Global Markets on Year End Volatility: Holidays, Headlines, and PMI Data to Shape 2025’s Opening Moves

Introduction

In the final stretch of 2024, a storm of market signals is colliding, setting the stage for a potentially turbulent start to the new year. Asian markets open to a negative lead from Wall Street’s Friday decline, where all three major U.S. indexes slumped and long-end Treasury yields crept higher. Meanwhile, subdued trading volumes, due in part to year-end holidays in markets like the Philippines and Thailand, could amplify price swings in an already jittery environment.

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Beyond the immediate market moves, a series of weekend events—from President-elect Donald Trump’s stance on H-1B visas to political upheaval in South Korea—underscore how quickly sentiment can shift. Looking ahead, the first week of 2025 brings a raft of economic data releases, especially in manufacturing and services PMIs across major economies, that will serve as early signals about the global growth trajectory. This blog unpacks these developments, shedding light on how currencies, bonds, equities, and commodities might react to fresh data and evolving geopolitical risks.

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Friday’s Sell-off Sets the Tone

Equities: Investors on Wall Street ended the week with a bout of profit-taking. The Dow and S&P 500 shed 0.77% and 1.105%, respectively, while the Nasdaq slumped by 1.49%. Despite earlier weekly gains, traders grew cautious as bond yields inched upward, suggesting a reevaluation of risk.

Treasury Yields: The standout move was in the long end of the yield curve, with the 10-year yield climbing 6 basis points to 4.631%. The 2-year yield remained at 4.330%, hinting that while near-term policy expectations remain anchored, longer-term inflation or growth concerns persist.

Dollar and Other FX: The U.S. dollar index dipped by about 0.1%, but this broad move masked diverging fortunes among individual currencies. The pound rallied on bargain-hunting, while the euro, yen, and Chinese yuan logged modest gains against the greenback.

Commodities: Oil prices rose, bolstered by data revealing a significant drawdown in U.S. crude inventories. Copper was little changed, caught between tight supplies and the drag of higher U.S. yields, and gold fell under the weight of rising real yields.

Weekend Headlines: Political and Tech Shifts

Trump Backs H-1B Program: Easing some fears in the tech sector, President-elect Trump reiterated support for foreign skilled workers, though details remain vague. This could have implications for tech equities in 2025, depending on how legislative measures unfold.

South Korean Impeachment and Tragedy: Political drama deepened after parliament impeached acting president Han, while President Yoon faces a separate trial. Adding to the turmoil, a catastrophic plane crash claimed at least 174 lives. While immediate market fallout may be contained, the situation bears monitoring for potential policy or investor confidence impacts.

Asian Holidays: Thin liquidity could amplify volatility, as the Philippines and Thailand observe year-end holidays. With lower participation, even small shifts in sentiment may generate outsized market reactions.

The Data That Will Drive Early 2025

Thursday, January 2

Eurozone HCOB Manufacturing PMI: Consensus expects the reading to remain at 45.2, underscoring persistent challenges in Europe’s industrial base. A further slip might drag the euro lower, especially if it widens the gap with the U.S. outlook.

UK S&P Global Manufacturing PMI: Projected to tick up slightly to 47.3, still below the 50 threshold for expansion. Traders will watch whether British manufacturing can stabilize despite Brexit hangovers and broader global headwinds.

U.S. Initial Jobless Claims: Forecast at 219K, hinting the labor market retains its strength. Any surprise here could swiftly move the dollar, influencing expectations for Federal Reserve policy in 2025.

Friday, January 3

U.S. ISM Manufacturing PMI: Projected at 48.4, remaining in contraction territory. A better-than-expected figure might reinforce the narrative of a resilient U.S. economy, potentially supporting both the greenback and equity markets. Conversely, a miss may stoke fears of a looming slowdown.

Monday, January 6

Eurozone HCOB Services PMI: Estimated to dip to 49.5, a concerning sign if Europe’s services sector also falters. A contraction here could amplify recession worries in the bloc.

UK S&P Global Services PMI: Forecast at 50.8, barely clinging to expansion. A downward surprise would undermine the pound, while a stronger reading could offset manufacturing gloom.

U.S. S&P Global Services PMI: Expected at 56.1, suggesting continued expansion. Markets will watch whether U.S. services can remain a bright spot, potentially fueling the dollar and lifting domestic equities.

Spillover Effects Across Markets

Equities: Divergent data between the U.S. and Europe/UK could widen performance gaps. A robust U.S. labor market and resilient services PMI might lift American stocks, while weak European PMIs could weigh on regional indices.

Fixed Income: Ongoing upward pressure on the U.S. long-end yields could persist if economic indicators remain solid. In contrast, Europe’s stagnating PMIs may keep yields lower in that region, spurring yield differentials that could further boost USD.

Forex: Should U.S. data exceed expectations, the dollar might extend gains against the euro and pound. However, any disappointing releases could see a flight to safety, benefiting the yen and Swiss franc. The British pound stands out as especially sensitive to PMI surprises and political developments.

Commodities: Oil’s recent gains might be challenged if fresh data or geopolitical events undermine confidence in global growth. Gold, often a hedge against instability, may remain under pressure if real yields continue to rise.

Key Risks and Opportunities

Policy Surprises: Investors should note any unexpected signals from central banks as they interpret incoming data. If the Federal Reserve shifts tone, or if the Bank of England hints at policy adjustments, markets could realign quickly.

Geopolitical Flashpoints: The complex situation in South Korea and potential global spillovers from U.S. political decisions on trade or immigration add layers of uncertainty.

Sector Divergence: Despite weak manufacturing data, the services sector in key economies—particularly the U.S.—may keep broader economic momentum intact, creating opportunities in consumer-facing stocks.

Conclusion

The backdrop of year-end profit-taking, rising yields, and lingering political uncertainties sets a cautious stage for the opening chapters of 2025. While many investors will be watching from the sidelines due to holiday closures in parts of Asia, significant market moves could still materialize as data trickles in. The spotlight remains on PMIs across Europe, the UK, and the United States, as these readings could confirm or challenge prevailing economic narratives. For those actively trading or investing, vigilance is paramount. Staying attuned to real-time data releases and monitoring geopolitical developments will be crucial to navigate the shifting tides of global sentiment. If the tailwinds of robust U.S. data persist, expect the dollar to remain sturdy. Conversely, surprises to the downside may embolden risk-averse positions, buoying safe-haven currencies and possibly gold, should yields stabilize. Either way, 2025 begins with a mix of cautious optimism and guarded uncertainty—an environment ripe for both potential pitfalls and opportunities.