Overnight Headlines

*S&P500 hits a fresh record high in thin holiday trade

*PBoC pledges more “proactive” monetary policy, hints at easing property curbs

*Brent crude soars through $78 as the risk trade cranks up

*Japan industrial production for November rises 7.2% vs 4.8% m/m expected

USD was subdued as is often the case around this time of the year. With the risk mood mildly positive, the yen lagged as USD/JPY hit one-month highs close to 115. The cycle high from late November sits at 115.52. GBP was the leading major, building on pre-Christmas gains and not far from a one-month high. Cable rose above 1.3411 and up to the 50-day SMA at 1.3437. EUR was quiet still trading around 1.13. AUD looks like it wants to push higher above the recent high at 0.7251.

US equities closed at a record high marking the fourth straight session of gains. An ecommerce boom in retail sales underscored economic strength and eased worries from Omicron-driven flight cancellations which hit travel stocks. The S&P500 rose 1.38%, the Nasdaq was up 1.39% and the Dow climbed 0.98%. Asian stocks are in the green with the Nikkei posting one-month highs. US futures are mixed.

Market Thoughts – Positive risk sentiment into 2022

The traditional Santa rally is again playing out so far. This week has historically seen the main gains for the bullish festive move in stocks. It should continue into the first couple of days of 2022. Omicron news remain modestly upbeat as the UK and France forego imposing more social restrictions.

The bond market remains muted with the US 10-year yield still stuck below 1.5% and just below the 200-day SMA. Liquidity will remain low until after New Year with equity investors having half an eye on the Q4 earnings season which kicks off in mid-January. Will higher input costs see profit margins continue to get squeezed?

Chart of the Day – Gold creeps higher

Gold is enjoying the last few days of the year, on a four-day win streak. Prices had been trading around the $1800 mark but have pushed up above the 200-day SMA in recent sessions.

Of course, holiday trading is thin and moves can evaporate quickly. The first major level of resistance is $1834, ahead of the November highs above $1860. Further signs that the market is taking the risk of more persistent high inflation seriously will be needed for gold bugs to reach these heights.