Economy

The S&P 500, Dow and Nasdaq are near record highs and are on track to end higher for a second straight year.A nearly 100-basis point cut in interest rates in 2024 by the Federal Reserve and a rally in technology stocks in anticipation of boost to corporate profits from artificial intelligence powered a strong surge in equities in 2024. The S&P 500 tech, communications services and consumer discretionary have jumped more than 30% this year.Although AI poster-child Nvidia (NASDAQ:NVDA)’s nearly 170% surge this year was smaller compared with last year, the rally helped the company notch $3 trillion in market value, while Tesla (NASDAQ:TSLA) reclaimed $1 trillion level. At 05:45 a.m. ET, Dow E-minis were up 90 points, or 0.21%, S&P 500 E-minis were up 17 points, or 0.29% and Nasdaq 100 E-minis were up 75.25 points, or 0.36%.Nvidia was up 0.7%, while the Elon Musk-led automaker added 1.6% in premarket trading. Moves are expected to be influenced by thin volumes ahead of New Year’s holiday on Wednesday.”It’s also normal to start thinking that the AI rally will one day fizzle out…but still, all those who called for a correction have so far happened to be wrong, and Wall Street analysts spent the year rising their price targets,” said Ipek Ozkardeskaya, senior analyst, Swissquote Bank. Toward the end of the year, risk-taking improved as Donald Trump’s presidential win boosted bets that he would deliver on his promises to ease regulations, cut taxes and raise tariffs to help domestic businesses. His win also powered small-cap stocks. The Russell 2000 clinched a record high, setting it up for a rise of about 10% – its second consecutive annual gain. Banks also have benefited and are up more than 30% this year.However, equities hit a rough patch in December, putting the S&P 500 on course for its biggest monthly decline since April, due to higher yields on Treasury notes at a time when equity valuations are stretched and the Fed is cautious.The yield on the benchmark 10-year note has come off its seven-month high and is at 4.5%, as markets see Trump’s plans as inflationary, potentially slowing the pace of the Fed’s rate cuts. Traders expect the central bank to deliver its first rate cut of 2025 in either March or May, according to the CME Group’s (NASDAQ:CME) FedWatch Tool.Trump’s win has also proved to be a tailwind for crypto stocks as bitcoin prices touched $100,000. MicroStrategy shares have more than tripled in value this year as it continues buying and holding bitcoin. The stock rose 3.3% on Tuesday, while Coinbase (NASDAQ:COIN) and MARA Holdings added 1% and 0.6%, respectively.Other areas of the market, however, have witnessed annual declines, with materials stocks down more than 2%, hurt by the economic woes in top metals consumer China. More

SINGAPORE/LONDON (Reuters) – World stocks held steady on Tuesday in cautious year-end trading that has seen investors bracing for the incoming Donald Trump administration by scaling back bets on deep U.S. interest rate cuts in 2025, helping the dollar stand tall against most other currencies.Volumes were light with a holiday for the New Year looming, with the Santa-rally largely failing to materialise as elevated Treasury yields weigh on high equity valuations and boost the greenback.MSCI’s world share index was flat on the day, but set to wrap up 2024 with a 16% annual gain.This year’s rally has been largely a U.S. phenomenon, with the S&P 500 having risen around 24% compared with an 8% gain for MSCI’s broadest index of Asia-Pacific shares outside Japan, and just 5% for Europe’s STOXX 600. (EU) But the mood latterly has been more cautious on the back of higher U.S. Treasury yields. The yield on the 10-year note reached 4.64% late last week, its highest since May. This marks something of a change as until late December, the U.S. benchmark yield had spent all of the second half of 2024 below 4.5%.This upward pressure, said Lee Hardman, senior currency analyst at MUFG, “reflects investor unease over the potential inflationary impact from the incoming Trump administration’s policy agenda.” Investors anticipate President-elect Trump’s policies around looser regulation, tax cuts, tariff hikes and tighter immigration to be both pro-growth and inflationary, which in theory would keep U.S. yields high. “The Fed has already displayed more caution over cutting rates further next year in light of potential policy changes,” said Hardman. But in a sign of end-of-year positioning, the 10-year yield dipped three basis points on Tuesday, after a seven-bp drop on Monday, to trade at 4.52%. [US/]Similarly all three major U.S. indexes closed on Monday