Business

By Naomi Rovnick, Dhara Ranasinghe and Rodrigo Campos

LONDON (Reuters) – Markets that began the year with investors expecting a global stock rally to fizzle, swift U.S. interest rate cuts to boost Treasuries and soften the dollar and emerging market currencies to strengthen have firmly defied that consensus.

World stocks are set for a second consecutive annual gain of 16%, unfazed by wars in the Middle East and Ukraine, Germany’s economic contraction and government collapse, French budget chaos and China’s slowdown.

That comes mostly thanks to a second year of huge gains for Wall Street stocks as artificial intelligence fever and robust economic growth sucked more global capital into U.S. assets and took the dollar up 6.6% against peers in 2024.

U.S. exuberance rose after Donald Trump’s Nov. 5 election win, as traders focused on the President-elect’s plans for tax cuts and deregulation, with the surge in animal spirits propelling cryptocurrency bitcoin to a 122% annual gain.

World markets enter 2025 increasingly exposed to U.S. trends – a risk factor that burst into life after the Federal Reserve roiled markets this month by pointing to fewer rate cuts in the year ahead.

That came after weak U.S. jobs data and a surprise midyear Japanese rate hike that pressured dollar-denominated assets and sent a volatility wrecking ball swinging through global markets and sparked a short-lived rout in August.

Debt investors, meanwhile, are growing anxious about Trump’s proposed trade tariffs refueling inflation and fear excessive White House borrowing that could roil the $28 trillion Treasury market and spark wider government bond disruption.

“It’s going to be difficult, in the event of a (U.S.) pullback, to find anywhere to hide,” Barclays private bank chief market strategist Julien Lafargue said.

WALL STREET JUGGERNAUTS

Wall Street’s S&P 500 share index is 24% higher this year after a similar jump last year, in its strongest two-year streak since 1998.

Shares in artificial intelligence chipmaker Nvidia rose 178% in 2024, Elon Musk’s carmaker Tesla gained 68% while investors’ exposure to U.S. stocks hit record levels in December.

The combined value of the so-called Magnificent Seven U.S. tech stocks accounts for around a fifth of MSCI’s world share index, according to Schroders, raising market threat levels if their earnings or AI technology disappoint.

EUROPE’S STRUGGLES

The euro slid around 5.7% against the dollar this year while European stocks performed worse relative to their U.S. peers than they have in at least 25 years.

After four European Central Bank rate cuts, the euro zone economy is declining more slowly and some forecasters are tipping Europe for a 2025 rebound.

The chances of any international market rallying if the U.S. falters are usually slim. Gold gained 26% in 2024 as investors struggled to find other diversification trades.

MIGHTY DOLLAR

U.S. tariff fears and dollar strength have hit emerging market currencies particularly hard, exacerbating losses for struggling nations.

Currencies in Egypt and Nigeria fell around 70% against the dollar following devaluations, and Brazil’s real weakened more than 27% as worries about government debt and spending intensified.

A sparse set of mild annual gains included a 2.8% rise for Malaysia’s ringgit. Among the top performers South Africa’s rand and the Hong Kong dollar rose 2% and 0.5%, respectively, while Israel’s shekel was set for a 1.5% decline for the year.

“We continue to be cautious on emerging market currencies, and the main reason behind that is the Trump trade war,” said Arif Joshi, co-head of emerging market debt at Lazard Asset Management.

CHINA ROLLERCOASTER

Chinese stocks had a wild year, surging almost 16% in a single week in September after Beijing signaled its readiness to stimulate the weakening economy, with a number of deep weekly falls since.

Investors who held on to China in 2024 were rewarded with an 16.5% annual gain but many expect the short-term boom and bust cycle to continue, disrupting markets in Europe and Asia, until Beijing takes direct action.

BOND BULLS BRUISED

Interest rates fell across big economies this year but bond investors suffered annual losses after spending much of 2024 pricing in more monetary easing than central banks eventually delivered as inflation stayed stickier than expected.

U.S. 10-year Treasury yields rose nearly 70 basis points in 2024, Britain’s 10-year gilt yield jumped 107 bps and 10-year German yields rose 33 bps.

In Japan, where interest rates rose twice this year as inflation accelerated, the 10-year bond yield added 47 bps in its biggest yearly jump since 2003.

Next year looks challenging for bond markets uncertain about how Trump’s policies will sway the U.S. Federal Reserve. French debt turmoil last month also signaled the so-called bond vigilantes stand ready to punish governments for excessive borrowing.

SURPRISE WINNERS

Bond investors’ 2024 wins came from some of the riskiest markets.

