Morning Bid: Markets usher in 2025 with Trump trepidation

Rae Wee's analysis on the day's events in the European and international markets

As Donald Trump's imminent return to the White House and his proposals for significant tax cuts, import tariffs, and immigration restrictions set the tone for the new year, a sense of trepidation pervaded markets on Thursday.

Investors were preparing for uncertainty regarding Trump's economic program and its potential impact on the world economy as the U.S. President-elect took office on January 20.

Due to this uncertainty, markets in Asia were susceptible to a selloff on Thursday, but European shares appeared to fair better, as futures pointed to a strong opening.

 Both Chinese stocks and the yuan, which depreciated to its lowest level against the US dollar in nearly 14 months, experienced significant declines.

The picture for an economy that has been struggling to gain speed has been clouded by Trump's rhetoric of imposing tariffs of more than 60% on imports of Chinese goods, which coincided with central government promises of proactive measures to spur development this year.

As prospects for the new year were clouded by stubbornly poor Chinese demand and mounting trade danger from a second Trump presidency, data released Thursday showed that China and other Asian industrial powerhouses closed 2024 on a low note.

Investors were also troubled by worries that Trump's government will revive the American economy with policies that are predicted by market observers to increase inflation.  and add to government debt, limiting the scope for the Federal Reserve to ease interest rates.

 The dollar is expected to be solidly supported well into 2025 as markets now factor in 42 basis points of Fed cuts this year.

Following the cessation of Russian gas supplies through Ukraine via Soviet-era pipelines on New Year's Day, which put an end to decades of Russian hegemony over European energy markets, market attention in Europe is expected to be on energy shares.

However, since the long-planned halt will have little effect on EU pricing, the impact is probably going to be mild. This is in contrast to 2022, when declining Russian supplies caused prices to soar, exacerbated a cost-of-living crisis, and hurt the bloc's competitiveness.

Key developments that could influence markets on Thursday:

- UK nationwide house prices (December)

- France, Germany HCOB manufacturing PMI (December)

- U.S. weekly jobless claims

(By Rae Wee; Editing by Christopher Cushing)