The FTSE 100 rose in the first trading days of 2025, in contrast to sharp falls in US indices as December’s sell-off continued with all major Wall Street benchmarks – the S&P 500, the DJIA and the Nasdaq Composite – registering further losses. US equities were weak at the end of last year following messaging from the Federal Reserve that the pace of interest-rate cuts in 2025 will be slower than the central bank had previously expected.
The FTSE 100 was up 1.4% over the week by mid-session on Friday, with the more UK-focused FTSE 250 trading flat over the week.
2025 Outlook
What lies in store for markets in 2025? The political and policy upheaval we can expect out of the US, the stimulus program out of China, economic stagnation in Europe, and the budget tightrope walk in the UK. How will these factors impact underlying demand for company sales, margin pressure, inflation pressure, central bank action, long-term bond yields and, ultimately, market outcomes?
Read our 2025 Outlook here.
Garry White and Chief Investment Officer, Patrick Farrell sit down to discuss the investment themes that we expect to effect markets next year. Watch webcast here.
When will UK interest rates fall further in 2025?
Three investment mistakes to avoid in 2025.
Economics
The number of Americans filing new applications for unemployment benefits dropped to an eight-month low last week, with low levels of layoffs at the end of 2024. The report from the Labor Department was another piece of upbeat data on the US economy that is supportive of the Federal Reserve’s messaging in December that the pace of interest-rate cuts in 2025 will be slow and rates will be higher for longer. Following the news, the US dollar hit a two-year high against the euro and an eight-month high against sterling, which was the best-performing G10 currency against the dollar last year.
Activity in the UK manufacturing sector contracted more than previously believed in December, according to revised estimates from S&P Global. An acceleration of the fall in output, new orders and employment caused the manufacturing purchasing managers' index (PMI) for December to fall 47.0 from 48.0 in November – below the initial estimate of 47.3 released two weeks ago. Any reading below 50 indicates a contraction.
UK house prices moved closer to record highs in December, according to Nationwide. However, the lender said the market is likely to see increased volatility over the next few months ahead of the introduction of new changes to stamp duty. UK house prices rose 0.7% over the month of December to £269,426, up 4.7% on last year, to sit just below an all-time high (£273,751) recorded in summer 2022.
Growth in China’s factory sector slowed in December as export demand waned.
A dull December marked the end of yet another “disappointing” year for UK retail footfall, with data showing that 2024 was the second year in a row to see a decline. According to the British Retail Consortium, UK footfall fell by 2.5% year-on-year during the three months to December. The slide in the Euro-area’s manufacturing sector was worse than originally estimated in December, according to revised estimates from S&P Global and the Hamburg Commercial Bank (HCOB). The final reading of the single-currency area’s manufacturing purchasing managers' index (PMI) came in at 45.1, down from the initial estimate of 45.2 released two weeks ago which was unchanged from November.
Growth in China’s factory sector slowed in December as export demand waned, according to the private-sector survey compiler Caixin. It reported a decline in its manufacturing sector PMI from a reading of 51.5 in November to 50.5 for December. This was below a consensus view of 51.7.
Geopolitics
Russian gas has stopped flowing to Europe via Ukraine, which cut off the transit route after an agreement signed in 2019 expired in the early hours of New Year’s Day. The move resulted in power cuts for hundreds of thousands of people in Transnistria, a breakaway region of Moldova. Russia’s Gazprom said in a statement that it had stopped sending gas via Ukraine as of 8am Moscow time on Wednesday. Ukraine’s energy minister, German Galushchenko, called the move “historic”, while the president, Volodymyr Zelenskyy, described it in a post on social media as “one of Moscow’s biggest defeats”.
Companies
Vodafone Group finalised the sale of Vodafone Italy to Swisscom for €8bn in cash. The proceeds will be mostly used to reduce net debt – but the board said it planned to return up to €2bn to shareholders once the current share buyback programme concluded.
Tesla reported fourth quarter vehicle delivery numbers that disappointed Wall Street. Global annual sales fell for the first time in at least nine years, with a 2.3% increase in the final quarter not enough to overcome a sluggish start to 2024. Tesla delivered 1.79 million electric vehicles (EVs) over the year, but that was 1.1% below 2023 sales of 1.81 million. However, Chinese manufacturer BYD sold 1.76m battery electric cars in 2024, so Tesla maintained the top spot by volume in the EV market.
Budget airline Wizz Air reported a 1.9% increase in passenger numbers for December on an annual basis, but capacity declined as it continued to ground aircraft due to problems with Pratt & Whitney engines. It added that early indications for the fourth quarter to March 2025 remained positive, with bookings currently running ahead by more than 2 percentage points against this time last year.
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