US 

Stocks Wrap Up the Week Mixed, Ending Another Strong Year 

Major U.S. stock indexes delivered mixed results in the holiday-shortened week, but broad gains on Friday helped lift indexes from their weekly lows. Early-week underperformance stemmed partly from year-end profit-taking, with Tuesday marking the S&P 500 Index's fourth consecutive day of declines. 

Despite a year-end slump in U.S. equities, where roughly 70% of December trading sessions saw more decliners than advancers, 2024 closed with significant gains. The S&P 500 Index posted a second consecutive annual increase of over 20%, making this the best two-year stretch in 25 years. Similarly, the Nasdaq Composite ended the year with a gain exceeding 20% for the sixth time in the last eight years. 

Economic Updates: Chicago PMI Falls; GDP Forecast Revised Downward 

While the week was light on economic data due to the New Year’s holiday, the Chicago Purchasing Managers’ Index (PMI) grabbed attention on Monday. The PMI, which gauges manufacturing activity in the Chicago region, dropped to 36.9 in December, below the expected 42.9 and down from November’s 40.2. This marked the 13th consecutive month of contraction and the steepest monthly decline since May (readings below 50 indicate contraction). 

Stocks fell on Thursday, the year’s first trading day, partly due to the Atlanta Federal Reserve lowering its Q4 GDP growth forecast from 3.1% to 2.6%. This adjustment reflected weaker expectations for real gross private domestic investment growth, revised from 1.3% to -0.7%, based on recent U.S. Census Bureau data. Tesla's Q4 delivery numbers, which missed expectations, and a decline in Apple shares (-2.62%) due to falling iPhone shipments to China, further weighed on sentiment. 

However, some positive news emerged from the labor market. Initial jobless claims fell to 211,000 for the week ending December 28, down from 220,000 the previous week and marking an eight-month low. Continuing claims also dropped to a three-month low of 1.84 million. 

Treasury Yields Decline, Bond Markets Strengthen 

U.S. Treasury yields fell across most maturities heading into Friday, pushing bond prices higher. The municipal bond market started the new year on a strong note, supported by reinvestment cash inflows and Treasury market stability. Traders noted that the municipal bond issuance calendar is expected to remain light in the coming weeks, further supporting secondary market activity. 

Investment-grade corporate bonds delivered positive returns, with approximately USD 15 billion in new issuance spread across 10 issuers. The high-yield bond market also advanced modestly amid low trading volumes, despite broader equity weakness. 

Index	Friday's Close	Week's Change	% Change YTD
DJIA	42,732.13	-260.08	0.44%
S&P 500	5,942.47	-28.37	1.03%
Nasdaq Composite	19,621.68	-100.35	1.61%
S&P MidCap 400	3,152.14	13.53	1.00%
Russell 2000	2,268.47	23.88	1.72%

UK  

Housing Market Continues to Climb 

The UK housing market showed robust growth in December, according to data from the Nationwide Building Society. The organisation’s house price index recorded a 0.7% increase from November, significantly outperforming the forecasted rise of 0.1%. On an annual basis, the house price index rose by 4.7%, marking the highest year-over-year increase since 2022. 

In related data, the Bank of England reported a slight decline in net mortgage approvals for house purchases in November, with approvals reaching 65,700—falling short of the expected 68,500. However, this figure remains above the 12-month average of 60,400, reflecting continued resilience in the housing market despite the dip. 

Europe 

In local currency terms, the pan-European STOXX Europe 600 Index edged up 0.20% during a week marked by low trading volumes and minimal news flow. However, major stock indexes mostly declined. Germany’s DAX fell 0.39%, France’s CAC 40 dropped 0.99%, and Italy’s FTSE MIB slipped slightly. In contrast, the UK’s FTSE 100 Index rose 0.91%, supported by a weaker British pound against the U.S. dollar, which benefited the index’s multinational companies with significant overseas revenues. 

Inflation Surprises to the Upside in Spain 

The macroeconomic data calendar was relatively light as the new year began. Spain’s preliminary estimate for December consumer price inflation exceeded expectations. Nonseasonally adjusted annual inflation rose to 2.8%, up from 2.4% in November, driven by higher fuel costs. Core inflation, excluding volatile energy and food prices, also accelerated to 2.6%, surpassing the forecast of 2.4%. 

ECB Hawks Push for Caution on Rate Cuts 

Spain’s stronger-than-expected inflation data bolstered arguments from hawkish European Central Bank (ECB) policymakers for a cautious approach to reducing interest rates. Governing Council member Robert Holzmann suggested in an interview with Austria’s Kurier newspaper that the ECB might delay further rate cuts due to rising energy prices and the potential devaluation of the euro if new U.S. trade tariffs are introduced. Meanwhile, ECB President Christine Lagarde reiterated in a video statement that inflation remains on track to meet the 2% target by 2025, indicating that the overall direction for rates remains downward. 

Japan 

Japanese stocks ended lower in a holiday-shortened week, with the Nikkei 225 up nearly 20% for the year, driven by corporate reforms and a weaker yen, while bond yields hovered near multi-year highs amid BoJ rate speculation. Factory activity contracted for the sixth month, though at a slower pace, with rising costs and stabilizing new orders. 

China

Chinese stocks fell sharply as weaker-than-expected manufacturing data dampened sentiment, though PMI figures pointed to modest economic recovery. Property sales stabilized in December, suggesting a potential turnaround after government rescue measures. 

Turkey

Türkiye’s central bank cut rates for the first time since February 2023, while parliament approved a 30% minimum wage hike for 2025, reflecting cautious economic policies and potential inflation easing. 

Mexico 

Mexico’s central bank cut rates to 10.00%, balancing optimism over moderating inflation risks with extended inflation target timelines to Q3 2026.