US and European futures are trading higher as investors are hoping for the Santa Rally to continue in the final stretch of the year. Most of the optimism in the market is mainly due to the news that indicates that China is finally ready to scrap its quarantine rules for its international travelers. This is certainly something that traders and investors have been hoping for a long period of time as China remained very strict with its zero-covid policy throughout this year. Nonetheless, recession remains a major among investors and traders, and this is likely to keep a cap on any corrective moves in the markets. It is widely anticipated that trading volume is expected to remain on the low side due to a short holiday week.
As mentioned before, the biggest worry for many traders and investors is how far the Fed will go with its interest rate and how much adverse influence it will have on the US economy. From their tone, it is very much clear that the Fed isn’t afraid of continuing their process of hiking interest rates and recession remains the least concern for them as they want to bring inflation lower at any cost.
The core PCE inflation data that came out on Friday matched the forecast number of 0.2% but what made traders really worried was the Durable Goods order and personal spending m/m data. Both of them failed to impress their forecast and pushed traders further on edge causing the markets to melt further. However, it is the bargain hunters that saved that day for markets and the Dow Jones Industrial Average finished higher by 176 points, which is equivalent to a gain of 0.5%, on Friday during the regular session. Both the S&P 500 and the Nasdaq Composite recorded gains of 0.6% and 0.2%, respectively.
Overall, the US stock market is very much on track to post its worst annual performance since 2008. It is likely that in 2023, things may not improve that much, especially during the first few quarters as inflation is more than likely to remain anchored in place.
In the currency market, the Japanese Yen remains an interesting currency to watch out for as the recent tweet in the BOJ’s monetary policy continues to create a major shock. The BOJ’s governor tried to assure the market players on Monday that the bank is still very much committed to its loose monetary policy, but the reality may be a little different in 2023. This is because inflation has moved in the direction that the BOJ wanted for many years, and this leaves less incentive for the BOJ to continue to parade its monetary policy in the direction that it has been doing for a long period of time.
In the crypto space, the price action continues to remain lifeless as the BTC continues to consolidate near its new trading range of 16,800, which is immensely close to its psychological support of 15,000, which no one to be challenged again. The fact that the bulls are struggling to keep the price moving higher is a concern for many, and the path of the least resistance remains skewed to the downside.