Lebanon’s defaulted dollar bonds returned around 100% over the year as investors anticipated Middle East conflict weakening armed group Hezbollah.

An ambitious reform programme and the prospect of Trump’s White House return powered a 100% return for dollar bonds issued by Argentina, whose leader Javier Milei has close ties with the U.S. president-elect. Boosted by bets that Trump could end Russia’s Ukraine invasion, Ukrainian bonds returned over 60%.

(Reporting by Naomi Rovnick and Dhara Ranasinghe in London and Rodrigo Campos in New York, additional reporting by Libby George; Editing by Hugh Lawson)

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BEIJING (Reuters) – China’s gross domestic product is expected to grow by around 5% in 2024, President Xi Jinping said on Tuesday, state media reported.

(Reporting by Beijing newsroom; Editing by Kim Coghill)

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(Reuters) – Contracts to buy U.S. previously owned homes rose more than expected in November, notching a fourth straight month of gains as buyers focused on taking advantage of improved inventory despite stubbornly high mortgage rates.

The National Association of Realtors (NAR) said on Monday its Pending Home Sales Index, based on signed contracts, rose 2.2% last month to 79.0 – the highest since February 2023 – from 77.3 in October. Economists polled by Reuters had forecast contracts, which become sales after a month or two, would rise 0.9% after increasing 1.8% in October.

Pending home sales rose 6.9% from a year earlier. On a regional basis, the Midwest, South and West saw monthly increases while contract signings slipped in the Northeast. All four regions posted annual gains.

The increase in contract signings in November dovetailed with a second straight rise in existing home purchase completions last month reported previously by NAR. That earlier report showed the inventory of homes for sale in November was up by nearly 18% from a year earlier.

“Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory,” said Lawrence Yun, the NAR’s chief economist. “Mortgage rates have averaged above 6% for the past 24 months. Buyers are no longer waiting for or expecting mortgage rates to fall substantially. Furthermore, buyers are in a better position to negotiate as the market shifts away from a seller’s market.”

Indeed, the rate on popular 30-year-fixed-rate mortgages has climbed in the past two months to the highest since July at 6.85%, according to Freddie Mac, essentially counter-acting the interest rate cuts delivered since September by the Federal Reserve.

The 10-year U.S. Treasury note, which is the top influence in determining rates on most home loans, has climbed by roughly a percentage point since September. That has occurred as bond market investors have grown concerned about how policies favored by President-elect Donald Trump – such as tariffs, tax cuts and immigration crackdowns – might feed into higher inflation.

(Reporting By Dan Burns; Editing by Chizu Nomiyama)

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(Reuters) -Bill Ackman expects U.S. President-elect Donald Trump to remove Fannie Mae and Freddie Mac from conservatorship, potentially making them private companies again, the billionaire investor said on Monday.

Shares of Fannie Mae climbed 18.4%, while those of Freddie Mac rose 18% following Ackman’s post on social media platform X.

According to Ackman’s post, Fannie Mae and Freddie Mac may emerge from conservatorship in the next two years, potentially leading to their public listing around 2026.

Fannie and Freddie, which operate as for-profit corporations with private shareholders, were created by Congress with the mission of expanding the national home lending market by buying home loans from private lenders and repackaging them as mortgage-backed securities.

When the housing market collapsed in 2008, the companies suffered overwhelming losses. To avoid catastrophic effects for the U.S. economy, they were placed in conservatorship under the newly created Federal Housing Finance Agency.

(Reporting by Arunima Kumar and Shivansh Tiwary in Bengaluru; Editing by Shinjini Ganguli)

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By Stephen Culp

NEW YORK (Reuters) – U.S. stock exchanges will close on Thursday, January 9 in observation of a national day of mourning in honor of former U.S. President Jimmy Carter, who died on Sunday at the age of 100.

The New York Stock Exchange and the Nasdaq announced the closures on Monday, a customary gesture to honor deceased presidents.

President Joe Biden directed January 9 to be a day of national mourning for Jimmy Carter, the 39th U.S. President and recipient of the 2002 Nobel Peace prize for his humanitarian work.

The Securities Industry and Financial Markets Association has recommended an early close on Jan 9 for the U.S. bond market at 2:00 p.m. ET/1900 GMT.

(Reporting by Stephen Culp)

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(Reuters) – Air taxi start-up Volocopter GmbH filed for insolvency proceedings on Monday, citing its inability to raise new funds to maintain regular operations.

The Mercedes-Benz and Honeywell-backed company plans to continue business operations during the insolvency proceedings while seeking additional funding.

