Asia Kicks Off New Year After Ominous End To 2024: Markets Wrap

The start of the New Year in Asia comes with a cautious outlook, particularly following a troubling conclusion to 2024. Despite a strong overall year for global equity investors, the Asian markets were not immune to the recent downturn.

Market Performance Overview

In Sydney, shares remained relatively stable, with futures indicating a slight uptick for Hong Kong's benchmark index. However, futures for Shanghai’s indices showed a decline after mainland Chinese markets experienced a significant drop on the last trading day of December. Additionally, both the S&P 500 and Nasdaq 100 indexes faced losses for four consecutive days, resulting in a decline of over one trillion dollars in large-cap market values as the year came to an end.

Currency and Oil Markets

The Japanese yen fell to around 157 against the dollar, marking its third consecutive day of depreciation amid a robust US dollar performance. The Bloomberg Dollar Spot Index finished the year with its best performance in nearly a decade. Meanwhile, oil prices remained stable as reports indicated a decrease in US crude stockpiles, which can signal tighter supply.

Global Economic Context

In a significant development, Russia halted gas supplies to Europe via Ukraine, shutting down a major transit route operational for over 50 years. This cessation occurred after a crucial transit deal expired, leading to confirmations from both Russia and Ukraine regarding the stoppage.

Fiscal policies around the world are also taking shape. For instance, in December, China’s central bank introduced 1.7 trillion yuan (approximately $233 billion) into the economy to enhance liquidity as global growth remains uncertain. According to President Xi Jinping, China's economy is expected to grow by around 5% for the full year of 2024.

Corporate News and Strategic Moves

Several corporate activities were highlighted during the New Year period. Notably, Nippon Steel Corp. made an offer to the US government, granting it a veto over any production cuts in US Steel Corp. as part of an effort to gain approval for its planned acquisition of the American company. As a result, US Steel shares surged significantly.

In another notable transaction, Alibaba Group Holding Ltd. agreed to sell its shares in Sun Art Retail Group Ltd. to private equity firm DCP Capital. This move reflects Alibaba's strategy to focus more on its core online business. Additionally, BYD Co. reported a record year in 2024, achieving sales of 4.25 million passenger cars.

Outlook for 2025

As investors look ahead to 2025, they face a myriad of economic challenges, including persistent inflation and the evolving response from the Federal Reserve regarding interest rates. Following signals from Chair Jerome Powell, it is expected that interest rate cuts may occur less frequently. Observers are also evaluating the potential impacts of President-elect Donald Trump's future policies on consumer prices and federal finances.

Key Events to Watch

This week, key events include US construction spending data, jobless claims, and manufacturing PMI, set to provide crucial insights into the ongoing economic landscape.

Market Movements

Stocks

• S&P 500 futures dipped by 0.1% in early Tokyo trading.

• Hang Seng futures registered a slight increase of 0.3%.

• Australia’s S&P/ASX 200 index remained largely unchanged.

Currencies

• The Bloomberg Dollar Spot Index demonstrated minimal movement.

• The euro held steady at $1.0351.

• The Japanese yen slipped 0.3% to 157.69 against the dollar.

• Similarly, the offshore yuan showed little variation at 7.3344 per dollar.

Commodities

• West Texas Intermediate crude oil rose by 0.4% to reach $71.98 a barrel.

• Spot gold prices remained stable.

Asia, Markets, New Year