The FTSE treads water, as many global stocks fall. The TPP weekend wrap.

The FTSE treads water while stocks sink.

After a strong start to the week London stock markets closed in the red on Friday as sharp declines in airline, mining, and housebuilding stocks weighed on indices, with a lack of significant news and profit-taking following a recent rally dampening sentiment.

In economic news, the UK retail sector faced a challenging ‘Golden Quarter’, with footfall declining across bricks-and-mortar stores.

According to the British Retail Consortium, footfall dropped 2.2% in the five weeks between 24 November and 28 December, following a 4.5% slide in November. The shift of Black Friday into December helped buoy that month’s figures but dragged on November's performance.

Over the fourth quarter, total footfall fell 2.5% year-on-year, contributing to a 2.2% annual decline for 2024. High street and shopping centre visits were particularly weak in December, down 2.7% and 3.3%, respectively, while retail parks remained stable.

UK house prices rose strongly in December, according to the Nationwide Building Society. Its house price index climbed 0.7% in December from November, exceeding a forecast for a 0.1% increase. On a year-over-year basis, the house price index increased 4.7%. Separately, Bank of England data showed that net mortgage approvals for house purchases dipped to 65,700 in November, below expectations of 68,500 but still above the 12-month average of 60,400.

Europe

The pan-European STOXX Europe 600 Index ended 0.20% higher on thin trading volume and light news flow. Major stock indexes ended lower. Germany’s DAX eased 0.39%, France’s CAC 40 Index fell 0.99%, and Italy’s FTSE MIB was down modestly.

The year began with a light macroeconomic data calendar. Spain released its first estimate of consumer price inflation for December, which came in stronger than forecast. Non seasonally adjusted annual inflation accelerated to 2.8% from 2.4% in November on higher fuel prices. However, core inflation, which excludes energy and food prices, also quickened to 2.6%, exceeding the forecast for 2.4%.

The uptick in Spain’s inflation rate appeared to play into arguments from more hawkish policymakers in the European Central Bank for a cautious, gradual reduction in borrowing costs. Governing Council member Robert Holzmann told Austrian newspaper Kurier that rate setters could take more time before cutting interest rates again, citing rising energy prices and a possible devaluation of the euro if the US introduces trade tariffs. Still, ECB President Christine Lagarde reiterated in a video that inflation was on track to hit the 2% target in 2025, suggesting that rates remained on a downward path.

The US

Major stock indexes in the US were mixed during the holiday-shortened week, although broad gains on Friday helped indexes finish off their worst levels. Underperformance at the beginning of the week can be partially attributable to some profit-taking heading into the end of the year as Tuesday was the fourth consecutive day of declines for the S&P 500 Index.

It was a quiet week in terms of economic data releases around the New Year’s Day holiday, although the Chicago Purchasing Managers’ Index released on Monday did grab headlines. The index, which measures the economic health of the manufacturing sector in the Chicago region, came in at 36.9 in December, falling short of consensus expectations of 42.9 and declining from a reading of 40.2 in November. December marked the 13th consecutive month of contracting activity and the steepest month-over-month drop since May (readings below 50 are a sign of contraction, while readings above 50 indicate expansion).

Stocks also fell on Thursday, the first trading day of the new year, partially in response to the Atlanta Fed’s downward revision to its fourth-quarter gross domestic product forecast, from 3.1% to 2.6%. The revised forecast cited recent data releases from the U.S. Census Bureau that led to a reduction in expectations for real gross private domestic investment growth, from 1.3% to -0.7%. Several individual stock headlines also appeared to weigh on broader sentiment on Thursday, including Tesla’s report of fourth-quarter deliveries, which failed to meet consensus expectations. Also, declining iPhone shipments to China led to shares of Apple falling 2.62% for the day.

In more positive news, the Labor Department reported initial jobless claims of 211,000 for the week ended December 28. This was a decline from the prior week’s reading of 220,000 and was the lowest level in eight months. Continuing claims also fell for the prior week to a three-month low of 1.84 million.

