European stocks jump into 2025, powered by energy sector gains

4:51 pm Thursday, January 02nd, 2025

By Sruthi Shankar and Pranav Kashyap

(Reuters) -European stocks kicked off the first trading session of 2025 on a high note on Thursday, buoyed by a strong performance in the energy sector, while global investors analysed fresh economic data from the United States.

The pan-European STOXX 600 index rose 0.6% to 510.67, reversing modest losses earlier in the session as trading volumes were light with investors still returning from their New Year holidays.

Europe’s oil and gas sector jumped 2.3% as crude prices surged 2% following a pledge by China’s President Xi Jinping to promote growth. China is the world’s top crude importer. [O/R]

Utilities and defence each gained over 1.5%.

Meanwhile, automobiles <.SXAP and luxury stocks <.STXLUXP> led sectoral declines, with losses of more than 0.4%.

The benchmark STOXX 600 suffered its worst quarterly drop in more than two years from October to December, weighed by uncertainty around interest rates and the Trump administration’s policies that several market participants fear will boost inflation.

Still, the index clocked a roughly 6% gain in 2024, which was, overall, a positive year for stocks. The U.S. market, in particular, jumped to all-time highs due to optimism about the adoption of AI and the Federal Reserve’s interest rate cuts.

The STOXX 600, too, hit a record high last year but lagged the S&P 500’s 23.3% surge, as a slowing European economy and political turmoil in Germany and France weighed on sentiment.

A survey showed manufacturers in the euro zone ended last year on a sour note, with factory activity declining at a faster rate, offering scant signals of an imminent recovery.

HCOB’s final euro zone manufacturing Purchasing Managers’ Index (PMI), compiled by S&P Global, dipped to 45.1 in December, just under a preliminary estimate and further below the 50 mark separating growth from contraction. Economists were expecting the index to hold steady at 45.2.

Across the pond, a Labor Department report showed jobless claims unexpectedly fell last week, consistent with a healthy labor market. Major Wall Street indexes opened higher. [.N]

“For now, the focus is on what appears to be the enduring resilience of the American economy, with jobless claims falling sharply, underlying the buoyant labour market,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“There are hopes that companies will continue to shrug off the effect of high interest rates, while benefiting from lower taxes and expected de-regulation policies under a fresh Trump presidency.”

On the day, Vestas Wind Systems rose 6.7% after the Danish wind turbine maker said it received new orders in Italy.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Savio D’Souza, Mrigank Dhaniwala and Chris Reese)