U.S. index futures are set to open higher on Monday, suggesting potential early gains in stocks following last Friday's subdued market performance. Investors are optimistic about interest rates as the Federal Reserve's monetary policy decision looms on Wednesday. The Fed is widely expected to reduce interest rates further, with CME Group's FedWatch Tool indicating a 97.1 percent probability of a 25-basis point cut.
Market participants will closely scrutinize the Fed's statement and economic projections, particularly their interest rate forecasts, as recent inflation data raises concerns about the pace of rate reductions next year. In U.S. economic developments, the Federal Reserve Bank of New York reported a significant decline in regional manufacturing activity for December.
On Friday, stocks struggled to maintain an upward trajectory and fluctuated throughout the day before closing mixed. The Dow fell by 86.06 points or 0.2 percent to 43,828.06, marking its seventh consecutive decline. The S&P 500 dipped slightly by 0.16 points, closing at 6,051.09, while the Nasdaq gained 23.88 points or 0.1 percent, ending at 19,926.72.
For the week, the major indices displayed mixed results: the Nasdaq rose by 0.3 percent, whereas the S&P 500 dropped by 0.6 percent, and the Dow decreased by 1.8 percent.
The early market optimism was partially fueled by Broadcom's (AVGO) favorable earnings report, which led to a 24.4 percent surge in its stock, driven by upbeat fiscal fourth-quarter results and strong demand for custom AI chips.
However, buying enthusiasm diminished as traders anticipated the Federal Reserve meeting. The Labor Department revealed an unexpected increase in U.S. import prices for November. Additionally, gold stocks further declined, following an ongoing slump in gold prices, pulling the NYSE Arca Gold Bugs Index down by 2.7 percent. Steel stocks also weakened significantly, with the NYSE Arca Steel Index dropping 2.6 percent, reaching its lowest level in nearly three months. Computer hardware, airline, and housing stocks experienced downward pressure, whereas semiconductor and networking stocks demonstrated strong upward movements.
**Commodity and Currency Markets**
In commodities, crude oil futures are down $0.65 to $70.64 per barrel after gaining $1.27 to $71.29 on Friday. Gold futures, having declined $33.60 to $2,675.80 per ounce in the prior session, are recovering slightly by $3.80 to $2,679.60 per ounce.
On the currency markets, the U.S. dollar is exchanging at 154.03 yen, up from 153.65 yen in New York's Friday trading. In relation to the euro, the dollar is trading at $1.0498, a marginal change from $1.0501 on Friday.
**Asia Markets**
Asian markets ended mixed on Monday amid China's mixed economic data and focus on upcoming interest rate decisions from the Bank of Japan and Federal Reserve. The dollar remained near a three-week high against major currencies, while the Japanese yen continued to struggle after a tough last week due to expectations that the Bank of Japan will maintain its rate policy.
China's Shanghai Composite Index eased by 0.2 percent to 3,386.33 amid mixed economic signals and regulatory promises to stabilize markets. Hong Kong's Hang Seng Index dropped 0.9 percent to 19,795.49 despite tentative prospects for rate cuts and adjustments from China next year.
Official data from China illustrated uneven growth for November, with industrial production expanding, housing prices declining at a slower rate, but retail sales growth waning, indicating potential need for further stimulus for sustained economic growth.
Japanese markets closed lower after a volatile session, with the Nikkei 225 Index slightly off at 39,457.49 and the broader Topix Index down by 0.3 percent at 2,738.33, as investors exercise caution ahead of the Bank of Japan meeting.Seoul's stock exchange faced a modest decline following the impeachment of President Yoon Suk Yeol over the weekend. The Kospi closed 0.2% down at 2,488.97, as early gains were wiped out by profit-taking after a four-day ascent. Prominent companies such as Samsung Electronics, Hyundai Motor, and Kia Corp. saw a drop of 1-3%, while SK Hynix surged by 2.2%.
In Australia, stocks also ended lower, particularly weighed down by losses in the technology and mining sectors. The S&P/ASX 200 Index fell by 0.6%, closing at 8,249.50, while the All Ordinaries Index declined by 0.7% to finish at 8,494. Meanwhile, in New Zealand, the S&P/NZX-50 Index edged upwards by 0.3%, reaching 12,797.33.
European Markets
European stock markets mostly trended downward on Monday following an unexpected downgrade of France's credit rating by Moody's, which increased the nation’s borrowing costs and cast doubt on the new government’s ability to address financial challenges. However, a silver lining emerged with a survey revealing that the decline in eurozone business activity has slowed this month.
The preliminary composite Purchasing Managers' Index for the eurozone, as compiled by S&P Global for HCOB, increased to 49.5 in December, up from 48.3 in November. Eurozone government bond yields remained stable as European Central Bank President Christine Lagarde confirmed that the worst inflationary periods have passed and reiterated the central bank's intention to further reduce its key interest rate.
In terms of specific markets, France's CAC 40 Index fell by 0.9%, while both the UK's FTSE 100 Index and Germany's DAX Index declined by 0.4%.
On the corporate front, Novo Nordisk A/S saw a significant increase in its share price following its announcement to invest 8.5 billion Danish kroner in a new production facility in Odense, Denmark. Swiss pharmaceutical firm Basilea Pharmaceutica experienced a surge as well after securing an exclusive distribution and license agreement with Innoviva Specialty Therapeutics for the commercialization of its hospital antibiotic Zevtera in the U.S. Additionally, Vivendi's stock soared in Paris with its new spin-off entities, Canal+, Havas, and Louis Hachette Group, beginning trading in London, Amsterdam, and Paris respectively.
Conversely, Porsche Automobil Holding SE faced a slump after retracting its profit forecast for 2024, citing potential non-cash impairment charges linked to its investments in Volkswagen AG and Porsche AG. Likewise, Entain, the owner of Ladbrokes, saw its shares drop in London following the commencement of civil penalty proceedings by Australia's anti-money laundering regulator due to alleged legal breaches.
U.S. Economic Updates
In the United States, the Federal Reserve Bank of New York released its latest report indicating a sharp decrease in regional manufacturing activity in December. The general business conditions index plummeted to 0.2 from November's 31.2, far lower than economists' expectations of 12.0, though a positive reading still signals growth. Looking forward, firms remain cautiously optimistic, with the index for future business activity declining to 24.6 in December from November's 33.2.
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