A quiet holiday trading session saw shares across Asia mostly edge higher on Monday, even as many global markets remained closed for Christmas celebrations. Signs of cooling inflation in the US and cautious optimism over the economic outlook buoyed investor sentiment after Wall Street capped its eighth straight weekly gain last Friday.
The Milestone The US Market Hit Last Week
The S&P 500 rose 0.2% last Friday to close in on its record peak from early 2021, now sitting less than 1% below the all-time high it set nearly two years ago at 4,754.63. Marking a milestone, the index clinched its longest weekly winning run since 2017 driven by falling treasury yields and hopes of less aggressive rate hikes from the Federal Reserve going forward.
How Other Major Indices Fared Over The Week
While the S&P 500 stayed just shy of reclaiming its record, the blue-chip Dow Jones slipped 0.1% on Friday to 37,385.97. The tech-heavy Nasdaq Composite fared slightly better, gaining 0.2% to end the week at 14,992.97.
What Drove Last Week’s Gains
Much of Wall Street’s rally has tracked the steady decline in Treasury yields since October, easing pressure across the financial system. The benchmark 10-year yield hovered around 3.90% on Monday, well off its October peak above 5% as the Fed’s aggressive rate hikes through the year finally reined in red-hot inflation.
Investors welcomed news that the central bank’s preferred inflation gauge, the core personal consumption expenditures price index, slowed substantially more-than-expected to 2.6% in November from 2.9% in October. Other data indicated consumer spending remains resilient while sentiment is improving and demand for big-ticket manufactured items is firming up.
The figures likely give the Fed room to moderate the pace of rate increases through 2024 after lifting rates over 5% this year, the highest since 2007. Markets widely expect a 50 basis-point raise at the next policy setting in February, rather than another 75 basis-point hike.
Asia’s Subdued Monday Trading Session
With most global markets closed for Christmas Day on Monday, trading volumes remained light across Asia. Japan’s Nikkei 225 added 0.3%, while benchmarks in Shanghai and Taiwan edged up 0.1%.
China’s regulators released draft rules late last week to increase oversight over its big tech giants that saw over $100 billion wiped off the market value of Tencent, Alibaba and other gaming and social media firms. Concern over the crackdown sent shares plunging before recovering on Monday as regulators approved dozens of new video games in show of support for the massive industry.
Currencies And Commodities
The US dollar slid against the safe-haven Japanese Yen to 142.38 from 142.49 on Friday. The Euro also clawed higher to $1.1029 from $1.1019 amid the weaker Greenback.
Oil held steady with Brent Crude rising above $85 while gold edged up to $1,813 in quiet holiday trading.
Outlook For The Start Of 2024
As the year draws to a close, early 2023 looks set fair for stocks – though risks around an economic slowdown linger. With inflation cooling and confidence in the American consumer still robust, markets expect the Fed’s firefighting efforts may well engineer an oft-elusive soft landing for the economy.