with sharp losses mainly due to end-of-year tax positioning, valuations worries and uncertainties about 2025. [.N]CHINA The only economic indicators of note from Tuesday came from China, where data showed manufacturing activity barely grew in December, although services and construction recovered, suggesting policy stimulus is trickling into some sectors, as the economy braces for new trade risks.The National Bureau of Statistics purchasing managers’ index slowed to 50.1 in December from 50.3 a month prior, barely holding above the 50-mark denoting growth and missing a median forecast of 50.3 in a Reuters poll.Onshore Chinese blue chips shed 1.6%, while Hong Kong just held in positive territory. For all of 2024 the CSI 300 rose 14%, its first annual gain following an unprecedented three-year decline. The Hang Seng Index gained 18% after four years of declines. South Korea’s KOSPI was the worst-performing stock market in Asia this year with a decline of 10% as political turmoil took its toll on investor sentiment.Politics accounted for some underperformance in Europe too, and France’s main index fell 2.8% in 2024, as lawmakers continue to haggle over the 2025 budget after an inconclusive election and the collapse of one cabinet under Michel Barnier. In contrast, large jumps by a handful of Frankfurt-listed names, such as software firm SAP means the German benchmark is up over 18% on the year, despite a political vacuum there ahead of February’s election. In currency markets, 2024 has all been about the dollar, which gained against all other major developed-market currencies, as higher U.S. yields, and outperforming stock markets, drove inflows to the U.S. The dollar index which measures the U.S. currency against six others, dipped 0.16% on Tuesday, but held close to the two year high touched in November. The index is on course to rise 6.5% this year. In commodities, oil prices were poised for a second straight year of decline on demand concerns in top consuming countries. For the year, Brent crude futures declined 3.4%, while U.S. West Texas Intermediate crude was down 1%. [O/R]Both eked out small gains on Tuesday. But gold had a banner year, surging over 26% in the year, its strongest annual performance in over a decade on safe-haven demand amid geopolitical tensions around the world as well as monetary policy easing. [GOL/] (This story has been refiled to correct the year to 2024 in paragraph 3) More

This article is an on-site version of our FirstFT newsletter. Subscribers can sign up to our Asia, Europe/Africa or Americas edition to get the newsletter delivered every weekday morning. Explore all of our newsletters hereGood morning and welcome to the final FirstFT Americas of 2024. Today’s highlights include:A record exodus from active equity fundsTrinidad and Tobago declares a state of emergency FT writers make their 2025 predictionsAnd who killed the rave?The shift away from actively managed stock funds into cheaper index-tracking investments accelerated this year.Outflows from stockpicking mutual funds rose to a record $450bn in 2024, eclipsing last year’s previous high of $413bn, according to data from EPFR.Traditional mutual funds have struggled to justify their relatively high fees in recent years, with their performance lagging behind the gains for Wall Street indices, which have been powered by big technology stocks. Active managers typically invest less in such companies than their benchmark indices. The trend has accelerated in recent years as older investors, who typically favour these products, cash out and retire while younger investors choose to put their savings in index-tracking ETFs. Read more on the trend that is reshaping the fund management industry.And here’s what else we’re keeping tabs on today: New year celebrations: From Sydney and London to New York, public events will mark the start of 2025. Edinburgh’s famous Hogmanay celebrations, however, have been cancelled due to concerns over “extreme weather”. FirstFT Americas is taking a break tomorrow and will return on Thursday.Five more top stories1. A Chinese state-sponsored actor hacked the US Treasury department through a third-party service provider in a “major cyber security incident”, the agency said yesterday. The department has been working with the FBI to determine the impact of the hack, it said in a letter to a Senate committee seen by the FT.2. The government of Trinidad and Tobago has declared a state of emergency over an unprecedented crimewave as violence surges across the Caribbean, partly fuelled by weapons from the US. The country, with a population of 1.5mn, has experienced its highest number