The first trading day of the year, be wary

On the one hand, U.S. economic exceptionalism, bolstered by robust consumer spending and a resilient labour market, deregulation and hopes for a China rebound bode well for global markets in 2025.

China's President Xi Jingping said on Tuesday in his New Year's address that the country would implement more proactive policies to promote growth in 2025.

China's factory activity grew in December, according to the private-sector Caixin/S&P Global survey on Thursday, though at a slower than expected pace.

On the flip side is the more cautious narrative that sticky inflation could force the Fed to pause rate cuts, U.S. President-elect Donald Trump's plans for tariff hikes could hurt global economic growth just as political uncertainty in France and Germany dents confidence in the single-currency bloc.

China stocks ended sharply lower on the first trading session of 2025, their weakest New Year start since 2016.

Geopolitical risks are also on the worry list. Russian gas exports via Soviet-era pipelines running through Ukraine came to a halt on New Year's Day, marking the end of decades of Moscow's dominance over Europe's energy markets.

The widely expected stoppage will not impact prices for consumers in the European Union though, unlike in 2022 when falling supplies from Russia sent prices to record highs, worsened a cost-of-living crisis and hit the bloc's competitiveness.

Still, the move could be a potential issue for central European countries, analysts say, while the rise in European natural gas futures to a more than one-year high could add to inflationary pressures in the euro area.

Ahead of the U.S. open, the dollar and U.S. Treasury yields edged down, while oil prices were around a third of a percent firmer.

Graphics are produced by Reuters.

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