ASX starts 2025 with a bang, defying a Wall Street hangover

Miners and energy stocks pushed the Australian sharemarket into the green on the first trading day of 2025, defying expectations of a New Year’s hangover after Wall Street ended the year on a sombre note.

The S&P/ASX 200 rose 42.1 points, or 0.5 per cent, to 8201.2 points, even though ASX futures on December 31 had suggested a slump of 0.9 per cent for the start of the year. Markets were closed for the New Year’s Day holiday on Wednesday. The Australian dollar edged back above US62¢ after hitting record lows this week, trading at US62.16¢ as of 4.48pm AEDT.

The New York Stock Exchange finished the end of year on a sober note, which sent ASX futures lower.Credit: Bloomberg

Ten of the 11 industry sectors traded higher. Energy stocks were the best performers, posting a 1.5 per cent sector rise. Oil and gas giant Woodside was up 1.5 per cent, and Santos rose 1.4 per cent.

The increase in energy stocks comes as crude oil prices rose above $US72 for the first time in two months, having lost 20 per cent over the past year.

Mining stocks also gained. Iron ore heavyweights BHP was up 1 per cent and Rio Tinto up 0.6 per cent. Fortescue jumped 3.1 per cent.

Financial stocks also held up. The Commonwealth Bank – the biggest stock on the ASX – edged up 0.2 per cent, joined in the green by Westpac (up 0.3 per cent), ANZ (up 0.2 per cent) and NAB (up 0.4 per cent). Insurers QBE and Suncorp climbed 1.5 per cent and 1.7 per cent respectively.

Real estate stocks were led higher by shopping centre owner Scentre Group (up 1.8 per cent) and Vicinity (up 1.4 per cent). Property developer Lend Lease recovered early losses to close up 0.1 per cent after announcing it had sold its UK construction business to finish its exit from international construction and focus on Australia. The sale wouldn’t affect its profits, the company said, reiterating its forecast for the year, but it warned earnings would be heavily skewed towards the June half.

The local gains come after Wall Street had an ominous close to an otherwise stellar year for investors. The S&P 500 and the Nasdaq 100 dropped for a fourth consecutive session on New Year’s Eve in a year-end pullback that cut more than a trillion US dollars from large-cap market values. Still, those losses were just a blip in an advance that has lifted the S&P 500 more than 50 per cent since the start of 2023, the best two-year gain since the late 1990s.

The US benchmark surged 23 per cent in 2024, stoked mostly by the hype around artificial intelligence breakthroughs. But gains slowed in the final quarter of the year, as the pace of the rally raised concerns and investors grew jittery about factors such as President-elect Donald Trump’s protectionist policies and the possibility of fewer interest rate cuts from the Federal Reserve.

Donald Trump and Chinese President Xi Jinping in 2019. Australian market watchers are concerned what impact the two largest economies will have on the local bourse.Credit: AP

The S&P 500 fell 2.5 per cent in December, marking its weakest return since April.

“November and early December were very concentrated at the top of the market, so it didn’t take much once those names took at breather for markets to lose momentum,” wrote Walter Todd, president and chief investment officer at Greenwood Capital Associates in the US. “Valuations are elevated, there are a lot of unknowns regarding new administration and the move higher in rates have been problematic for stocks.”

Still, the 2024 gains in the US left the Australian market in the dust. The ASX finished the year a tad worse than it did in 2023 amid exacerbating cost-of-living pressures and rising interest rates. Losses over the past two days of the year trimmed its 12-month return to 7.5 per cent, short of the market’s 7.8 per cent gain in the year before.

Analysts view Trump’s inauguration on January 20 as the first major test for the Australian sharemarket in 2025, which is likely to be followed by the Australian Reserve Bank’s interest rates decision on February 6.

Some of Trump’s policies spell trouble for global markets. AMP chief economist Shane Oliver said Trump’s looming presidency was among the factors weighing down the Australian dollar.

“We know that tariffs can put up the currency proposing tariffs, which will be bad news for countries like Australia heavily exposed to exports,” Oliver said.

IG market analyst Tony Sycamore found that the threat of tariffs on China – Australia’s biggest trading partner – “isn’t a good thing” for domestic trading.

“We still don’t know the outcome of what Trump’s tariffs will be, and won’t know until January 20, or the days after that.”

While the prospect of increased tariffs has accelerated inflationary fears, Trump’s agenda is also forecast to stimulate growth for big tech, industrial and mining stocks, and the banks, which are expected to enjoy increased borrowing demand as interest rates are lowered in 2025.

“Trump is quite supportive of the stock market in general,” Jessica Amir, a market strategist at Moomoo, said in an interview last week. “Cutting taxes, regulation and red tape is really good for tech stocks, especially the chip sector.”

The RBA is expected to cut interest rates as early as February, as underlying inflation falls further and unemployment rises. The federal election, slated for some time between March and May, might prompt an increase in government spending, although it is unlikely to influence short-term economic policies.

With Bloomberg