Global markets from December into January reflected a mix of optimism and caution as investors navigated year-end developments and the early signals for 2025. Equity markets generally performed well, with the S&P 500 and Nasdaq continuing their upward momentum as U.S. economic data pointed to moderating inflation and resilience in the labor market. Gains in the technology and consumer discretionary sectors were notable, driven by robust holiday sales and continued enthusiasm for innovations in artificial intelligence and clean energy. In Europe, equity markets posted solid performances, with the STOXX 600 gaining ground as the energy and industrial sectors saw strong demand. However, softer-than-expected economic data from the Eurozone tempered the enthusiasm, highlighting lingering concerns about growth prospects.
In Asia, market performance was mixed. Japanese equities extended their rally into the new year, supported by favorable currency dynamics and strong corporate earnings. The Nikkei 225 reached its highest levels in years, reflecting positive sentiment around export-driven sectors. Meanwhile, Chinese markets remained subdued, as investor confidence was dampened by continued signs of economic slowdown, even with incremental policy support from Beijing. The Hang Seng Index struggled to gain traction, with lingering concerns about the property sector and weak consumer demand weighing on sentiment. Indian markets, on the other hand, sustained their positive trajectory, fuelled by strong domestic consumption and infrastructure spending, which kept the Sensex near record highs.
Currency markets were characterized by a weaker U.S. dollar as markets increasingly priced in the possibility of rate cuts by the Federal Reserve later in the year. The euro and British pound capitalized on the dollar's softness, with the euro finding additional support from declining energy prices in the region. The Japanese yen rebounded slightly after prolonged weakness, as speculation grew that the Bank of Japan might consider revising its ultra-loose monetary policy. Emerging market currencies were broadly supported by the weaker dollar and improving global risk appetite, although some currencies in commodity-exporting countries faced pressure from declining oil prices.
Commodities markets saw significant fluctuations during this period. Crude oil prices declined, with Brent crude falling below $75 per barrel amid concerns about slowing global demand and higher-than-expected inventory levels in the United States. Natural gas prices also remained under pressure due to mild winter conditions across much of Europe and North America, which reduced heating demand. Gold prices surged, nearing $1,950 per ounce by mid-January, as the softer dollar and heightened demand for safe-haven assets bolstered the precious metal. Industrial metals like copper and aluminium saw modest gains, reflecting optimism around China's reopening, even as the pace of its recovery appeared slower than anticipated.
Bond markets experienced lower yields as global central banks signaled a more measured approach to monetary policy. In the United States, the 10-year Treasury yield fell below 4.2%, driven by expectations of a potential shift toward rate cuts later in the year. Similarly, German Bunds and UK Gilts saw yields decline as inflation data pointed to easing pressures, giving central banks room to adopt a more dovish stance. Emerging market debt also benefited from the easing global yield environment, with strong demand for both sovereign and corporate bonds in regions with stable economic outlooks.
Overall, the period reflected cautious optimism across global markets, with a focus on shifting central bank policies and the potential for improved economic conditions in 2025. While equities and bonds found support in this environment, commodities faced headwinds from slowing demand. Market participants remain attuned to the interplay of monetary policy, inflation trends, and geopolitical developments, which will likely shape sentiment in the months ahead.