Markets continue to power northwards on expectations of rate cuts

Uptrend appears intact but some volatility in later part of week possible on fresh news and data flows

- Ven Sreenivasan

All the ingredients for a year-end Santa Claus rally seem to be falling into place, judging by the data flows that have powered markets over the past couple of weeks.

The latest US job numbers have reinforced the belief that Federal Reserve interest rate cuts will remain on track when the US central bank meets on Dec 17 and 18. On Dec 6, the US Bureau of Labour Statistics released data showing payrolls rose by 227,000 in November, just beating estimates, though the jobless rate ticked up to 4.2 per cent as the labour participation rate slipped.

The numbers have raised Wall Street's bet on a 25-basis point Fed rate cut next week to 80 per cent, according to the CME FedWatch tool.

Meanwhile, inflation remains somewhat subdued, while consumer demand remains robust, suggesting that the US economy remains strong.

Also, recent news flows from the Middle East and Ukraine suggest there could be some hope for stability in the geopolitical outlook.

On Wall Street, key indexes clawed their way to new highs. Despite the marquee Dow Jones index giving up a bit of its gains, the risk-on mood continued to pervade Wall Street.

The S&P 500 powered its way to a new high at 6,090.27 points for a 0.96 per cent gain on the week. Similarly, the Nasdaq gained 3.34 per cent last week to a new high at 19,859.77 points.

In Singapore, The Straits Times Index (STI) advanced 2.2 per cent over the first four sessions of the week before a partial pullback on Dec 6 as markets took a cautious tone ahead of the US November employment report. This brought the STI's gain on the week to 1.5 per cent to 3,796.16.