Help
China manufacturing slows as global markets start 2025 on cautious note
China’s manufacturing expansion eased in December, setting a cautious tone for global markets as investors weigh geopolitical tensions, U.S. policy shifts, and China’s economic outlook for 2025.
China’s manufacturing PMI fell to 50.5 in December, signaling slower expansion.
U.S. crude inventories fell for a sixth week, boosting oil prices.
Gold prices rose amid market uncertainty and geopolitical tensions.
President Xi projected 5% GDP growth for China in 2024, with bond yields hitting record lows.
China’s manufacturing sector slowed its pace of expansion in December, reflecting a cooling economy as investors cautiously began the first trading day of the year. Risk-off sentiment dominated markets globally, fueled by simmering geopolitical tensions and the execution of new asset allocation strategies for 2025.
President Xi Jinping indicated that China’s economy grew by approximately 5% in 2024, aligning with forecasts. However, the nation’s sovereign bond yields hit record lows as the central bank announced increased liquidity support. Bank stocks traded lower as they adjusted for dividends, while Chinese equities led declines in Asia, driven by weaker economic data and concerns over potential U.S. tariffs.
The Caixin Manufacturing PMI unexpectedly dropped to 50.5 in December, reflecting softer expansion in the sector. In South Korea, economic concerns deepened as the government slashed its 2025 GDP growth forecast to 1.8%, down from 2.6% projected in July.
Asian equities broadly retreated, with MSCI’s index of regional shares hitting a near two-week low. Financial markets in Japan remained closed for the New Year holiday, contributing to subdued trading volumes across the region.
Commodities provided mixed signals: oil prices edged higher after the American Petroleum Institute reported a 1.4 million-barrel decline in U.S. crude inventories, marking a sixth consecutive weekly drop. Meanwhile, gold prices rose amid market uncertainty.
In geopolitical developments, U.S. President Joe Biden confirmed an investigation into a potential link between a Cybertruck explosion in Las Vegas and a recent attack in New Orleans. The Tesla vehicle, which exploded outside a Trump hotel, killed the driver.
In Europe, ECB President Christine Lagarde expressed confidence in meeting the 2% inflation target, describing 2025 as a pivotal year in the central bank’s “heavy agenda.”
In Russia, gas exports to Europe via Ukraine came to a halt after Ukraine refused to renew a transit agreement, according to the Russian-owned energy company Gazprom. As the last European countries that still bought Russian gas have arranged alternative supply or upheld buying via other pipelines, the halt will not affect energy prices in Europe.
Today, the focus turns to final PMI data for the euro area, the US, and the UK. Given the early flash release in December, the final figures could show larger-than-usual deviations, making this release particularly important to monitor.