Focus on Interest Rate Cuts and Positive Investor Outlook

In the week gone by, global markets exhibited a mixed bag of emotions to investors. While initial optimism reigned, fueled by the prospect of a shifting political landscape and anticipated interest rate cuts aimed at invigorating the US economy, a dose of caution soon set in. In this blog, we’ll know in detail what happened last week (December 30, 2024 to January 3, 2025) all across the globe.

US Positive Economic Outlook

The robust US labor market data, a testament to the economy’s underlying strength, tempered initial enthusiasm. Despite the lingering uncertainties – the pace of Federal Reserve interest rate cuts, the yet-to-be-unveiled policies of the incoming Trump administration, and the simmering geopolitical tensions across the globe – investors chose to focus on the positive trajectory of the US economy.

European Market Remained Weak

The European stock markets exhibited a weak movement, grappling with disappointing manufacturing data that signaled a sluggish start to the new year. This grim economic reality fueled expectations of further interest rate cuts from the European Central Bank (ECB) as it desperately sought to revitalize the struggling regional economies.

China Market Downswing

Chinese and Hong Kong markets experienced a sharp decline, mirroring the prevailing uncertainty surrounding US-China relations. The specter of a significantly strained bilateral relationship under Trump’s second term cast a long shadow over investor sentiment.

Adding to the woes, underwhelming Chinese factory activity data painted a bleak picture of the economic outlook, intensifying calls for more robust policy support. The Caixin/S&P Global manufacturing PMI for China, a key indicator of economic health, dipped to 50.5 in December, falling short of analyst expectations and further dampening market optimism.

Nifty and Sensex on a Roll

The Indian stock market displayed a mixed performance recently. Major indices like the Nifty and Sensex exhibited positive momentum, while mid-cap and small-cap indices saw more modest gains.

Investor sentiment remained upbeat, driven by factors such as positive economic indicators like the HSBC India Manufacturing PMI and the anticipation of upcoming quarterly results from numerous companies.

Global brokerage Jefferies predicts that 2025 could witness monetary policy easing in India, given the narrowing gap between loan and deposit growth.

The December GST collection surged by 7.3% year-on-year to ₹1.77 lakh crore, reflecting a rebound in consumer spending. This is a positive sign of economic momentum, potentially boosting investor confidence.

Conclusion

Going forward, the sustainability of Foreign Institutional Investor (FII) buying will be crucial in determining market direction. The upcoming Q3 earnings season is anticipated to significantly influence market sentiment, with a focus on management commentary and future growth projections. So, open Demat account with SMC Global Securities and invest as per your investment objective and risk profile.

Reference:
SMC Global Securities’ Research Team

Author: All Content is verified by SMC Global Securities.