FX.co ★ Trading Activity May Be Subdued Ahead Of Christmas

Major U.S. index futures are currently indicating a near flat opening for Monday, suggesting that stocks may remain directionless following last Friday’s significant gains.

Traders are likely to be cautious about making bold moves amid an anticipated quiet week due to the Christmas holiday on Wednesday. The markets are set for an early closure on Christmas Eve, Tuesday, which is expected to result in lower than average trading volumes.

The uncertain outlook for the markets may also contribute to some traders preferring to stay on the sidelines, particularly after last week’s volatility. This week's economic calendar doesn’t feature significant events, though data releases on durable goods orders, new home sales, and weekly jobless claims could garner attention.

After Thursday's session ended with minor changes, stocks experienced a sharp rise throughout Friday. The major indices overcame early weakness, moving decisively into positive territory as the day progressed.

The Dow advanced by 498.02 points, or 1.2 percent, reaching 42,840.26, building on the moderate gain logged on Thursday, when the blue-chip index ended a ten-day losing streak. The tech-heavy Nasdaq rose by 199.83 points, or 1.0 percent, to 19,572.60, while the S&P 500 increased by 63.77 points, or 1.1 percent, to 5,930.85.

Despite the strong daily rally, the major indices suffered notable declines for the week. The Dow dipped 2.3 percent, the S&P 500 fell 2.0 percent, and the Nasdaq decreased 1.8 percent.

Friday's rally was driven by traders responding to the Federal Reserve's preferred inflation measure release. The Commerce Department reported that its personal consumption expenditures (PCE) price index edged up by 0.1 percent in November after a 0.2 percent rise in October, falling short of economists’ expectations for another 0.2 percent rise.

The annual growth rate of the PCE price index accelerated to 2.4 percent in November, up from 2.3 percent in October, but below the anticipated 2.5 percent. Excluding food and energy, the core PCE price index similarly ticked up by 0.1 percent in November, after climbing 0.3 percent in October, while expectations were for a 0.2 percent increase. The annual growth rate for the core PCE index in November remained at 2.8 percent, contrary to economists’ projection for an acceleration to 2.9 percent.

The slower-than-expected annual growth rates prompted traders to purchase stocks at relatively lower prices after the mid-week sell-off.

Stocks had plummeted on Wednesday after the Fed projected fewer interest rate reductions next year than previously estimated, amidst ongoing concerns about persistent inflation.

Chicago Fed President Austan Goolsbee expressed optimism on CNBC, suggesting the recent firming in data might be a temporary bump rather than a change in trend.

Meanwhile, worries about a potential U.S. government shutdown were largely dismissed by traders, likely due to optimism about a last-minute legislative resolution, which ultimately occurred.

Banking stocks demonstrated significant upward movement, with the KBW Bank Index climbing by 2.0 percent after closing Thursday’s session at a monthly low. Commercial real estate stocks also showed notable strength, as reflected by a 1.8 percent gain in the Dow Jones U.S. Real Estate Index. Interest rate-sensitive utility stocks regained traction, raising the Dow Jones Utility Average by 1.5 percent for the day. Gold, brokerage, and semiconductor stocks likewise showed substantial strength, moving up along with most other major sectors.

**Commodity and Currency Markets**

Crude oil futures are down $0.27 to $69.19 a barrel after a $0.08 rise to $69.46 in the previous session. Conversely, gold futures, having surged by $37 to $2,645.10 an ounce, are now down $15.20 to $2,629.90. On the currency exchange, the U.S. dollar is trading at 157.19 yen compared to the 156.31 yen it reached at Friday’s New York close. Against the euro, the dollar is trading at $1.0394, down from last Friday's $1.0430.

**Asia**

Asian markets mirrored Wall Street’s rise on Monday, buoyed by the Fed's inflation gauge coming in below forecasts, which nurtured optimism for additional U.S. rate cuts in 2025. Sentiment was further supported by anticipated Chinese stimulus measures and the passing of a crucial funding bill in the U.S., avoiding a year-end government shutdown.The dollar index remained stable, while bond yields showed signs of stabilization following the release of core PCE inflation data last week, indicating milder price pressures. In Asian markets, gold and oil prices saw modest increases.