“Despite recent intensive fundraising efforts, finding a viable solution to maintain regular operations outside of insolvency proceedings has not been possible,” the Bruchsal, Germany-based firm said.

The electric vertical takeoff and landing (eVTOL) industry is facing a financial crunch, with companies persistently seeking new investments to support their capital-intensive operations as companies prepare for commercial operations.

In November, peer Lilium said it would file for insolvency “soon”, after failing to resolve its financial difficulties.

Founded in 2011, Volocopter was scheduled to enter the market in 2025 with its urban eVTOL, the VoloCity.

(Reporting by Anshuman Tripathy in Bengaluru; Editing by Tasim Zahid)

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By Stephen Culp

NEW YORK (Reuters) -Wall Street closed in negative territory on Monday in light volume at the top of a holiday-shortened week in the second-to-last trading session of an eventful year in which all three indexes posted strong double-digit gains.

End-of-year tax positioning, valuations, climbing Treasury yields and uncertainties about 2025 all contributed to the risk-off sentiment. The three major U.S. stock indexes bounced off early lows but still were down more than 0.5%.

“Investors are saying the S&P, even after this recent sell off, is up over 50% in the last two years,” said Oliver Pursche, senior vice president at Wealthspire Advisors, in New York. “Maybe we should take some chips off the table and protect those gains. And when you have thin volume, it doesn’t take a lot (to move markets).”

Despite recent weakness, 2024 has been a banner year for U.S. equities. The Nasdaq is on track for about a 30% annual gain and the S&P 500 is headed for just over a 24% rise for 2024. The Dow remains up just over 13% from the last closing levels of 2023.

On the sector level, technology, communication services and consumer discretionary were on course to notch gains of nearly 30% or more, while materials appear poised to nab the dubious distinction of the only sector to have lost ground on the year.

It was a year during which geopolitical tensions came to a boil in the Middle East and elsewhere, while the Federal Reserve cut U.S. interest rates for the first time in over four years.

In U.S. politics, former President Donald Trump was convicted of 32 felonies early in the year, then won re-election to a second term after President Joe Biden dropped out of the race to be replaced as Democratic candidate by Vice President Kamala Harris.

Chip maker Nvidia’s stock shot up nearly 180% this year as investors placed heavy bets on the promise of emergent artificial intelligence (AI) technology. In November, Nvidia replaced rival chip maker Intel in the Dow Jones Industrial Average.

“Next year is going to be much more volatile for investors, in particular in the first quarter,” Pursche added. “However, I do think there’s a good chance of stocks doing reasonably well and having mid-single-digit returns next year.”

“The combination of likely lower taxes and a friendlier regulatory environment is likely to result in stocks rising well beyond fair valuations,” Pursche said, citing investor expectations that Trump will deliver on his campaign promises.

According to preliminary data, the S&P 500 lost 63.95 points, or 1.06%, to end at 5,907.43 points, while the Nasdaq Composite lost 235.25 points, or 1.19%, to 19,486.79. The Dow Jones Industrial Average fell 410.18 points, or 0.95%, to 42,582.03.

Boeing shares fell after South Korea’s acting president Choi Sang-mok ordered an emergency safety inspection of its entire airline operation following the deadliest air accident in that country’s history, involving a Boeing 737-800.

Crypto stocks including MicroStrategy Coinbase and MARA Holdings tumbled.

Biden declared a national day of mourning on Thursday Jan. 9 to mark the death on Sunday of former President Jimmy Carter.

The U.S. stock market will be closed that day.

(Reporting by Stephen Culp; Additional reporting by Johann M Cherian and Pranav Kashyap in Bengaluru; Editing by David Gregorio)

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SEOUL, South Korea (AP) — South Korea has vowed thorough investigations to find what caused a plane crash that killed 179 people, saying Monday that it will also inspect all Boeing 737-800 aircraft operated by the country’s airlines.

Sunday’s crash, the nation’s deadliest aviation disaster in decades, has sent a shock wave through South Korean society, which is already facing a political crisis that led to the successive impeachments of the country’s top two officials — President Yoon Suk Yeol and Prime Minister Han Duk-soo.

Here are things to know about developments on the crash.

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Jeju Air flight 7C 2216 had departed from Bangkok and was making its landing at Muan International Airport in southern South Korea. After an initial failed landing attempt, the Boeing 737-800 plane received a bird strike warning from the ground control center. The pilot then issued a distress signal before the plane came down with its front landing gear closed, overshot the runway, slammed into a concrete fence and burst into a fireball.

Observers say videos of the crash showed the plane was suffering from suspected engine trouble, but the landing gear malfunction was likely the main reason for the crash.

