All three US stock indexes notched their eighth weekly gains in a row
Wall Street stocks saw a mixed close on Friday ahead of the Christmas holiday weekend even as weaker-than-expected inflation data added to bets for Fed rate cuts next year. PCE price index rose 2.6% on a yearly basis last month, down from the 2.9% increase recorded in October. The result also came in below the market expectation of 2.8%. Furthermore, on a monthly basis, the PCE declined 0.1%, while the core PCE increased 0.1%. After the release, markets saw a strong chance of the Fed cutting the policy rate as early as March. Still, the S&P 500 rose just 0.2%, the Dow Jones slipped less than 0.1%, and the Nasdaq composite edged 0.2% higher. All three indexes notched their eighth weekly gains in a row.
Asian equities were mixed to start the last trading week of the year in holiday-thinned trade on Tuesday. Japan’s Nikkei 225 index finished less than 0.1% higher after Bank of Japan Governor Ueda highlighted progress towards the 2% inflation target, which implies that the central bank could eventually end its ultra-dovish stance. This year, the index was among the best performers in the region, heading for a 27% gain. Extending recent losses, China’s Shanghai Composite index fell 0.68% during the session. In contrast with Japan, Chinese stocks were the worst performers in Asia this year. Australia, New Zealand and Hong Kong markets were closed for Boxing Day holiday.
Meanwhile, the US dollar stays pressured on Tuesday, albeit the bearish momentum has slowed. The USD index has settled slightly above the 101.50 support zone, still digesting a weak inflation report out of the US, with Fed rate cut bets rising, adding to negative tone surrounding the greenback. Against this backdrop, EURUSD keeps clinging to the upper end of the trading range, staying close to August highs seen around 1.1040 last week. Despite thin trading conditions and some overbought signals, the shared currency stays above the 1.10 figure, suggesting traders refrain from profit-taking at this stage. Should the bullish momentum persist in the near term, the pair may retest the mentioned multi-month tops to target the 1.1100 mark.