370, while the GBP/USD pair rose 0.1% to 1.2531.
What to watch: Data on initial jobless claims (1730 UAE Time), S&P Global manufacturing PMI (1845 UAE Time) and construction spending (1900 UAE Time) will be released today. Initial jobless claims in the US, which fell by 1,000 from the previous week to 219,000 during the second week of December, are expected to increase to 224,000 in the latest week.
Analysts expect the S&P Global US manufacturing PMI to decline to 48.3 in December, from 49.7 in November, while construction spending is projected to increase by 0.3% in November, following a 0.4% rise in October.
Other Markets: Asian trading indices traded lower this morning, with the Asia Dow, Japan Nikkei 225, China’s Shanghai Composite Index and Hong Kong’s Hang Seng Index down by 0.36%, 0.96%, 0.99% and 1.42%, respectively. The Indian Sensex bucked the trend and rose 0.58%.
Russia reportedly launched a drone attack on Ukraine’s capital, severely damaging at least two districts. The news sent the RUB/USD pair higher in forex trading this morning.
China’s Caixin general manufacturing PMI fell to 50.5 in December, from 51.5 in November. The latest reading missing market expectations of 51.7 exerted pressure on the CNY/USD forex pair.
Thailand’s S&P Global manufacturing PMI climbed to 51.4 in December, from 50.2 in the previous month. The recent reading marked the strongest growth in the country’s manufacturing activity in four months, which sent the THB/USD pair higher in forex trading this morning.
Singapore’s private home prices rose by 2.3% in the final quarter of 2024, rebounding from a 0.7% decline in the previous quarter, which lent support to the SGD/USD forex pair.
Philippines’ S&P Global manufacturing PMI improved to 54.3 in December, from 53.8 in the previous month. The latest reading signalled the strongest growth in factory activity since April 2022 and sent the PHP/USD pair higher in forex trading this morning.
Spain’s HCOB manufacturing PMI (1215 UAE Time), Italy’s HCOB manufacturing PMI (1245 UAE Time), France’s HCOB manufacturing PMI (1250 UAE Time), Germany’s HCOB manufacturing PMI (1255 UAE Time), South Africa’s ABSA manufacturing PMI (1300 UAE Time), UK’s S&P Global manufacturing PMI (1330 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), US MBA mortgage applications (1600 UAE Time), Brazil’s S&P Global manufacturing PMI (1700 UAE Time), Singapore’s SIPMM manufacturing PMI (1700 UAE Time), US continuing jobless claims (1730 UAE Time), US EIA crude oil stocks change (2000 UAE Time), EIA gasoline stocks change (2000 UAE Time), EIA distillate stocks change (2000 UAE Time), EIA gasoline production change (2000 UAE Time) and EIA heating oil stocks change (2000 UAE Time), Canada’s S&P Global manufacturing PMI (1830 UAE Time), as well as Mexico’s S&P Global manufacturing PMI (1900 UAE Time).
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