Global markets are heading into the busiest week before Christmas, fully engaged with political shifts and central bank decisions. Germany's no-confidence vote by Chancellor Olaf Scholz was accepted, paving the way for a possible early election, and hasn't overshadowed the country's stock market, which has risen 21% this year. The upcoming central bank meetings, especially the Federal Reserve, are keeping investors on the sidelines waiting for official announcements. While political turmoil is occurring from South Korea to Canada, with both countries calling for the resignation of its top leadership, financial markets remain relatively stable. The Bank of Japan is believed to keep interest rates steady, focusing on their minimum taxable income threshold instead. As the new year approaches, rising market volatility is fearful, although it could taper off if there is no surprise decision by any of those central banks.
EQUITY
The Nasdaq starts the week in euphoria, gaining over 1% in anticipation of Microstrategy inclusion effective next Monday. Tesla received a major boost after Wedbush Securities raised Tesla's price target to $515, or 11% higher than the market price—the highest on Wall Street. Apple's key chip supplier, Broadcom, gained over 38% in just 2 days after its earnings, projecting higher revenue from AI-related chips. The fear index, VIX, jumped 6% ahead of the FOMC meeting, which some analysts say is fine as long as it's under 20.
GOLD
Gold prices gain slightly as the US dollar takes a small step back with overall steady price movement as investors wait for central banking decisions. Last week ended weak even though it closed slightly higher as traders locked in profits just before year end. Higher treasury yield might push price lower as the technical analysis saw price testing the same high with a higher low. A bullish factor may become apparent if the volatility index continues to rise, although unlikely.
OIL
Benchmark crude oil prices fell slightly at the top of its sideways bound with OPEC holding the market by its noose with its uncertain production ceiling. China's economic landscape plays a big factor, with industrial output inching up but retail sales and home prices still weak, with its 10-year government bond yield continuing to decline, implying safe-haven buying. The Federal Reserve and PBoC decision could provide some economic stimulus, potentially supporting oil prices in the near term.
CURRENCY
The U.S. dollar was slightly weaker as the market recalibrated their projection for interest rates in 2025, with traders now seeing fewer cuts or a total pause ahead. The Federal Reserve is widely expected to make its 25 basis point rate cut this Wednesday, although strong services sector activity and healthy GDP growth may challenge current projections for next year. The dollar's strength is evident across currency markets, with the euro sliding and other currencies like the Australian and New Zealand dollars hovering near yearly lows.
