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UBS projects the Greek economy will grow by 2.8% in 2025, supported by RRF fund utilization and strong corporate credit growth. While Eurozone GDP growth is expected at 0.9% in 2025, Germany and France face challenges with lower growth forecasts amid ongoing political uncertainties. The ECB is anticipated to cut interest rates to 2% by mid-2025, influenced by labor market trends and inflation dynamics.
The European Central Bank (ECB) is expected to slow the pace of interest rate cuts starting in Q3, following anticipated reductions of 25 basis points at upcoming meetings. Analysts from Deutsche Bank predict four cuts in the first half of 2025, with a gradual slowdown in the second half, contingent on below-trend growth and inflation risks. ECB President Christine Lagarde has indicated a preference for a gradual approach to rate adjustments.
UBS analysts assign a 35% probability to the emergence of a stock market bubble, particularly in high-value sectors like technology, as bond yields rise. They note that the P/E ratio for major tech stocks is currently at 34x, with a potential bubble forming if it reaches 45x at 5.5% yields. UBS advises caution with non-financial cyclicals and recommends defensive stocks with low financial leverage, while suggesting financials as a hedge against populism and inflation.
Equity outlook for 2025 appears uncertain, with BNP Paribas projecting the Nifty 50 to reach 25,500, indicating nearly a 10% upside from current levels. Key challenges include high food inflation, rising US bond yields strengthening the dollar against the rupee, and increasing commodity prices. The report notes that the demand for expensive emerging market equities is likely to remain low unless there are clear signs of robust growth recovery.
The Kantar India Union Budget Survey 2025 reveals a decline in consumer sentiment, with 59% of Indians citing rising inflation as their primary concern. While 67% felt the 2024 budget met their needs, expectations for tax relief and increased medical insurance rebates are growing amid economic challenges. As the economy slows, citizens are increasingly worried about AI misuse and seek measures to stimulate growth and address the high cost of living.
The Central Bank of Turkey (CBT) is expected to cut rates by 250 basis points to 45% amid positive inflation signals, maintaining a cautious, data-driven approach. Despite a trend of nominal depreciation, the Turkish lira (TRY) continues to outperform other emerging market currencies, remaining a favored carry trade for the year.
Barclays urges the government to implement effective personal income tax cuts in the FY26 Budget to stimulate consumption and demand, while maintaining fiscal discipline. The firm anticipates changes to the new tax regime to enhance its attractiveness and suggests reducing excise duties on fuel to boost disposable income. Additionally, Barclays expects a modest increase in customs duty collections and emphasizes the need for a clear debt consolidation roadmap to achieve a general government debt-to-GDP ratio of 60% in the medium term.
The Bank of Japan is poised for a monetary policy meeting on January 23–24, 2025, with speculation of a 25 basis point interest rate hike amid persistent inflation and significant wage growth expectations. Market reactions are anticipated, particularly in forex and bond markets, as the yen's sensitivity to policy changes could lead to increased volatility. The Nikkei 225 index remains in a tight trading range, with potential for an upward breakout if key support levels hold.
The Japanese yen may strengthen as the Bank of Japan is expected to adopt a hawkish tone amid rising wage growth and persistent inflation above 2%. With USD/JPY stabilizing near 158, a bearish reversal could occur if it exits an "ascending wedge," targeting a drop to 150. Japanese authorities are keen to prevent further yen depreciation, adding to market dynamics.
Raiffeisen Styria is poised for growth in 2025, supported by a strong capital base and a focus on customer stability amid economic challenges. With a 2.4% increase in managed customer funds to €54 billion, the bank anticipates a rise in demand for residential property financing due to falling interest rates and improved affordability. Additionally, the introduction of a subsidy for land transfer tax aims to bolster residential property creation.
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