In China, the Shanghai Composite Index closed down by 0.5% at 3,351.26 after a volatile trading session. Conversely, Hong Kong's Hang Seng Index rose by 0.8%, reaching 19,883.13, fueled by expectations of increased economic support from China and a shift towards a moderately loose monetary policy in the coming year.

Japanese markets experienced significant gains, driven primarily by the automotive and technology sectors. The Nikkei 225 Index surged by 1.2% to 39,161.34, while the broader Topix Index rose by 0.9% to 2,726.74. Key performers included Toyota Motor, which gained 2.4%, Nissan which added 1.5%, Honda Motor climbing 3.8%, Tokyo Electron rising 1.3%, and Advantest soaring 4.5%.

In Seoul, stocks rallied as both foreign and institutional investors became net buyers, encouraged by the unexpected softness in U.S. PCE inflation data. The Kospi index jumped 1.6% to 2,442.01. Tech giants Samsung Electronics and SK Hynix gained approximately 1% and 0.7%, respectively. Hanmi Semiconductor experienced an impressive surge of 8.7% following the clarification of its eligibility for U.S. government semiconductor subsidies.

Australian stocks rebounded strongly after a significant downturn in the previous session. The S&P/ASX 200 Index closed up by 1.7% at 8,201.60, spurred by gains in banking and mining sectors after a surprise dip in U.S. inflation figures. The All Ordinaries Index similarly increased, ending 1.6% higher at 8,452.70, as the market anticipated insights from the Reserve Bank of Australia's meeting minutes.

In New Zealand, the benchmark S&P/NZX-50 Index saw an uptick of 0.7%, closing at 12,988.03, buoyed by festive season optimism.

**Europe**

European stocks exhibited a cautious trend amidst low trading volume on Monday, reflecting the typical lull in market activity ahead of Christmas. Market participants appeared hesitant to execute significant trades due to ongoing political uncertainties in Germany and France, alongside concerns regarding former President Trump's tariff threats.

The FTSE 100 Index in the U.K. rose by 0.3%, with the French CAC 40 Index increasing by 0.2%, whereas the German DAX Index showed little change.

In foreign exchange, the U.S. dollar steadied following lower-than-anticipated core PCE inflation figures from the U.S. for November, which suggested that the Federal Reserve might have adopted an overly pessimistic view on inflation. Meanwhile, the British pound traded below 1.2600, influenced by data indicating stagnation in the U.K. economy during the third quarter due to reduced export demand. Revised GDP figures showed no growth, contrary to the initially projected 0.1% increase.

On the corporate front, AstraZeneca's shares climbed approximately 1% after receiving EU approval for its lung cancer drug, Tagrisso, supported by strong Phase III trial results. Shares of Aviva edged slightly lower, while Direct Line Insurance saw a rise of nearly 3% after agreeing to a £3.7 billion acquisition offer from Aviva, following earlier rejections of competitor bids.

Chesnara experienced a decline of about 1% after announcing a second portfolio acquisition from Canada Life Ltd. (Canada Life UK) for a unit-linked bonds and legacy pension business portfolio. Swisscom shares rose by 0.5% after Italy's competition and industry bodies approved its planned acquisition of Vodafone Italia.

Novo Nordisk's shares leapt by 9% despite disappointing trial results for its new weight-loss drug, CagriSema. Renault of France fell by 0.6% after Nissan and Honda, Japanese automakers, announced formal discussions to merge, potentially becoming the globe's third-largest automaker by sales volume, with Renault holding a minority position in Nissan. Knorr-Bremse AG's shares declined over 1% following the divestment of its U.S. subsidiary Sheppard to Balmoral RHS Acquisition Corp., as the firm focuses on braking technologies and operational growth.

**U.S. Economic Outlook**

The Conference Board is set to release its December report on consumer confidence by 10 a.m. ET, with predictions indicating an increase to 113.0, following a rise to 111.7 in November. Additionally, the Treasury Department will announce the outcomes of its auction of two-year notes, valued at $69 billion, at 1 p.m. ET.