Asian markets slump as 2025 opens with investor panic, U.S. dollar surge, and Trump’s growing political shadow

NEW YORK: As per a Reuters report, global stock markets took a downturn on Thursday, with initial gains quickly evaporating, continuing the year-end slump into the first trading day of 2025.

U.S. stocks closed lower, marking a fifth consecutive daily decline for the S&P 500 and Nasdaq, the longest losing streak since April.

Meanwhile, the dollar surged to a two-year high after fresh economic data revealed the U.S. labor market remained strong.

The U.S. Labor Department reported a significant drop in new unemployment claims, falling to an eight-month low of 211,000 last week—better than the 222,000 expected by economists.

This news pointed to a resilient labor market, a crucial pillar for the U.S. economy.

Keith Buchanan, senior portfolio manager at Globalt Investments, commented, “The labor market has been incredibly resilient and we’ve seen that continue. It’s what’s fueled the consumer, holding the economy together despite challenges like inflation.”

In response to this positive data, the U.S. dollar climbed to its highest level in two years, buoyed by expectations that the U.S. economy will continue growing faster than other major economies.

This outlook supports the belief that the Federal Reserve will maintain a slow pace of interest rate cuts.

The dollar index, which tracks the greenback against a basket of currencies, rose 0.67% to 109.27, after reaching 109.54, its highest since November 2022.

Adam Button, chief currency analyst at ForexLive, said, “In terms of 2025 economic growth, there’s no rival to the dollar. The U.S. stock market has outperformed every other global market.”

The euro fell 0.89% to $1.0263, while the Japanese yen saw a drop as the dollar strengthened by 0.47% to 157.60 yen. The British pound also weakened, down 1.12% to $1.2377.

Stock markets had already been showing signs of strain as 2024 ended, after a year-long rally driven by expectations around artificial intelligence, anticipated Federal Reserve rate cuts, and the potential impact of deregulation under the incoming Trump administration.

However, recent economic forecasts from the Fed and concerns over potential inflationary effects from Trump’s policies have led to rising bond yields, creating headwinds for stocks.

The yield on the 10-year U.S. Treasury note slipped slightly to 4.563%, still hovering above the 4.5% threshold that analysts consider problematic for equities.

On a brighter note, oil prices saw a boost, with U.S. crude rising 1.97% to $73.13 a barrel and Brent crude climbing 1.73% to $75.93, driven by optimism over China’s economic growth and fuel demand, following a pledge from President Xi Jinping to support expansion.

As 2025 kicks off, the markets are navigating a complex mix of economic signals, with a resilient labor market helping to prop up the dollar and oil prices, while stock markets remain under pressure from higher bond yields.