Reuters – Samuel Indyk’s view of the coming day in US and global markets
2025 has begun as 2024 ended: stocks are wobbly and the dollar is still in charge as investors bet that the Fed’s rate cuts will be few and far between this year.
Thursday’s data backs up that view, with the number of Americans filing new claims for jobless benefits falling to an eight-month low last week.
A strong labor market should eradicate any near-term expectations for a rate cut by the Fed, with lower borrowing costs now driven by a weaker employment picture and softer inflation.
The chances of a reduction at the Fed meeting in January are around 11 percent.
With US rates expected to stay higher for longer, the dollar dominates.
The dollar index, although slightly weaker on Friday, remains near its highest level in more than two years, pushing the pound to multi-month lows and the euro inching closer to parity.
On Thursday, the single currency fell to a more than two-year low of $1.0225.
Europe remains unloved for now, with the threat of US import tariffs further weighing on sentiment.
The fourth quarter of 2024 marked the worst quarterly performance in more than two years for the pan-European STOXX 600.
And it is not only Europe that is showing signs of stress. And Wall Street is wavering.
The S&P 500 index failed to sustain gains on Thursday and fell for the fifth straight time, its longest losing streak since mid-April. The Nasdaq Composite also fell for the fifth day in a row.
Wall St futures were higher before the bell on Friday on hopes that a holiday-disrupted week will end in the positive ahead of next week’s big week, which includes December’s non-farm payrolls report and flash inflation data from the eurozone.
Key events that should give more direction to US markets later on Friday:
* ISM PMI for manufacturing
* EIA Change of natural gas storage
(Writing by Samuel Indyk; Editing by Christina Fincher)