of murders on record this year. 3. BlackRock is heading for a showdown with US banking regulators. The Federal Deposit Insurance Corporation has given the $11.5tn investment giant until January 10 to accept proposed new compliance measures whenever it owns more than 10 per cent of the outstanding shares in FDIC-supervised banks, people familiar with the situation said. Brooke Masters in New York has more details.4. A possible global trade war and regional political paralysis are the two biggest threats facing the Eurozone economy in 2025, according to a Financial Times poll of 72 economists. The region, which holds a large trade surplus with the US, is seen as acutely exposed to not only higher US tariffs but also the threat of China dumping cheap products on global markets.5. Donald Trump threw his support behind Mike Johnson for Speaker of the House, giving the embattled lawmaker a crucial endorsement amid Republican infighting ahead of a vote on who will lead the lower chamber of Congress on Friday. Johnson said he was “honoured and humbled” by the president-elect’s support. Here’s more on a pivotal moment for Johnson. We are planning to publish a special edition of FirstFT Americas ahead of the inauguration on January 20. Please submit your questions to firstft@ft.com, giving your name and location, and we will put them to our experts to answer. Forecasting 2025© FT montage/James FergusonFT writers have penned their best guesses for the new year, from the likelihood of peace in Ukraine, to whether the friendship between Donald Trump and Elon Musk will endure, and the chances of a CD revival. Read our forecasts and submit your own.We’re also reading . . . Map of the daySome content could not load. Check your internet connection or browser settings.Climate change is redrawing Europe’s wine map. Extreme weather is pushing viticulture into colder northern territories while forcing traditional winemaking regions such as Bordeaux and Rioja to grapple with hotter weather. Susannah Savage reports from Denmark where wine production has tripled in the past decade. The story you commented on most in 2024Readers had a lot of thoughts about the June news that wealthy foreigners were stepping up plans to leave the UK as taxes increased, with more than 2,500 leaving comments. Here’s a selection: If your only motivation for being in Britain is you want to pay less tax and a when a democratically elected government asks you to do pay slightly more you have a tantrum and leave then good riddance. Enjoy being a citizen of nowhere. — Reader Tony, Islington It is rich people that pay the vast majority of taxes. If they leave the country and pay nothing, everyone else either has to pay more or face big cuts in government spending. Policies driven by petty jealousies and envy end up costing those who are envious the most. — Reader Androcydes“I’ve worked my backside off for 25 years, having worked my butt off all through school. I’ve saved enough to retire age 49. You can be jealous, but I went to state school, started with nowt and my grandad was a builder. I am now going to move to Portugal (Golden visa for €500k), and whilst there I will be avoiding all this nonsense and paying 10 per cent tax. Plus getting a tan. — Reader 8Thank you for reading and remember you can add FirstFT to myFT. You can also elect to receive a FirstFT push notification every morning on the app. Send your recommendations and feedback to firstft@ft.comRecommended newsletters for youOne Must-Read — Remarkable journalism you won’t want to miss. Sign up hereNewswrap — Our business and economics round-up. Sign up here More

At a New Year’s event on Tuesday, Xi described the economy as “overall stable and progressing amid stability,” according to remarks published by Xinhua News Agency. He noted that risks in critical areas had been effectively managed, while employment and inflation remained steady.Though the final GDP figure won’t be confirmed until next month, Xi’s comments reflect the conclusion of a year marked by economic uncertainty.Initially, the 5% growth goal was seen by some as a “target without a plan.” However, the economic outlook improved after policymakers introduced a series of stimulus measures starting in late September. Economists now anticipate growth of around 4.8% for the year.Xi indicated that economic support would extend into 2025, reiterating the need for proactive macroeconomic policies during his New Year’s Eve address to China’s top political advisory body.China is expected to target a growth rate similar to 2024’s next year, with leaders signaling a willingness to apply stronger stimulus measures