Stock futures rise, dollar weakens in thin trading following holiday

BLOOMBERG

US equity futures edged higher while the dollar extended losses as trading resumed after the Christmas holiday amid investor expectations for earlier and deep interest rate cuts next year.
Stocks in Asia were mixed in a thin trading session with markets including Hong Kong, New Zealand and Australia shut. Emerging Asian currencies rose, with South Korea’s won and Taiwan dollar leading gains against a weak dollar that fell to its lowest level in almost five months.
Some on Wall Street are positioning for further stock gains ahead as the session kicked off the start of the “Santa Claus rally” — a seasonal trend where equities tend to climb into the first few days of the new year. The S&P 500 notched an eight-week winning run on Friday — the longest in more than five years on signs price pressures in the US were easing. Ten-year US Treasury yields slid two basis points to 3.88%.
“As for emerging markets in Asia, ‘silent night’ says much, given that there isn’t particularly inspired trading, with Wall Street equivocating ahead of Christmas,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank. “It looks like a case of averting the China drag and hanging on to earlier Santa rallies being the best case for Boxing day — boxing in risks.”
Stocks fell in mainland China, with the benchmark CSI 300 Index headed for its first drop in four sessions, as investor sentiment remains weak even after the authorities softened their stance following a move last week to tighten curbs on the videogame industry.
Elsewhere, Singapore dollar was little changed after core inflation edged lower in November, giving the central bank room to extend its monetary-policy pause next month to support the economy.
Japan’s auction of two-year sovereign debt saw tepid investor appetite, sending a gauge of demand to the weakest in a year, amid speculation the central bank will end negative interest rates in 2024. Its labour market remained relatively tight in November, keeping pressure on employers to boost wages in order to fill positions.
The benchmark Topix index traded within tight ranges after Bank of Japan Governor Kazuo Ueda’s speech that suggested he’s in no hurry to end the ultra-easy monetary policy. “With the Nikkei 225 at high levels, year-end selling to lock in profits and losses is likely to weigh on the upside,” says Hideyuki Ishiguro, senior strategist at Nomura Asset Management. In the corporate world, Chinese gaming shares outperformed the benchmark after a number of companies announced plans to repurchase their shares following news of the latest government curbs on the sector.
Cathie Wood made her first purchase of shares in LY Corp in over a year, indicating a possible shift toward more positive sentiment on the operator of Yahoo! Japan and popular messaging app Line. Iron ore futures hit $140 a ton, highest in 18 months as traders keep a close eye on China’s steel outlook for the next year. Oil rose slightly after posting the largest weekly gain in more than two months, with shipping disruptions in the Red Sea in focus after a spate of Houthi attacks against vessels in the vital waterway.
Global markets have been buoyed in recent months as traders bet major central banks including the Federal Reserve will aggressively cut interest rates next year as inflation falls. Bond yields have tumbled while the S&P 500 is nearing a fresh record. Data released showed signs of resilience in US growth while the Fed’s preferred underlying inflation metric barely rose in November.