Key Economic Indicators for the First Week of 2025

Overview

LONDON (Reuters) – The first full trading week of 2025 brings key U.S. jobs data as well as Chinese and euro zone inflation numbers. These are set against concerns over the U.S. interest rate outlook and potential policy surprises under U.S. President-elect Donald Trump, with the euro and Chinese yuan already starting the new year on a weak note.

1. JOB DONE

Markets are largely accepting that inflation will rise under Trump, given his promises regarding tariffs, taxes, and immigration. Traders do not expect two Federal Reserve rate cuts in 2025, but stock prices are still near record highs. However, they may struggle with signs of slowing growth. The January 10 non-farm payroll report is projected to show an increase of 150,000 jobs, which would bring 2024’s total job creation to 2.134 million—the lowest annual total since 2019, apart from the COVID-driven loss in 2020.

2. MORE CHINA GLOOM

China is starting 2025 under considerable strain due to Trump’s threat of tariffs surpassing 60% on imports of Chinese goods. Its stock market has recorded the weakest start to the year since 2016. Economists anticipate tariffs of nearly 40% this time, which could reduce China’s growth by up to 1 percentage point. China is expected to release December trade and inflation figures, providing insights into the economy’s performance by the end of 2024.

3. INFLATION TEST

Investor expectations for the European Central Bank (ECB) to ease policy are facing scrutiny with the release of December’s flash euro zone inflation data. Any indications of slowing inflation might encourage the ECB to loosen policy. However, energy prices remain a concern, particularly with natural gas prices at 14-month highs, which could hinder economic recovery.

4. LAGGARD AGAIN

European equity markets lagged behind global peers in 2024, but some analysts are optimistic about potential relief in 2025. Despite risks, the STOXX 600 index is trading at a significant discount compared to the U.S. S&P 500, creating opportunities for investors who anticipate a rally in European stocks as the economic landscape improves.

5. WHICH WAY NEXT?

The S&P 500 grew over 20% in 2024, but mixed signals as the year ended have raised concerns. Investor sentiment is hurt by anxiety that the Fed might pause rate cuts if inflation remains high. Also critical will be reactions to Trump’s policies and U.S. Treasury yields, which jumped 40 basis points in December, potentially signaling further declines in stock prices.