A look at the day ahead in European and global markets from Ankur Banerjee
While stock markets shrugged off a mediocre start to 2025, the higher-longer US rate theme continued to dominate the dollar, leaving the euro and sterling near multi-month lows.
In addition to concerns over the path of the US central bank’s measured rate cuts to 2025, investors are also grappling with how President-elect Donald Trump’s policies on inflation, growth and tariffs will play out.
European stock markets are set to open higher after Asian shares ended the week at higher levels, boosted by South Korean shares. Japan is closed for holidays.
The focus will be on whether the pan-European STOXX 600 index can build on its steady start to 2025 after a 6% gain last year.
European markets and the euro have been hampered in the past few months by uncertainty around interest rate paths for Europe and the United States, as well as political quagmire in France and Germany.
The threat of tariffs from the incoming Trump administration has also weighed on sentiment.
That leaves the euro at its lowest level since November 2022 after the single currency fell more than 6% last year.
Traders expect deeper rate cuts from the European Central Bank in 2025, with markets pricing in at least four 25 basis point cuts, while uncertainty over two such moves by the Federal Reserve.
The pound, however, has fared better than other G10 currencies compared to the greenback’s rise, depreciating just 1.7% against the dollar in 2024. It hit a nine-month low to start the new year and remained near those levels on Friday.
All appreciate the king dollar?
In company news, Tesla reported its first-ever drop in annual deliveries as lucrative year-end incentives failed to warn customers of higher borrowing costs.
Meanwhile, US President Joe Biden, with less than three weeks left in his term, has decided to block Nippon Steel’s proposed purchase of US steel, the Washington Post reported.
Key developments that could affect the markets on Friday:
Economic Events: German Unemployment Data for December; UK mortgage lending data for November
(By Ankur Banerjee in Singapore)
