Market update: 21 January 2025
This week, global markets were buoyed by softer-than-expected U.S. inflation data and strong economic indicators from China, boosting optimism about rate cuts in 2025. The ASX 200 posted modest gains, while Wall Street and European equities rallied significantly.
In Australia, the ASX 200 advanced 0.2%, supported by strong performances in Energy (+3.2%) and Materials (+2.6%). China’s better-than-expected Q4 GDP growth of 5.4% YoY, coupled with rising oil prices, provided a boost to these sectors. Oil surged to a five-month high near US$81 a barrel after U.S. sanctions on Russia’s energy industry sparked supply concerns. Mid-week, a softer U.S. CPI print lifted Australian markets by 1.4%, increasing U.S. rate cut expectations, but profit-taking in the banking sector on Friday weighed on gains.
In the U.S., all major indices finished higher, with the Dow Jones, S&P 500, and Nasdaq gaining 3.7%, 2.9%, and 2.4%, respectively. December’s CPI print showed core inflation rising 3.2% YoY, below expectations, reducing fears of re-acceleration and boosting hopes for rate cuts. Treasury yields fell, while consumer inflation expectations hit their highest levels since 2008 on concerns over trade tariffs. European markets also rallied, with the Euro Stoxx 50 up 3.4%. UK inflation unexpectedly slowed to 2.5%, clearing the way for a likely Bank of England rate cut in February, and bond yields declined in response.
In Asia, China’s Q4 GDP growth came in above expectations at 5.4% YoY, with retail sales and industrial production also exceeding forecasts. This bolstered the Hang Seng and Shanghai Composite, which rose 2.7% and 2.3%, respectively, although real estate challenges persist. Japan’s Nikkei fell 1.9% as speculation of a Bank of Japan rate hike grew after wholesale prices rose 3.8% YoY, while declining retailer profits added to concerns about cost-of-living pressures.
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