South Korean Transport Ministry officials said Monday they will examine whether the fence the plane hit — which housed a set of antennas designed to guide aircraft safely during landings — should have been made with lighter materials that would break more easily upon impact. They said they were also trying to establish whether there were any communication problems between air traffic controllers and the pilot.

Ministry officials said Monday the plane’s flight data and cockpit audio recorders were moved to a research center at Seoul’s Gimpo International Airport ahead of their analysis. Ministry officials earlier said it would take months to complete the investigation of the crash.

The crash wrapped up a troubling 2024 for U.S. aviation giant Boeing, which has grappled with safety problems, a machinists strike and plunging stock prices.

Experts say the 737-800 aircraft is a more proven model than the company’s much-maligned 737 Max jetliners, which were linked to fatal crashes in 2018 and 2019. Still, South Korean authorities said they’ll conduct safety inspections on all of the 737-800s operated by domestic airlines, including 39 by Jeju Air.

Representatives from Boeing and the U.S. National Transportation Safety Board were to travel to Seoul to participate in the South Korean investigation.

On Monday, another Boeing 737-800 plane operated by Jeju Air returned to the Gimpo airport shortly after takeoff when the pilot detected a landing gear issue. Jeju Air said the issue was resolved through communication with a land-based equipment center but the pilot decided to return to Gimpo as a precautionary measure.

Only two people — both crew members — survived. They were rescued from the plane’s tail section, the only part of the aircraft that remained relatively intact after the crash.

One of the survivors was treated for fractures to his ribs, shoulder blade and upper spine. Ju Woong, director of the Ewha Womans University Seoul Hospital who treated him, said the man told doctors he “woke up to find (himself) rescued.”

The passengers were predominantly South Korean, although they included two Thai nationals.

The Transport Ministry said Monday that authorities have identified 146 bodies and are collecting DNA and fingerprint samples from the other 33.

Park Han Shin, a representative of the bereaved families, said they were told that the bodies of their loved ones were so badly damaged that officials need time before returning them to their families. He called for the government to mobilize more personnel.

The crash caps a tumultuous month for South Korea that began with Yoon’s extraordinary but short-lived martial law imposition. Following that, the opposition-led legislature voted to impeach Yoon and then his replacement, Han. Deputy Prime Minister Choi Sang-mok is now the country’s acting president.

Also, the safety minister resigned and the police chief was arrested over their roles in the declaration of martial law. The absence of the top officials directly responsible for handling disasters has caused concerns among many people.

Choi quickly traveled to the crash site, met bereaved families and presided over emergency meetings to discuss the incident.

On Monday, Choi instructed authorities to conduct an emergency review of the country’s overall aircraft operation systems. He said that South Korea should use the crash as a chance to formulate steps to prevent the recurrence of similar disasters and build a safer country.

World leaders expressed their sympathies as South Korea dealt with the tragedy.

Thailand’s prime minister, Paetongtarn Shinawatra, expressed deep condolences to the families and ordered the country’s Ministry of Foreign Affairs to provide assistance immediately.

U.S. President Joe Biden issued a statement saying he was “deeply saddened” by the tragedy.

“As close allies, the American people share deep bonds of friendship with the South Korean people and our thoughts and prayers are with those impacted by this tragedy. The United States stands ready to provide any necessary assistance,” he said.

The office of United Nations Secretary-General Antonio Guterres said he extends his “heartfelt condolences to the families of the victims and expresses his solidarity with the people and Government of the Republic of Korea during this difficult time.”

Pope Francis offered condolences from St. Peter’s Square, while Japanese Prime Minister Shigeru Ishiba said he was “deeply saddened by the loss of many precious lives.”

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Asian shares were mixed on Monday after stocks fell broadly on Friday as Wall Street closed out a holiday-shortened week on a down note.

U.S. futures were lower while oil prices were little changed.

In Asia, South Korea’s Kospi added 0.6% to 2,418.80. But shares of Jeju Air Co. lost 8.8% after one of the company’s jets skidded off a runway, slammed into a concrete fence and burst into flames Sunday in South Korea as its landing gear failed to deploy. 179 people died in the crash.

Political turmoil continued as South Korean law enforcement officials requested a court warrant on Monday to detain impeached President Yoon Suk Yeol. They are investigating whether his martial law decree on Dec. 3 amounted to rebellion.

Tokyo’s Nikkei 225 index lost 0.9% to 39,914.21 as the dollar gained against the Japanese yen, trading at 157.83 yen, up from 157.75 yen. The Tokyo market will wrap up trading for 2024 with a yearend ceremony as Japan begins its New Year holidays, the biggest festival of the year.