Asia

Japan’s stock markets also ended lower on the week. The Nikkei 225 Index lost almost 1% on Monday, the last trading day of 2024, to end at 39,894.54, its highest year-end closing level ever. The benchmark posted an annual gain of nearly 20%, supported by share buybacks, corporate governance reforms, and a weaker yen that boosted exporters. The broader TOPIX Index declined 0.6%, reducing the annual increase to 17.6%.

The Japanese yen remained largely unchanged near JPY 157 on Friday in thin trading volumes, depreciating close to 11% over the year, with traders keeping a lookout for signs of Bank of Japan’s (BoJ’s) intervention to support the currency.

The yield on the 10-year Japanese government bond edged lower to 1.09% on Monday, remaining close to its highest level in 13 and a half years. Investors continued to assess the BoJ’s interest rate outlook following an acceleration of Tokyo’s consumer price inflation in December. Minutes of the central bank’s policy meeting last month revealed that policymakers had debated the possibility of a near-term rate hike.

Chinese stocks retreated as weaker-than-expected manufacturing data hurt investor sentiment. The Shanghai Composite Index declined 5.55%, while the blue chip CSI 300 fell 5.17%. Hong Kong’s benchmark Hang Seng Index gave up 1.64%, according to FactSet.

China’s factory activity expanded for the third consecutive month. The official manufacturing PMI slowed to 50.1 in December from 50.3 in November, according to the statistics bureau. Though December’s reading surpassed the 50-mark threshold separating growth from contraction, it missed economists’ forecasts. The nonmanufacturing PMI, which measures construction and services activity, rose to a better-than-expected 52.2 in December from November’s 50 reading.

The Week Ahead

Next week brings the first key US job market reading of the year, alongside UK retail sales and house market data, as normal service resumes after the Christmas break.

Retail sales figures for December from the British Retail Consortium will kick off proceedings on Tuesday, delving into the vital Christmas trading period.

As mentioned, figures so far have shown footfall across the industry declined over the month, with forecasts pointing to a further 2.4% drop in sales after November’s 3.4% fall. Sales are expected to be down around -0.2% year over year.

Halifax later in the day is expected to report a 0.8% increase in house prices for the month, following November’s 1.3% rise, as prospective buyers rush to avoid higher stamp duty from April.

Friday’s US non-farm payroll and unemployment figures for December then cap off the week, following dashed expectations for upcoming rate cuts by the Federal Reserve.

Expectations are for 150,000 jobs to have been added to the economy over the month, against November’s 227,000, as unemployment remains unchanged at 4.2%.

“This would all be consistent with the general cooling of the jobs market,” ING Economics analysts noted.

“But, after 100 basis points of Fed rate cuts in 2024, the widely held view is that we will see a much slower and less aggressive series of moves in 2025.”

European inflation and unemployment figures are also due over the week, alongside PMI data from the UK and US balance of trade numbers.

Shell, Tesco, Sainsbury's, M&S and Next will all report as next week brings a packed schedule following the quieter Christmas period.

Next's ambition to score its first-ever £1 billion profit will be the focus of its update on Tuesday after a typically tranquil Monday.

Shell's fourth-quarter update follows on Wednesday before a busy Thursday features M&S, B&M, Greggs and Tesco.

Sainsbury's figures on Friday then cap off a week set to paint a picture of how retailers fared over the key Christmas period.

Wall Street banks will be in focus the other side of the Atlantic when Bank of America, Wells Fargo and Blackrock update on Friday.

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Many of our strategies used the retracements in global stocks to enter certain markets at their lows, and rotate from other markets as they bounced back. It was a relatively volatile week with light volume, and across the board most strategies took advantage. Here's to many more weeks like that moving forward and here is to a brilliant and benchmark beating 2025.

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Next week it’s back to normal for the trading week and we’ll update you on Wednesday as to how it’s going. Until then, enjoy the rest of your weekend and Happy New Year.

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