Oil rises in price amid rising geopolitical risks in the Middle East. Santa Claus rally supports broad market

By JustMarkets

At yesterday’s stock market close, the Dow Jones Index (US30) was up by 0.43%, while the S&P 500 Index (US500) added 0.42%. The NASDAQ Technology Index (US100) closed positive by 0.54% on Tuesday. Stocks rose on Tuesday in leisurely holiday trading as markets in Europe and parts of Asia were closed for the Christmas holiday. Meanwhile, the S&P 500 Index (US500) hit a nearly two-year high, and the NASDAQ index (US100) hit a record high. Stocks are supported by the seasonal Santa Claus rally (prices typically rise between Christmas and the first days of the New Year). Strengthening chip stocks boosted the overall market and pushed the Nasdaq 100 Index to a record high, while a more than 2% rise in WTI crude oil prices drove energy stocks higher.

Rising holiday spending indicates consumer confidence in the economic outlook, which is supporting stocks. According to Mastercard (MA), retail sales data, from November 1 through December 24, in-store and online sales (excluding automotive) were up by 3.1% year-over-year, while spending at restaurants was up by 7.8%.

Equity markets in Europe did not trade yesterday due to the holidays.

According to economists, the Bank of England is set to cut interest rates by at least 125 basis points next year, with the first quarter-point cut coming at the MPC meeting on May 9. This dovish reassessment is partly due to recent reports on UK inflation and GDP. As a result, some banks see UK inflation at 3% at the end of H1 2024, while others see it falling to the Bank of England’s 2% target. According to the latest GDP statistics, the final Q3 GDP contracted by 0.1%, missing expectations, while Q2 GDP data was revised downwards. Lower inflation will be needed next year to give a boost to the weak UK economy, which is close to recession.

WTI crude oil prices jumped more than 2% to a 3-week high amid geopolitical risks after the US military struck three sites in Iraq, targeting an Iranian-backed terrorist group blamed for a series of drone attacks on US troops. In addition, Britain’s navy reported an attack on two commercial ships traveling in the Red Sea near Yemen.

Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) gained 0.16% over yesterday, China’s FTSE China A50 (CHA50) closed at its opening price on Tuesday, Hong Kong’s Hang Seng (HK50) and Australia’s ASX 200 (AU200) were not trading due to holidays.

Japanese and Indian stock markets were Asia’s best performers through 2023. Key supportive factors were the Bank of Japan’s soft stance and optimism about the Indian economy. On the other hand, Chinese blue-chip stocks performed the worst in the region as lingering concerns over the country’s economic recovery led investors to pull out of local markets.

S&P 500 (US500) 4,774.75  +20.12 (+0.42%)

Dow Jones (US30) 37,545.33 +159.36 (+0.43%)

DAX (DE40)  16,706.18 0 (0%)

FTSE 100 (UK100) 7,697.51 0 (0%)

USD Index  101.41 −0.30 (−0.29%)

• – US Richmond Manufacturing Index (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.