Thursday's Markets Update (January 2, 2025)

03 Jan 2025 by rate3

On Thursday, equities declined, with the Dow experiencing its 4th consecutive red day as manufacturing activity continued to decrease. Meanwhile, mortgage rates reached yearly highs due to the Fed's renewed hawkishness, and jobless claims fell again, undermining the prospects for a change in Powell's stance anytime soon. Tesla and Apple shares are underwater, while Nvidia and Meta Platforms gained ground. The Euro slid to a 2-year low due to the rise of the dollar and declining manufacturing activity, particularly in Germany and in France, where the downturn has been the most severe since 2020. This situation was compounded by a rise in natural gas prices to yearly highs after gas flows via Ukraine stopped on New Year's Day. Manufacturing activity also slowed in China. Both BTC and ETH jumped by about 3% due to traders' unfulfilled expectations, as stock markets opened in the green.

Details

The Manufacturing PMI fell to 49.4 in December, extending the contraction in factory activity. New orders declined, leading to lower output. Employment increased, but purchasing activity slowed. Input costs rose, leading to higher output prices. 1Y trend: "Down" (PMI)
The average 30-year fixed-rate mortgage rate increased to 6.97% in the week ended December 27, reaching its highest level since early July and erasing all easing reached over the past year. This rise reflects the upward trend in long-term Treasury yields, driven by the Fed's hawkish stance. 1Y trend: "Side" (MBA)
Initial jobless claims unexpectedly fell to 211K in the 52nd week of 2024, the lowest level in eight months. This suggests a continued tight labor market, supporting the Fed's stance on maintaining higher interest rates. 1Y trend: "Up" (DOL)

Crypto

Polymarket predicts an 85% chance of SEC approval for a Solana ETF in 2025, a significant increase from September. Approval is likely before August. Grayscale's Solana ETF faces a key decision on January 23rd. (source)

World Markets

The HCOB Eurozone Manufacturing PMI edged lower to 45.1 in December, extending the contractionary streak. New orders declined sharply, leading to lower output and workforce reductions. Input costs fell, while business confidence remained muted. 1Y trend: "Side" (SP)
China's Caixin Manufacturing PMI edged down to 50.5 in December 2024. Output and new orders expanded at a slower pace, while foreign orders shrank. Employment declined, and input costs rose while selling prices fell. Business confidence weakened amid concerns about growth and trade. 1Y trend: "Down" (PMI)

Currencies

The British pound fell to an eight-month low, pressured by weak UK economic growth, a dovish BoE stance, and a stronger US dollar. Concerns about potential trade disruptions under the new US administration also weighed on the currency. 1Y trend: "Side"

Commodities

WTI crude oil futures climbed to $73.5 per barrel, reaching a 3-month high. Optimism about Chinese economic recovery on Xi's New Year optimistic promises to revive the economy and a decline in crude oil inventories supported the price increase. 1Y trend: "Side"
European natural gas futures surged to a 14-month high, driven by concerns over gas supply disruptions following the end of Russian gas transit via Ukraine. Cold weather across Europe is expected to increase demand, while concerns remain about refilling storage levels next year. 1Y trend: "Up"