Europe close: Shares shrug off shaky start to rally on first day of 2025

(Sharecast News) - European shares rallied on the first day of trading in 2025 after a shaky start, with energy stocks boosted by a higher oil price and hints that China may provide more stimulus for the struggling economy. The pan-European Stoxx 600 index closed 0.60% higher at 510.64, with all major continental bourses also bouncing back during the afternoon session. The UK's FTSE 100 outperformed with a 1.07% rise to 8,260.

"Gains in the oil price boosted energy majors and mining stocks rose amid expectations that Chinese authorities will come forth with more stimulus to boost the world's second largest economy," said Hargreaves Lansdown analyst Susannah Streeter.

"A big drawdown of US crude stocks last week also put upwards pressure on oil prices and highlighted the ongoing strength of demand for energy in a buoyant US economy. There's a glass half full attitude taking hold, despite the threat of tariffs looming over the global economy, and the potential for inflation to stay stubborn in the US."

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

Asian shares were mixed overnight after growth in factory sector activity in the People's Republic of China slowed at the end of 2024, amid softer export demand, according to the results of a closely followed survey.

Private sector survey compiler Caixin reported a decline in its manufacturing sector Purchasing Managers' Index from a reading of 51.5 in November to 50.5 for December.

Economists had forecast a reading of 51.7.

Meanwhile, the contraction of the eurozone's manufacturing sector was slightly worse than originally estimated in December, according to revised estimates from S&P Global and the Hamburg Commercial Bank (HCOB).

The final reading of the single-currency region's manufacturing purchasing managers' index came in at 45.1, down from the initial estimate of 45.2 released two weeks ago which was unchanged from November.

This was the 30th successive sub-50.0 reading - the level which separates contraction and growth - marking two and a half years of continuous decline in factory operating conditions across the eurozone.

In the UK, house prices inched closer to record highs in December, according to Nationwide, though the market is likely to see increased volatility over the next few months ahead of the introduction of new changes to stamp duty.

Nationwide reported on Thursday that UK house prices rose 0.7% over the month of December to £269,426, up 4.7% on last year, to sit just below an all-time high (£273,751) recorded in summer 2022.

There was little corporate news to drive sentiment. Vestas Wind Systems gained after the Danish wind turbine maker unveiled its latest list of new orders.

Reporting by Frank Prenesti for Sharecast.com