What’s happening: Most Asian equity markets recorded gains on Thursday amid thin holiday trading volumes.
What happened: Markets sentiment remained elevated after US stock indices extending their rally during the previous trading session on Tuesday.
Stock markets in Japan, China, Australia and India continued their upward trajectory this morning.
Why it matters: US stock markets had risen sharply on Tuesday, driven by gains in tech stocks. This kicked off what is known as the Santa Claus Rally, which typically lasts from the last five trading sessions of the year to the first two sessions of the new year. The S&P 500 surged more than 1% on Tuesday, while the Nasdaq 100 climbed 1.4%.
Japan’s Nikkei 25 index recorded gains for the second straight session, amid a surge in retail stocks, following a travel pact with China. The two nations have also agreed to announce further measures to promote tourist visits.
News of China’s foreign minister looking to visit Japan in 2025 raised hopes of both nations improving their ties.
Market sentiment for Chinese stocks has been supported by a slew of stimulus measures announced by the government. Traders also widely expect more concrete policy support to be announced next year. However, investors are also bracing for a possible escalation in the US-China trade war.
Meanwhile, China’s central bank kept its benchmark interest rate unchanged on the one-year medium-term lending facility at 2%, in-line with expectations.
Bank of Japan Governor Kazuo Ueda did not provide any clear indication of the monetary policy move next month. Markets widely expect the BoJ to begin the new year with a hike in interest rates.
Japan’s Nikkei 225 gained 1.12% to close at 39,568.06, while China’s Shanghai Composite Index rose 0.14% to settle at 3,398.08 on Thursday.
Asian markets continued to climb this morning. The Asia Dow was up 0.84% at 4,137.46. Japan’s Nikkei 225 gained 1.81% to 40,283.13, while China’s Shanghai Composite Index rose 0.29% to 3,407.89. Australia’s AUX 200 was up 0.4% at 8,254.6, while India’s Sensex gained 0.66% to 78,988.20.
What to watch: Investors await the release of economic data on manufacturing PMI from Japan on Monday. Analysts expect the au Jibun Bank Japan manufacturing PMI to rise to 49.5 in December, from November’s eight-month low of 49.0.
Data on China’s current account (1300 UAE Time) will be released today. China is expected to record a current account surplus of $149.6 billion for the third quarter, versus the $60.8 billion surplus recorded in the year-ago period.
Data on China’s manufacturing and non-manufacturing PMIs will also be released on Tuesday. Analysts expect China’s official NBS manufacturing PMI to increase to 50.5 in December, from 50.3 in November, while China’s official NBS non-manufacturing PMI is projected to increase to 50.4 in December, from 50.0 in November.
Context: The CAD/USD edged lower this morning, as investors monitored the Bank of Canada’s monetary policy outlook.
Details: The Bank of Canada is widely projected to continue cutting its benchmark interest rates to combat weak economic growth. Meanwhile, the Canadian government slashed its GDP growth estimates for 2025 to 1.7%, from the earlier forecast of 1.9%. It also revised its 2026 GDP growth outlook from 2.2% to 2.1%.
Some strength in the US dollar exerted pressure on the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose 0.01% to 108.15 this morning.
Slight gains in the price of crude oil, one of Canada’s major exports, lent support to the loonie. WTI crude oil prices rose slightly to $69.65 per barrel this morning.
The CAD/USD forex pair slipped 0.01% to 1.4409 this morning. The S&P/TSX Composite Index gained 0.40% to close at 24,846.82 on Tuesday.
What to watch: With no major economic reports scheduled for release today, investors await data on CFIB Business Barometer on Monday. The CFIB’s Business Barometer in Canada, which improved to 59.7 in November from 55.8 in the previous month, is expected to decline to 55 in December.
Other Markets: European trading indices closed mostly higher on Thursday, with the Stoxx 600, FTSE 100, CAC 40 up by 0.18%, 0.42% and 0.14%, respectively, and the DAX down by 0.18%.
US President Joe Biden asked the US Department of Defense to continue providing weapons to Ukraine, after condemning Russia’s attack on Christmas Day. The news sent the RUB/USD pair lower in forex trading this morning.
Turkey’s central bank slashed its one-week repo auction rate by 250bps, exerting pressure on the TRY/USD forex pair.
Taiwan’s consumer confidence index fell to 74.61 in December, from 75.49 in the previous month. However, the TWD/USD pair rose in forex trading this morning.
South Korea’s Business Survey Index for the manufacturing sector declined to 62 in December, from 68 in November. The latest reading being the lowest since July 2020 exerted pressure on the KRW/USD forex pair.
Argentina’s retail sales grew by 127.1% year-over-year in October. However, this marked a slowdown from the previous month’s 161% growth, which sent the ARS/USD pair lower in forex trading this morning.
Spain’s retail sales (1200 UAE Time), Brazil’s IGP-M inflation (1500 UAE Time), bank lending (1530 UAE Time), unemployment rate (1600 UAE Time), India’s foreign exchange reserves (1530 UAE Time), US goods trade balance (1730 UAE Time), retail inventories (1730 UAE Time), wholesale inventories (1730 UAE Time), EIA natural gas stocks change (1930 UAE Time), EIA crude oil stocks change (2000 UAE Time), EIA gasoline stocks change (2000 UAE Time), EIA distillate stocks change (2000 UAE Time), EIA heating oil stocks change (2000 UAE Time), Baker Hughes oil rig count (2200 UAE Time) and Baker Hughes total rigs count (2200 UAE Time), as well as Russia’s unemployment rate (2000 UAE Time), business confidence (2000 UAE Time), real wage growth (2000 UAE Time) and retail sales (2000 UAE Time).