if necessary. This could help offset potential challenges, such as the prospect of increased U.S. tariffs under President-elect Donald Trump’s administration.The official growth target for 2025 will be announced in March during the annual legislative sessions. Reuters previously reported that the goal is likely to remain around 5%, while economists surveyed by Bloomberg forecast growth of 4.5% for next year.In December, policymakers pledged to drive growth through higher public borrowing, increased government spending, and monetary easing. Officials highlighted the first adjustment in monetary policy in 14 years, shifting to a “moderately loose” stance to boost confidence.Despite these measures, weak domestic demand and uncertainties in exports continue to weigh on the economy. Deflation is expected to persist into 2025, and the property market remains sluggish.While Beijing’s initial round of stimulus in 2025 may fall short of the aggressive interventions analysts believe are necessary to curb deflation, further support could be introduced later if growth begins to slow, mirroring the approach taken this year.The People’s Bank of China (PBOC) could play a key role in the next phase of economic easing. The central bank has yet to implement a liquidity boost by lowering the cash reserves that banks are required to hold, although this move was previously suggested as a possibility by the end of 2024.PBOC Governor Pan Gongsheng indicated in October that the bank might reduce the reserve requirement ratio (RRR) by 25 to 50 basis points, depending on liquidity conditions. At a major economic meeting in December, top officials echoed this sentiment, promising to lower the RRR at an “appropriate time” without specifying further details. More

From Jan. 1, the China Foreign Exchange Trade System (CFETS), which is overseen by the central bank, will lower the U.S. dollar’s weighting in the CFETS currency basket to 18.903% from 19.46%, cut the euro’s weighting to 17.902% from 18.08%, and reduce the yen’s weighting to 8.584% from 8.963%, according to an online statement.It will add Macau’s pataca to the basket, bringing the total number of currencies in the CFETS basket to 25 next year. More

BEIJING (Reuters) – China’s capital Beijing passed new regulations on Tuesday to encourage autonomous driving technology in the city, with authorities planning to eventually allow driverless public buses and taxis.Autonomous vehicles that pass road testing and safety assessments will be allowed to apply for road trials, the state-backed Beijing Daily newspaper reported, which said the new regulations take effect from April 1.The city supports the use of autonomous vehicles for private cars, urban buses, trams and taxis, it said, adding that it wants to encourage the construction of intelligent road infrastructure to support such transport.In a separate notice published on Monday, the central Chinese city of Wuhan also said it had approved regulations to promote the development of intelligent connected vehicles.Chinese authorities have been aggressively greenlighting trials for self-driving technology with at least 19 cities conducting robotaxi and robobus tests, Reuters reported in August. Companies with large robotaxi fleets in use in China include Apollo Go, a subsidiary of technology giant Baidu (NASDAQ:BIDU), which plans to deploy 1,000 robotaxis in Wuhan by end-2024.Pony.ai, which floated in the U.S. market in November, plans to expand its robotaxi fleet nationwide to over 1,000 by 2026 from 250 this year.Other firms exploring robotaxi opportunities in the world’s largest auto market include WeRide, AutoX and SAIC Motor.U.S. EV giant Tesla (NASDAQ:TSLA) also aims to bring full self-driving (FSD) to China in the first quarter of 2025, pending regulatory approval, and has said it will start producing its own robotaxi in 2026. More

LONDON (Reuters) – Markets that began the year with investors expecting a global stock rally to fizzle, swift U.S. interest rate cuts to boost Treasuries and soften the dollar and emerging market currencies to strengthen have firmly defied that consensus.World stocks are set for a second consecutive annual gain of 16%, unfazed by wars in the Middle East and Ukraine, Germany’s economic contraction and government collapse, French budget chaos and China’s slowdown.That comes mostly thanks to a second year of huge gains for Wall Street stocks as artificial intelligence fever and robust economic growth sucked more global capital into U.S. assets and took the dollar up 6.6% against peers in 2024. U.S. exuberance rose after Donald Trump’s Nov. 5 election win, as traders focused