Global stocks climb after holiday break
NEW YORK: Global stocks climbed Wednesday as several more major markets returned from a Christmas holiday break, with traders optimistic that the US Federal Reserve will cut interest rates early next year. London led the way among major European stock markets as trading on its benchmark FTSE 100 index resumed for the first time since Friday. Hong Kong and Australia finished higher after returning from their own breaks.
Wall Street stocks advanced Tuesday on continued positive momentum, extending a banner stretch in light trading following the Christmas holiday. Equities were in positive territory the entire session as traders settled in for an expected “Santa Claus rally” in the historically strong period of the calendar.
Stocks often rise during this stretch, with market watchers pointing to the light news flow, tepid trading volume and festive atmosphere as drivers of market action. The Dow Jones Industrial Average advanced 0.4 percent to 37,545.33. The broadbased S&P 500 also gained 0.4 percent to 4,774.75, while the tech-rich Nasdaq Composite Index climbed 0.5 percent to 14,074.57.
US stocks have been on a tear since late October as inflation has moderated, prompting the Federal Reserve to halt a streak of interest rate hikes and begin leaning towards expected rate cuts in 2024.
Yet a note from Charles Schwab pointed to increased geopolitical risk after US air strikes targeting pro-Iranian forces in Iraq added to tensions amid the Israel-Hamas war in Gaza.
Among individual companies, Manchester United jumped 3.5 percent after British billionaire Jim Ratcliffe reached a deal to buy a 25 percent stake in the team for about $1.3 billion and vowed to return the club to the “top of world football.” Apple slipped 0.3 percent after the Biden administration opted not to veto a ruling on patent infringements, a move that puts into effect a US import ban on some smart-watch models. The order stemmed from a complaint made to the International Trade Commission in mid-2021 accusing Apple of infringing on medical device maker company Masimo Corp’s “light-based oximetry functionality.”
Drug company Bristol Myers Squibb fell 1.6 percent after reaching a deal to buy RayzeBio for $4.1 billion, bolstering its oncology-related holdings. Shares of RayzeBio more than doubled. “Global stock markets seem to be headed for an end-of-year ‘Santa rally’ as traders and investors return to their desks after the Christmas break, gearing up for the final push into 2024,” noted Walid Koudmani, chief market analyst at XTB trading group. “The ongoing optimism surrounding the prospect of central banks initiating interest rate reductions in 2024, with multiple cuts expected next year, continues to propel shares higher.”
Market sentiment has been largely positive since the Fed’s most recent monetary policy meeting, when it indicated the rate-hike cycle could be nearing its end as global inflation slows. “The prevailing sentiment suggests a ‘risk-on’ environment in US markets, with renewed optimism focused on anticipating swifter and earlier rate cuts,” said Stephen Innes, managing partners at SPI Asset Management.
But Ipek Ozkardeskaya, senior analyst at Swissquote Bank, warned that “the market optimism is overstretched” and that “the Fed will probably cut rates but not at the speed that’s been currently priced in”. Global markets were also positively affected by the so-called “Santa Claus rally”, which has historically seen stocks tick higher—albeit at thinner volumes—during the end-of-year holiday period.
“Once the Santa high fades, the hangover will hit,” Ozkardeskaya said. Elsewhere on Wednesday, oil markets reversed last week’s gains, mainly owing to fears regarding the possible regional spread of the conflict between Zionist entity and Hamas.