Markets, Policies, and Growth Challenges

By Mora Makhlouf

???? Germany: Economic Contraction Deepens

Germany’s economy shrank by 0.2% in the fourth quarter of 2024, marking a bigger-than-expected decline. The ongoing manufacturing slowdown, political instability, and weakening business confidence continue to weigh on Europe’s largest economy, with analysts expecting minimal growth in 2025. Meanwhile, the 10-year bond yield dropped to 2.53%, and the euro fell 0.2% to $1.04.

???? France: Growth Stalls Amid Budget Woes

France saw a 0.1% contraction in GDP as consumer spending slowed and business investments stagnated. The lingering effects of the 2024 Paris Olympics have faded, while budget challenges have forced the government to rely on stopgap measures to avoid a shutdown. With a fiscal deficit reaching 6% of GDP, analysts remain skeptical about France’s near-term economic recovery.

???? Japan: Yen Strengthens as BOJ Signals More Rate Hikes

The yen gained 0.4% to 154.59 per dollar following hawkish remarks from Bank of Japan Deputy Governor Ryozo Himino. The central bank is expected to continue raising interest rates, despite real rates remaining negative. Traders are pricing in a 66% chance of another rate hike by July, further supporting the yen’s recovery.

???? United States: Fed Holds Rates Steady Amid Uncertainty

The Federal Reserve maintained interest rates at 4.25%-4.50%, with Chair Jerome Powell emphasizing a cautious stance. With inflation still above target and potential policy shifts from the Trump administration, the Fed signaled no urgency in cutting rates. U.S. stock markets responded positively, with the S&P 500 and Nasdaq futures rising.

???? Eurozone: ECB Expected to Cut Rates Again

The European Central Bank is set to lower interest rates to 2.75% in a bid to stimulate growth. However, concerns remain over lingering inflation, as Spain reported a higher-than-expected 2.9% increase in consumer prices. Analysts expect another rate cut in March, though future moves remain uncertain.

???? China: DeepSeek AI Raises Concerns in Silicon Valley

China’s AI development is facing scrutiny as DeepSeek, a low-cost AI chatbot, challenges U.S. tech dominance. Silicon Valley investors are concerned about the competitive threat, with experts noting China’s efficiency in optimizing AI models at lower costs. The implications for global AI investments remain a key focus in the tech industry.

?? Conclusion

Global markets are facing a period of uncertainty as economies navigate inflation concerns, interest rate adjustments, and political instability. While central banks are taking steps to stabilize growth, the outlook remains mixed, with varying levels of optimism and caution across major economies. Investors and businesses will need to adapt to these evolving economic conditions as 2025 unfolds.