The Impact of Recent Financial Developments on Markets
Recent policy changes by the Federal Reserve and economic projections have led to a rise in US yields, impacting markets significantly.
The release of US PCE data showing lower than expected growth on Friday helped alleviate some selling pressure on US equities.
While the Bank of Japan decided to hold rates steady, defying expectations of a rate cut, concerns about a potential US government shutdown increased.
The upcoming week is anticipated to have thin liquidity and range-bound trade due to the Christmas holiday and a bank holiday in the UK and other countries.
The Week’s Overview: Federal Reserve’s Hawkish Stance
This past week marked a significant ‘pivot’ by the Federal Reserve from a policy perspective, with a noteworthy impact on the markets.
Market participants are now factoring in approximately 40 basis points of cuts through December 2025, alongside a rise in US Yields.
Market Reactions and Global Trends
The market response was broad-based, with US equities facing their worst day since August. The VIX (volatility index) notably experienced its second largest daily jump in history.
Global equities also felt the pressure on Thursday and Friday, partially alleviated by the US PCE data showing slightly lower growth than anticipated.
International Monetary Developments
Amid rising concerns about demand, oil prices have continued to be impacted. In Asia, the Bank of Japan opted to maintain rates, with a potential rate hike in early 2025.
The US faced a potential government shutdown risk as President-elect Donald Trump indicated reluctance to back a temporary funding bill.
Looking Ahead: Market Expectations and Economic Data
The upcoming week is forecasted to be relatively tranquil due to the Christmas holiday, with some high-impact data releases expected.
Asia Pacific markets await key inflation data from Japan, while Europe, the UK, and the US brace for significant economic announcements.
Throughout this period of uncertainty and potential policy shifts, market participants must remain vigilant and adaptable to changing conditions.
Source : www.marketpulse.com