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What’s happening: US stocks mostly gained on Monday, taking the Nasdaq to a record high.
What happened: Investor risk appetite improved on expectations of the Federal Reserve announcing an interest rate cut on Wednesday.
While Nvidia’s stock continued to decline, shares of other major tech companies climbed.
Why it matters: The US Federal Reserve is gearing up to announce its interest rate decision on Wednesday. Markets have fully priced in an interest rate cut of 25 basis point (bps).
Lower interest rates support growth stocks, like the major tech companies, as they are heavily reliant on capital.
Markets also responded to PMI data released by the US. Although the S&P Global US manufacturing PMI fell to 48.3 in December, from 49.7 in the previous month, the services PMI climbed to 58.5, from 56.1 in November. This came is much higher than analyst expectations of a decline to 55.7 and represented the strongest growth in the services sector since October 2021.
Market sentiment for tech stocks has improved after US President-elect Donald Trump selected Andrew Ferguson to head the Federal Trade Commission. Ferguson is expected to be much softer on antitrust enforcement against big tech companies than his predecessor Lina Khan who proved to be one of the nation’s most aggressive competition watchdogs.
While naming Ferguson, Donald Trump said that he would be “the most America First, and pro-innovation FTC Chair” in the country’s history.
Shares of Nvidia declined 1.68% on Monday, as investors continued to take profit after the chipmaker announced higher-than-expected results. Despite the 5% decline over the past five trading days, Nvidia’s stock is still up more than 174% year to date. Shares of rival chipmaker Broadcom recorded 11% gains.
Among the MAGA stocks, Google-parent Alphabet climbed 3.54% and Amazon rose 2.4%, which both Apple and Microsoft added around 1% each.
Trump’s pro-autonomous driving policies supported Tesla. The stock spiked more than 6% on Monday to reach another record high.
The Nasdaq 100 rose 1.24%, or by 247.17 points, to close at 20,173.89 on Monday, while the S&P 500 added 0.38% to settle at 6,074.08. The Dow Jones index bucked the trend, closing 110.58 points or 0.25% lower at 43,717.48.
What to watch: Investors will watch comments from Fed officials about the pace of the US central bank’s rate cuts next year. Markets will also monitor further comments by Donald Trump.
Some data releases will also be in focus. US is scheduled to report retail sales (1730 UAE Time) and industrial production (1815 UAE Time) data today. Retail sales in the US, which grew 0.4% in October, is expected to grow by 0.5% in November. Industrial production, which contracted by 0.3% in October, is projected to grow 0.3% in November.
Context: The CAD/USD continued its downturn this morning, following the resignation of Canada’s finance minister.
Details: The Canadian dollar has been on a downtrend this year. The Bank of Canada cut its benchmark interest rate by 50 basis points (bps) last week. This was the fifth consecutive rate cut since June and kept the Canadian dollar in check.
The CAD/USD fell to four-and-a-half year low on Monday, as investors weighed the implications of the surprise resignation of Canada’s Finance Minister.
In an unexpected move, Deputy Prime Minister Chrystia Freeland resigned as the country’s Finance Minister on Monday over her disagreement with Prime Minister Justin Trudeau over tariff threats by US President-elect Donald Trump.
Canada’s Public Safety Minister Dominic LeBlanc was appointed to replace Freeland as the country’s Finance Minister on Monday.
Prime Minister Justin Trudeau, who has been facing criticism over the high cost of living and strained geopolitical relationships, is now under immense pressure to resign.
A declined in the price of crude oil, one of Canada’s main exports, also exerted pressure on the loonie. WTI crude prices fell by 0.16% to $70.60 on Monday.
Canada’s housing starts rose by 8.4% to 262,400 units in November, above market estimates of 248,200 units. This marked the highest level of housing starts in the country in four months. The positive data release was unable to support sentiment for the Canadian dollar as the country faces a political crisis.
The CAD/USD was down 0.04% this morning, after having lost around 1.5% over the past month. The forex pair has declined by more than 7% year to date.
What to watch: Canada is scheduled to report inflation rate, New Housing Price Index and foreign securities purchases at 1730 UAE Time today. The annual inflation rate in Canada, which rose to 2% in October from a three-year low of 1.6% in the previous month, is expected to remain flat at 2% in November.
New housing prices, which fell by 0.2% year-on-year in October for the first time in four months, is projected to decline by 0.3% in November. Foreign investors increased their purchases of Canadian securities by C$29.3 billion in September. This is expected to decline to C$24.5 billion in October.
Other Markets: European indices ended lower on Monday, with the DAX 40, CAC 40, STOXX Europe 600 and FTSE 100 down by 0.45%, 0.71%, 0.12% and 0.46%, respectively.
US President-elect Donald Trump said President Volodymyr Zelenskyy should prepare to make a deal to end the Russia-Ukraine war. The news sent the RUB/USD pair higher in forex trading this morning.
France’s HCOB Composite PMI improved to 46.7 in December, from 45.9 in November, coming in better than market estimates of 45.9. However, this being the fourth consecutive month of contraction in the private sector sent the CAC 40 lower by 0.7% on Monday.
Eurozone’s HCOB Composite PMI rose to 49.5 in December, from 48.3 in November, beating forecasts of 48.2. However, this marked the second straight month of contraction in the private sector and sent the EUR/USD slightly lower in forex trading this morning.
India’s balance of trade deficit widened to $37.84 billion in November, from $27.1 billion in the previous month. The figure coming in worse than market expectations of a deficit of $23.9 billion exerted pressure on the INR/USD forex pair.
Singapore’s balance of trade surplus grew to S$6.52 billion in November, from $$4.29 billion. The figure coming in much better than market expectations of S$3.9 billion sent the SGD/USD higher in forex trading this morning.
Eurozone’s ECB Lane Speech (13:00 UAE Time), Inflation Rate (14:00 UAE Time), and Construction Output (14:00 UAE Time), UK’s Industrial Trends Orders (15:00 UAE Time), Mexico’s Aggregate Demand (16:00 UAE Time) and Private Spending (16:00 UAE Time), and US 30-Year Mortgage Rate (16:00 UAE Time), Purchase Index (16:00 UAE Time), Building Permits (17:30 UAE Time), Current Account for Q3 (17:30 UAE Time), Housing Starts (17:30 UAE Time), EIA report on changes in the stockpiles of Crude Oil, Gasoline, Distillate and Heating Oil (19:30 UAE Time), and FOMC Economic Projections (23:00 UAE Time).
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