on the President-elect’s plans for tax cuts and deregulation, with the surge in animal spirits propelling cryptocurrency bitcoin to a 122% annual gain. World markets enter 2025 increasingly exposed to U.S. trends – a risk factor that burst into life after the Federal Reserve roiled markets this month by pointing to fewer rate cuts in the year ahead. That came after weak U.S. jobs data and a surprise midyear Japanese rate hike that pressured dollar-denominated assets and sent a volatility wrecking ball swinging through global markets and sparked a short-lived rout in August.Debt investors, meanwhile, are growing anxious about Trump’s proposed trade tariffs refueling inflation and fear excessive White House borrowing that could roil the $28 trillion Treasury market and spark wider government bond disruption.”It’s going to be difficult, in the event of a (U.S.) pullback, to find anywhere to hide,” Barclays (LON:BARC) private bank chief market strategist Julien Lafargue said. WALL STREET JUGGERNAUTSWall Street’s S&P 500 share index is 24% higher this year after a similar jump last year, in its strongest two-year streak since 1998.Shares in artificial intelligence chipmaker Nvidia (NASDAQ:NVDA) rose 178% in 2024, Elon Musk’s carmaker Tesla (NASDAQ:TSLA) gained 68% while investors’ exposure to U.S. stocks hit record levels in December.The combined value of the so-called Magnificent Seven U.S. tech stocks accounts for around a fifth of MSCI’s world share index, according to Schroders (LON:SDR), raising market threat levels if their earnings or AI technology disappoint. EUROPE’S STRUGGLES The euro slid around 5.7% against the dollar this year while European stocks performed worse relative to their U.S. peers than they have in at least 25 years. After four European Central Bank rate cuts, the euro zone economy is declining more slowly and some forecasters are tipping Europe for a 2025 rebound. The chances of any international market rallying if the U.S. falters are usually slim. Gold gained 26% in 2024 as investors struggled to find other diversification trades. MIGHTY DOLLARU.S. tariff fears and dollar strength have hit emerging market currencies particularly hard, exacerbating losses for struggling nations.Currencies in Egypt and Nigeria fell around 70% against the dollar following devaluations, and Brazil’s real weakened more than 27% as worries about government debt and spending intensified.A sparse set of mild annual gains included a 2.8% rise for Malaysia’s ringgit. Among the top performers South Africa’s rand and the Hong Kong dollar rose 2% and 0.5%, respectively, while Israel’s shekel was set for a 1.5% decline for the year.”We continue to be cautious on emerging market currencies, and the main reason behind that is the Trump trade war,” said Arif Joshi, co-head of emerging market debt at Lazard (NYSE:LAZ) Asset Management.CHINA ROLLERCOASTERChinese stocks had a wild year, surging almost 16% in a single week in September after Beijing signaled its readiness to stimulate the weakening economy, with a number of deep weekly falls since. Investors who held on to China in 2024 were rewarded with an 16.5% annual gain but many expect the short-term boom and bust cycle to continue, disrupting markets in Europe and Asia, until Beijing takes direct action. BOND BULLS BRUISEDInterest rates fell across big economies this year but bond investors suffered annual losses after spending much of 2024 pricing in more monetary easing than central banks eventually delivered as inflation stayed stickier than expected.U.S. 10-year Treasury yields rose nearly 70 basis points in 2024, Britain’s 10-year gilt yield jumped 107 bps and 10-year German yields rose 33 bps.In Japan, where interest rates rose twice this year as inflation accelerated, the 10-year bond yield added 47 bps in its biggest yearly jump since 2003. Next (LON:NXT) year looks challenging for bond markets uncertain about how Trump’s policies will sway the U.S. Federal Reserve. French debt turmoil last month also signaled the so-called bond vigilantes stand ready to punish governments for excessive borrowing. SURPRISE WINNERS Bond investors’ 2024 wins came from some of the riskiest markets.Lebanon’s defaulted dollar bonds returned around 100% over the year as investors anticipated Middle East conflict weakening armed group Hezbollah.An ambitious reform programme and the prospect of Trump’s White House return powered a 100% return for dollar bonds issued by Argentina, whose leader Javier Milei has close ties with the U.S. president-elect. Boosted by bets that Trump could end Russia’s Ukraine invasion, Ukrainian bonds returned over 60%. More