Risk appetite continues to recover as US PCE data came in lower than expected on Friday and most major stock indexes traded higher in the past few hours.
- Friday’s risk-on rally driven by lower-than-expected US PCE price index data (the Fed’s preferred inflation metric) looks set to continue, with most major stock indexes trading higher than today’s Tokyo open. The HSI, NASDAQ 100 and S&P 500 are all up today. Markets expect the Fed’s next rate cut won’t happen until March 2025.
- In the forex market, since the Tokyo open today, trading has been quiet as we have almost reached the Christmas shutdown. The EUR/USD currency pair remains in a valid long-term bearish trend after making a strong bearish move lower after the Fed meeting to trade not far from the multi-year low above $1.0300. Minutes from the Bank of Japan-Reserve Bank meeting if Australia produced little movement in those currencies and caused no real surprises, although the RBA said the Bank was more confident that inflation had come under control, which could lead to a rate hike more likely in early 2025.
- Canada’s GDP data released yesterday was stronger than expected, showing monthly growth of 0.3% when an increase of just 0.2% was expected.
- The 10-year US Treasury yield hit a new six-month high above 4.599% yesterday. Trend traders will be interested in going long here, but many analysts will argue that the rate is unlikely to be sustained over 10 years.
- Cocoa futures hit a new all-time high just below $13,000 a tonne last week, although there has been a minor pullback from the highs in the past few days. Cocoa has seen a very strong rise in value (about 40% increase) in the past few weeks, and the market will remember the spectacular rally in Cocoa in 2023, when the price of the superfood tripled in just 4 or 5 months. Trend traders will be interested in going long cocoa futures. Unfortunately for retail traders, the smallest cocoa futures available is a $100,000 position, but there is an Exchange Traded Commodity Symbol Cocoa (ETC) on the London Stock Exchange that is very affordable. “ETC aims to replicate the Bloomberg Cocoa Sub Total Return Index (BCOMCCTR) by tracking the Bloomberg Cocoa Sub Excess Return Index.”
- As it is Christmas Eve, the markets are likely to be quiet today.
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