European markets began the final full trading day of 2024 in negative territory, as investors prepared to close out the year amid subdued activity and persistent economic concerns. The pan-European Stoxx 600 index fell 0.4% shortly after the opening bell, with losses across all sectors and major stock exchanges. Leading the declines were industrials, media, and technology stocks.
Muted Trading as Year Ends
Market analysts expect trading volumes to remain low on Monday, with many investors winding down for the New Year holiday. Despite the lack of market momentum, key economic data from Spain and comments from European Central Bank (ECB) officials have drawn attention.
Inflation Concerns Persist in Spain
In a flash estimate released on Monday, Spain’s National Statistics Institute (INE) reported that the country’s EU-harmonized annual inflation rate rose to 2.8% in December, up from 2.4% in November. This figure surpassed analysts’ expectations of 2.6%, according to a Reuters poll. Core inflation, which excludes volatile components such as fresh food and energy, increased by 2.6% year-on-year.
The uptick in inflation could complicate policy decisions for the ECB, particularly as Governing Council member Robert Holzmann hinted at a slower pace of interest rate cuts. Speaking to Austria’s Kurier newspaper, Holzmann noted, “I don’t see any interest rate hikes at the moment. What could happen, though, is that one takes more time until the next interest rate cut.” This cautious tone underscores the challenges of addressing “sticky” inflation across the eurozone.
Budget Developments in Italy and France
Italy made headlines as lawmakers passed the country’s 2025 budget, which aims to reduce the fiscal deficit to closer to 3% of GDP, in line with EU regulations. Meanwhile, France’s newly appointed Finance Minister Eric Lombard outlined plans for the 2025 budget, targeting a deficit of just above 5%, as reported by La Tribune Dimanche.
Broader Global Market Sentiment
Overnight in Asia, markets displayed mixed performance. Investors kept a close eye on political instability in South Korea and industrial data from the region. Japan reported a slower contraction in factory activity for December, offering a glimmer of hope for its manufacturing sector.
However, South Korea faced tragedy on Sunday with the Jeju Air plane crash, which claimed 179 lives. The incident weighed heavily on airline stocks, with Jeju Air’s share price plunging to an all-time low. Boeing, whose 737-800 aircraft was involved in the crash, also saw its New York-listed shares drop by 4.5% in premarket trading. South Korean authorities have launched a comprehensive investigation into the crash, including inspections of all Boeing 737-800 planes operating in the country.
Outlook for 2025
With the European market session set to wind down early ahead of New Year celebrations, investors are already looking ahead to 2025. Persistent inflation, fiscal challenges in major EU economies, and global uncertainties will likely shape the economic landscape in the months to come.
As the countdown to 2025 begins, market participants remain cautious, balancing short-term volatility with long-term risks.
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