The Hang Seng in Hong Kong shed 0.3% to 20,030.63 while the Shanghai Composite index was up 0.3% at 3,408.72. Australia’s S&P/ASX 200 dipped 0.9% to 8,191.50.

On Friday, the S&P 500 fell 1.1% to 5,970.84. Roughly 90% of stocks in the benchmark index lost ground, but it managed to hold onto a modest gain of 0.7% for the week.

The Dow Jones Industrial Average fell 0.8% to 42,992.21. The tech-heavy Nasdaq composite fell 1.5%, to 19,722.03.

The losses were made worse by sharp declines for the Big Tech stocks known as the “Magnificent 7”, which can heavily influence the direction of the market because of their large size.

A wide range of retailers also fell. Amazon fell 1.5% and Best Buy slipped 1.5%. The sector is being closely watched for clues on how it performed during the holiday shopping season.

The S&P 500 gained nearly 3% over a 3-day stretch before breaking for the Christmas holiday. On Thursday, the index posted a small decline.

Despite Friday’s drop, the market is moving closer to another standout annual finish. The S&P 500 is on track for a gain of around 25% in 2024. That would mark a second consecutive yearly gain of more than 20%, the first time that has happened since 1997-1998.

The gains have been driven partly by upbeat economic data showing that consumers continued spending and the labor market remained strong. Inflation, while still high, has also been steadily easing.

A report on Friday showed that sales and inventory estimates for the wholesales trade industry fell 0.2% in November, following a slight gain in October. That weaker-than-expected report follows an update on the labor market Thursday that showed unemployment benefits held steady last week.

The stream of upbeat economic data and easing inflation helped prompt a reversal in the Federal Reserve’s interest rate policy this year. Expectations for interest rate cuts also helped drive market gains. The central bank recently delivered its third cut to interest rates in 2024.

Even though inflation has come closer to the central bank’s target of 2%, it remains stubbornly above that mark and worries about it heating up again have tempered the forecast for more interest rate cuts.

Inflation concerns have added to uncertainties heading into 2025, which include the labor market’s path ahead and shifting economic policies under incoming President Donald Trump. Worries have risen that Trump’s preference for tariffs and other policies could lead to higher inflation, a bigger U.S. government debt and difficulties for global trade.

In other dealings early Monday, U.S. benchmark crude oil picked up 1 cent to $70.61 per barrel. Brent crude, the international standard, lost 1 cent to $73.78 per barrel.

The euro fell to $1.0427 from $1.0433.

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By Florence Tan and Emily Chow

SINGAPORE (Reuters) -Oil prices edged up on Monday in thin holiday trade ahead of the year-end as traders awaited more Chinese and U.S. economic data later this week to assess growth in the world’s two largest oil consumers.

Brent crude futures rose 5 cents to $74.22 a barrel by 0430 GMT while the more active March contract was at $73.82 a barrel, up 3 cents.

U.S. West Texas Intermediate crude gained 3 cents to $70.63 a barrel.

Both contracts rose about 1.4% last week buoyed by a larger-than-expected drawdown from U.S. crude inventories in the week ended Dec. 20 as refiners ramped up activity and the holiday season boosted fuel demand. [EIA/S]

Oil prices were also supported by optimism for Chinese economic growth next year that could lift demand from the top crude oil importing nation.

To revive growth, Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025, Reuters reported last week.

“Global oil consumption reached an all-time high in 2024 despite China underperforming expectations, and oil stockpiles are heading into next year at relatively low levels,” said Ryan Fitzmaurice, senior commodity strategist at Marex.

“Going forward, China economic data is expected to improve as the recent stimulus measures take hold in 2025. Also, lower rates in the U.S. and elsewhere should be supportive of oil consumption.”

China has also issued at least 152.49 million metric tons of crude oil import quotas to independent refiners in a second batch for 2025 so far, trade sources said on Monday.

Separately, the World Bank has raised its forecast for China’s economic growth in 2024 and 2025, but warned that subdued household and business confidence, along with headwinds in the property sector, would remain a drag next year.

Investors are eyeing China’s PMI factory surveys due on Tuesday and the U.S. ISM survey for December to be released on Friday.

In Europe, hopes for a new deal to transit Russian gas through Ukraine are fading after Russian President Vladimir Putin said on Thursday that there was no time left this year to sign a new deal.

The loss of piped Russian gas should see Europe import more liquefied natural gas (LNG), analysts said.

(Reporting by Florence Tan and Emily Chow; Editing by Christian Schmollinger and Shri Navaratnam)

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