Stock Markets Begin 2025 with Losses Amid Trade Policy Concerns

The year 2025 has started on a downturn for major stock markets in Europe and Asia. Investors are feeling cautious as they await the announcement of planned tariffs by US President-elect Donald Trump. This uncertainty is compounded by ongoing economic difficulties in China.

In currency trading, the US dollar showed an increase against the euro and the British pound but faced a decline when compared to the Japanese yen. Meanwhile, oil prices surged, as many are hopeful for a rebound in demand.

"January can be a challenging month for the markets, and this year is no exception as investors worry about the implications of Trump's trade policies," remarked Russ Mould, investment director at AJ Bell. He also noted that technology and industrial stocks have suffered the most, impacted by disappointing manufacturing data coming from China, alongside the impending return of Trump to power.

"It's widely anticipated that tariffs will be a top priority for the new president, and China is likely to bear the brunt of these changes," Mould added.

The Hong Kong and Shanghai stock exchanges experienced a sharp decline, closing down by over two percent. In Europe, markets like Paris, Madrid, and Milan saw losses near the one percent mark as they reached the halfway point of the trading day.

With respect to currency values, the euro sank to its lowest position against the dollar since November 2022. On the monetary policy front, while the US Federal Reserve may implement fewer interest rate cuts than expected this year, the European Central Bank is anticipated to continue its reductions due to struggles within Germany, the largest economy in Europe.

Optimism concerning the robust performance of the US economy remains strong as we progress through 2025, according to Susannah Streeter, head of money and markets at Hargreaves Lansdown. "Economic growth has consistently surpassed expectations, with consumers and businesses largely unfazed by high interest rates," she stated.

Despite experiencing a successful 2024 overall, mainly driven by falling inflation and a surge in technology stocks, market sentiment took a downturn towards the year's end. Nevertheless, the Dow Jones index in the US finished the last year up by approximately 13 percent, with the S&P 500 and Nasdaq—both heavily weighted with technology stocks—climbing more than 23 percent and 29 percent respectively, thanks to the artificial intelligence boom.

European markets had mixed results, with Frankfurt's DAX seeing a near 20 percent increase and Japan's Nikkei following suit. In contrast, the FTSE 100 in London saw a modest rise of nearly six percent, while France's CAC 40 experienced a drop of 2.2 percent.

Market Performance Overview

As the markets opened for the new year:

• London - FTSE 100: FLAT at 8,172.25 points
• Paris - CAC 40: DOWN 1.2 percent at 7,294.11
• Frankfurt - DAX: DOWN 0.3 percent at 19,854.45
• Tokyo - Nikkei 225: closed
• Hong Kong - Hang Seng Index: DOWN 2.2 percent at 19,623.32 (close)
• Shanghai - Composite: DOWN 2.7 percent at 3,262.56 (close)

In currency exchange rates:

• Euro/dollar: DOWN at $1.0324 from $1.0360 on Tuesday
• Pound/dollar: DOWN at $1.2451 from $1.2520
• Dollar/yen: DOWN at 157.09 yen from 157.32 yen

Oil prices showed a positive trend:

• Brent North Sea Crude: UP 1.4 percent at $75.66 per barrel
• West Texas Intermediate: UP 1.4 percent at $72.73 per barrel

Stock, Market, Losses