MARKET WRAPS
Stocks:
Stocks in Europe started 2025 largely on the back foot, as investors awaited new market drivers and with light trading expected for the rest of the week.
Stocks to Watch
BASF's near-term earnings guidance is surprisingly resilient despite headwinds from tariff and gas costs, Berenberg said.
The company saw strong 4Q results in upstream chemicals, and policy shifts in Germany, China, and the U.S. could further benefit the chemicals sector, particularly with potential German electricity fee reductions as part of a new government.
While 2025 volume growth might be subdued due to likely higher tariffs in the U.S., 2026 should see tailwinds from lower gas prices and the company's new Chinese site, Berenberg said.
U.S. Markets:
Stock futures gained, suggesting Wall Street could advance in the first trading session of 2025.
Ahead
Initial jobless claims are expected to tick up to 225,000-an increase of 6,000 from a week earlier. PMI data from S&P Global will likely show U.S. manufacturing remained in contraction last month. The sector's purchasing managers index is seen holding steady at 48.3.
Forex:
The dollar is at risk of a correction lower in the near-term if the U.S. economic outlook weakens, Danske Bank said.
The market could be underpricing prospects of interest-rate cuts by the Federal Reserve, and a softer U.S. growth outlook would likely trigger falls in the dollar. That means the euro has some upside potential versus the dollar if upcoming U.S. economic data miss expectations, although it will probably remain range-bound.
The exchange rate is currently trading at the lower end of its recent $1.0350-$1.0450 range ahead of U.S. initial jobless claims data at 1330 GMT and ISM U.S. manufacturing data on Friday.
MUFG said the dollar should strengthen in the first half of 2025, buoyed by the likelihood of tariffs being implemented quickly by Donald Trump and by limited prospects of Fed interest-rate cuts.
The Norwegian krone could strengthen in the near term on the back of higher oil and natural gas prices, Danske Bank said.
"Also historically the krone has exhibited a positive seasonal pattern in the first weeks of the year with EUR/NOK haven fallen in seven out of the last 10 years."
However, Danske Bank will utilize any krone rallies to take longer-term bets against the currency. It expects the Norges Bank to cut interest rates by more than market pricing implies in 2025-26 and sees the energy sector as vulnerable amid weak global growth.
It expects EUR/NOK to reach 12.40 in 12 months.
Bonds:
Eurozone sovereigns kick off a heavy government bond issuance program next week, and as it's usually frontloaded, supply in the first quarter is heavy with a high number of syndicated transactions accompanying scheduled auctions.
Ireland and Portugal are usually some of the first sovereigns in the eurozone coming to the market and this pattern might continue this year, Danske Bank said.
Eurizon Asset Management has a positive view on eurozone peripheral government bonds: "Positive view [is] confirmed on peripheral euro area bonds, concentrated on Italy in particular."
It has a neutral view on German and U.S. duration.
Energy:
Oil prices rose to start the new year as optimism for demand boosted by Chinese leader Xi Jinping's annual New Year's address on Tuesday, according to market watchers.
Xi said the nation's economy is on "an upward trajectory," though he also noted "challenges of uncertainties in the external environment" in 2025.
Official manufacturing purchasing managers' index data released earlier this week showed factory activity in China is still slightly tilted toward expansion for third consecutive month. This has further boosted expectations of demand.
Metals:
Gold has started the new year on a reasonably positive note. although investors are awaiting fresh catalysts to decide the its future direction.
Bank of Singapore said gold likely has more upside in 2025, and will be aided in the medium-to-longer term by some of Donald Trump's policies: proposed tax cuts could raise worries over the budget deficit, and a further increase in debt levels will probably worsen the fiscal situation and the allure of U.S. assets, thereby benefiting the precious metal.
Bank of Singapore maintains its 12-month gold price target at $2,900/oz and sees the precious metal as a portfolio diversifier.
EMEA HEADLINES
Russian Gas to Europe Stops Flowing After Ukraine Refuses to Renew Pipeline Deal
Russia halted natural-gas flows to Europe via Ukraine, as Kyiv's refusal to extend a pipeline deal brought an end to one of the last remaining energy links between Russia and what was once its biggest market.
A gas transit deal using Soviet-era pipelines crisscrossing Ukraine expired at the end 2024. Ukraine had said it wouldn't extend the deal because it was providing revenues that helped Moscow conduct its war in Ukraine. Russian gas exporter Gazprom said it halted flows in the early-morning hours of the new year as the deal expired.
Swisscom Cuts Earnings Guidance on Early Closing of Vodafone Italia Deal
Swisscom lowered its core earnings guidance as the completion of its 8 billion-euro ($8.29 billion) acquisition of Vodafone Italia will be recognized in 2024.
The communications group said Thursday that it now expects earnings before interest, taxes, depreciation and amortization for the year to be between 4.3 billion and 4.4 billion Swiss francs ($4.75 billion-$4.86 billion), compared with its previously guided range of between 4.5 billion and 4.6 billion francs.
Sweden's Intrum Beats Bondholder Challenge to U.S. Bankruptcy Filing
Swedish debt collector Intrum won U.S. court approval for a $4.6 billion debt restructuring, defeating a bondholder group that argued the company didn't need or deserve the protections of bankruptcy.
Judge Christopher Lopez of the U.S. Bankruptcy Court in Houston confirmed a restructuring plan that cuts Intrum's debt while preserving its equity holders' stakes in the business. The judge simultaneously ruled against a bondholder group that argued the company wasn't in financial distress and had manufactured a bogus U.S. presence to justify its chapter 11 case.
GLOBAL NEWS
Hopes for a 'Santa Claus Rally' Fade on Wall Street
The Grinch might be coming for Wall Street this holiday season.
After a gangbusters year for the S&P 500, traders have been watching for a rally heading into 2025 to put the cherry on the cake. Stocks tend to rise in what is known as a "Santa Claus rally" over the period that spans the last five trading days of the year through the first two of the next.
U.S. Companies Vouched for China During Trump's First Term. Not Anymore.
SINGAPORE-During Donald Trump's first term, U.S. companies argued that a trade war with China was bad for Americans.
Businesses including Apple, Nike and small retailers said raising tariffs on imports from China would raise prices for consumers. Farmers and other businesses that exported to China warned about retaliatory tariffs from Beijing.
The U.S. Dollar Is Riding High. Trump Could Put an End to All That.
Jerome Powell spoke and the dollar jumped.
That was one of the surprising consequences of the Federal Reserve chair's Dec. 18 news conference. Powell and his colleagues had opted to lower interest rates by a quarter point. In general, lowering a country's interest rate might be expected to weaken the attraction of its currency, since investors could potentially earn a better return elsewhere. But the dollar isn't like other currencies.
At Least 15 Killed in New Orleans in What FBI Calls Terrorist Attack
NEW ORLEANS-A man in a pickup flying an Islamic State flag plowed into a large crowd in New Orleans's French Quarter early New Year's Day, killing at least 15 people and injuring more than 30 in what authorities called a terrorist attack.
Two police officers also were injured in a shootout with the suspect, an Army veteran, who was killed in the firefight.
One Dead After Cybertruck Explodes Outside Trump Hotel in Las Vegas
A Tesla Cybertruck loaded with canisters of gas and firework mortars exploded in front of Trump International Hotel in Las Vegas Wednesday, killing one person and injuring seven others, authorities said.
Police said they believe the explosion to be an isolated incident, but they haven't ruled out a connection to the attack hours earlier in New Orleans, where a man in a pickup truck with an Islamic State flag plowed into a crowd, killing 15 and injuring at least 30 people.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
01-02-25 0511ET