Monthly Market News - January 2025 – Market trends

Alexandre Gauthy - Economist

The stock markets began the year on a positive note. However, turbulence emerged at the end of the month due to reports on DeepSeek and the US government's announcement of new import tariffs. Our expert, Alexandre Gauthy, provides an analysis of January 2025’s market developments.

Equities: European stocks lead global gains

Global equities rose 3% in January, primarily driven by strong performance in European stocks, which outpaced their U.S. counterparts. In contrast, emerging market equities lagged.

In the latter half of the month, a report from China put pressure on the U.S. technology sector. DeepSeek, a Hangzhou-based AI company, demonstrated its ability to develop an artificial intelligence model at a fraction of the usual investment while achieving results comparable to—or exceeding—those of leading U.S. firms. This raised concerns about the valuations of American tech stocks.

Global indices recovered but then suffered from the US government's announcement that import tariffs would be imposed on goods from Mexico, Canada, and China. Over the following weekend, Trump decided to delay the introduction of import tariffs for Mexico and Canada by a month. Last Monday, China retaliated against the US measures. Chinese authorities also announced non-tariff measures. A handful of minerals have been added to China's export control list, and an antitrust investigation has been launched against Google.

Finally, two US companies have been added to China's list of ‘unreliable entities’: Illumina and PVH (the parent company behind brands such as Calvin Klein and Tommy Hilfiger).

Bond markets: limited fluctuations

The interest rate on long-term bonds rose in the first half of the month on both sides of the Atlantic, driven by a stronger-than-expected U.S. employment report for December, which reduced the likelihood of Fed rate cuts in the coming months. However, bond yields dipped slightly in the second half of January following weaker-than-expected inflation data, while Trump's statements in Davos further contributed to the decline.

Central banks: Fed temporarily suspends rate cut cycle

In January, the European Central Bank (ECB) implemented another rate cut, lowering the deposit rate. Despite persistent inflation in the services sector, ECB President Christine Lagarde noted that all key indicators point to a slowdown in wage growth, which should help ease inflationary pressures.

Meanwhile, the Federal Reserve kept its benchmark interest rate unchanged, adopting a cautious stance as it assessed the potential impact of the new administration’s fiscal, trade, and immigration policies on inflation.

Currencies: dollar rises in value

The U.S. dollar appreciated at the end of January, supported by the announcement of tariffs on Canadian, Mexican, and Chinese imports.

Commodities: gold price to new records

Gold prices surged to a new all-time high in late January, driven by rising uncertainty surrounding global trade relations. Oil prices followed a volatile trajectory, climbing initially before retreating after the Trump administration postponed the enforcement of new tariffs by one month.

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