US stock markets experienced choppy trading conditions ahead of the Christmas holiday period, with indices ending on a mixed note but showing an overall upward bias. The Russell 2000 index was the sole exception, closing in the red. The Nasdaq led the outperformance with significant gains driven by a rebound in Nvidia shares. This upturn came after reports indicated that Nvidia had addressed production challenges associated with its Blackwell chip. While the technology sector stood out, other spots, including Consumer Staples, Materials, and Industrials, struggled to keep pace. In terms of market performance, the S&P 500, Nasdaq 100, and Dow Jones Industrial Average saw increases of 0.73%, 1.01%, and 0.16%, respectively.
With liquidity thinning out as investors prepare for the holiday season, reports about economic drivers were scant. The week’s focus shifted towards upcoming reports from central banks, especially the minutes from the Bank of Japan (BoJ) and the Reserve Bank of Australia (RBA), along with Japanese retail sector sales data. These reports are critical as they may offer insights into monetary policy directions and economic recovery strategies for the year ahead, particularly in response to inflationary pressures and global markets’ performance.
The Bank of Canada (BoC) recently released minutes from its policy meeting and noted that the decision to cut interest rates by 50 basis points on December 11 was closely debated among members. There was a split opinion, with some officials advocating for a smaller cut of 25 basis points, arguing for a more patient approach to see the effects of past easing measures. The majority recognized that a revised outlook had emerged, suggesting that the current state of the economy didn’t require continued overly restrictive monetary policies.
On the data front, key economic indicators revealed mixed messages about the state of the US economy. Durable goods orders fell by 1.1%, worse than expected, while new home sales posted a slight increase, showcasing economic resilience in that sector. However, consumer confidence dropped significantly against expectations, highlighting ongoing concerns among consumers. In Canada, GDP improved beyond predictions, indicating stronger economic activity than anticipated as the nation moves into the new year.
In currency markets, the US dollar showed strength amid thin trading liquidity, as many participants were away due to holiday preparations. However, while the dollar rose against several currencies, it faced weaker movements from emerging market currencies, which continue to battle the impacts of US interest rate adjustments and ongoing discussions about trade and tariffs. The anticipation surrounding potential tariffs imposed by President-elect Trump on emerging markets, namely China and Mexico, will loom large as 2025 approaches, further complicating international currency dynamics.
In commodities, oil prices experienced volatility with minor losses due to the strength of the dollar amidst light holiday trading volumes. Energy prices began to show some recovery earlier in the session but were ultimately influenced by broader market trends rather than specific regional developments. Geopolitical tensions, particularly in the Middle East, continue to influence oil markets, with Israeli leadership deliberating on military strategies and their implications for regional stability. Additionally, China’s assertions regarding the US chip investigation hint at broader repercussions for global supply chains, reflecting the interconnectedness of international economic policies and national security considerations in contemporary trading environments.