Why is Santa missing from rally stocks?

 

The Santa rally in stock markets usually starts in mid-December due to festive fervor and New Year optimism.

Asia's stock markets made a wobbly start to the last full trading week of 2022, shrugging off festive cheer with the prospect of a further hike in interest rates next year.

The Federal Reserve and the European Central Bank raised rates and promised more last week, and speculation is even building that the Bank of Japan, which meets on Monday and Tuesday, will return to its ultra-accommodative stance in the future. Watching for change.

Japan's Nikkei fell 1% in early trade and the yen, which rose nearly 0.5% to 136.00 per dollar, was the biggest mover in quiet currency trading. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.1%.

Japan will consider revising the 2% inflation target agreed between the government and the central bank next year, four sources familiar with the matter told Reuters. News agency Kyodo first reported the potential change. When asked about Kyodo's report, Chief Cabinet Secretary Hirokazu Matsuno said there was no truth to the government's willingness to revise its inflation pact.

"Where there's smoke, there's fire," said Rodrigo Catril, strategist at National Australia Bank in Sydney.

"News like this is giving us the perspective that the government will open the door for the BOJ to have a more accommodative approach," he said, "and that some of this uber-undervaluation of the yen could be reversed."

The yen was the worst performing G10 currency this year with a 15% loss against the dollar, driven mainly by the gap between rising US rates and stable Japanese rates. Japanese government bonds sold off on Monday morning.

US rates held steady last week despite expectations that the Fed would hike further, as traders worried that interest rates were already high enough to hurt economic growth.


The S&P 500 dropped 2% last week. It is down 20% for the year and has failed in several attempts to trade permanently above the 200-day EMA. S&P 500 futures rose 0.1% in early Asian trade.

In Europe, the bond market was taken by surprise by the ECB's unexpectedly dovish tone.

lack of good vibes

A softening of year-end rising economic data isn't helping the mood much, with the market wondering if the U.S. will close 11 of the last 15 times in the last two weeks of December. years.

Shane Oliver, strategist at AMP Capital, said, “The Santa rally typically begins in mid-December due to festive cheer and New Year optimism, no bonus investments, low volume and no capital raising at this time of year.” "

"It has become weaker or less reliable in years when the market is falling year-on-year," he said.

European, Japanese and US trading activity shrank in December, surveys last week bid for the safe haven dollar and capped gains for the euro. The euro hit a six-month high of $1.0737 last week, although it last bought $1.0607.

Business confidence in China also fell to its lowest since the World Economic Survey began collecting the data in January 2013 and China's stock markets have struggled to extend a rally fueled by the easing of COVID controls. The Hang Seng fell 0.6%.

Hopes of a recovery in demand steadied oil prices on Monday, with Brent crude futures rising 1.2% to $80.06 a barrel, but it has barely risen for the year. Gold was steady at $1,793 an ounce. Bitcoin is trading below $17,000.