Global Markets Rally Ahead of Christmas

The German stock exchange is beautifully decorated for the Christmas season, as the DAX graph is displayed in Frankfurt, Germany, on December 23, 2024.

NEW YORK/LONDON,– Global markets experienced a notable surge in a pre-Christmas rally, with Wall Street leading the way amid light trading on Thursday. Investors are optimistic that the U.S. Federal Reserve may ease its monetary policy in 2025, which has resulted in rising Treasury yields and a stronger U.S. dollar.

In the late morning session, the Dow Jones Industrial Average gained 0.47%, the S&P 500 increased by 0.73%, and the Nasdaq Composite climbed 0.99%. U.S. stock trading is set to close early, with markets shutting down at 1:00 p.m. EDT (1800 GMT) and the bond market closing an hour later. Most global financial markets will be closed on Wednesday for Christmas, with some observing a second holiday on Thursday.

“Limited news and data are focusing attention on a potentially more hawkish Fed stance,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

Global Gains Across Regions

MSCI’s global stock index rose over 0.5%, reflecting strong performances across several major markets. The pan-European STOXX 600 increased by 0.18%, while the UK's FTSE 100 and France’s CAC 40 both posted modest gains of 0.19% and 0.14%, respectively. However, Germany's markets remained closed for the Christmas holiday.

In Asia, Chinese stock markets saw a boost after reports surfaced indicating that Beijing plans to issue a record amount of special treasury bonds next year to enhance fiscal stimulus measures. The CSI300 blue-chip index and the Shanghai Composite ended 1.3% higher, while Hong Kong’s Hang Seng Index rose by 1.1%.

The finance ministry in China announced plans to support fiscal consumption in 2025, which includes increasing pensions and medical insurance subsidies as well as promoting trade-ins for consumer goods. Despite this, there are concerns regarding the future of China’s economy, especially in light of potential U.S. tariffs.

MSCI’s index for Asia-Pacific shares outside Japan saw a rise of 0.37%, showing optimism across the region.

Fed Signals Influence Market Sentiment

Investor sentiment remains heavily influenced by the Federal Reserve's monetary policy decisions, especially following last week’s 25-basis-point interest rate cut. This has led to speculation regarding further easing in 2025, with markets anticipating around 35 basis points of cuts. Analysts predict this could include one rate cut of 25 basis points and possibly a second one at a later stage.

U.S. Treasury yields have reacted accordingly, with the two-year yield rising slightly to 4.359% and the benchmark 10-year yield hitting a seven-month high at 4.629%.

“While uncertain, we expect a gradual policy rate of 3.75% as the Fed navigates through inflation and labor market issues,” analysts at Citi Wealth commented.

Currency and Commodities Update

The U.S. dollar has strengthened, with the dollar index rising by 0.14%, nearing a two-year high. The euro fell by 0.15% to $1.0389, and the yen was trading close to a five-month low at 157.35 per dollar.

Spot gold gained 0.13%, reaching $2,616.26 an ounce, marking a remarkable 27% increase this year—its largest annual rise since 2010.

In energy markets, U.S. crude oil prices increased by 1.56%, reaching $70.32 per barrel, while Brent crude saw a rise of 1.51% to $73.73.

As markets prepare for the holiday season, traders are remaining cautious about inflation forecasts, monetary policy, and ongoing geopolitical uncertainties, setting the stage for a dynamic beginning to 2025.

Markets, Stocks, Investors