Image Source: PixabayUS MARKETSLast week, U.S. equity markets maintained their fiery upward momentum, cruising into the end of 2024 with unwavering optimism despite a haze of economic, geopolitical, and central bank uncertainties. With 2025 on the horizon, the fervour within the markets shows no signs of fading, especially after Friday’s labour market data hit the sweet spot in the Goldilocks zone—not too hot, not too cold. The S&P 500 set new records, capping off the week on an exuberant note, while the Nasdaq 100 has skyrocketed, boasting a year-to-date gain of over 28%. Over in the bond markets, credit spreads have narrowed to levels not seen in decades, a clear signal of the robust confidence coursing through Corporate America.These past few months have marked a decisive shift in market dynamics, with investors moving away from defensive and resource-heavy sectors to embrace classic early-cycle industries, driving a sector rotation that underscores the economy’s strength. The resilience of the U.S. labour market, rebounding from October’s setbacks due to hurricanes and strikes, added fuel to the fire, suggesting that the Fed’s soft landing strategy is effectively on track. Although the unemployment rate edged to 4.2%, signalling a cooling job market, it reinforced the rationale for a further rate cut expected at the Fed’s upcoming meeting.ASIA OPENOn Monday, all eyes will be on China as it releases its November inflation data. This comes against a backdrop of robust global investor sentiment fueled by Wall Street’s relentless rally. However, given the increasingly volatile geopolitical landscape, the mood could be best categorized as cautiously optimistic at the Monday Asia Open.Recent events such as the toppling of Syrian President Bashar al-Assad, which adds layers of unpredictability to an already tumultuous Middle East, criminal charges against South Korean President Yoon Suk Yeol, and ongoing political turmoil in France might prompt regional investors to adopt a more conservative stance.If so, anticipate the typical demand for government bonds, gold and the yen as markets open on Monday. Yet, South Korea’s financial caretakers are well-prepared to stabilize the market and curb outflows, reducing broader market concerns to a mere storm in a teacup as fears of widespread contagion stay low. Should capital exit South Korea, it’s likely to be swiftly absorbed by other Asian markets or rerouted to the thriving U.S. markets, offering dynamic opportunities for investors amid the persistent geopolitical upheaval.CPI WEEK: SHOULDER SHRUGCPI week might make waves in analyst circles, but the trading floors are hardly buzzing about price pressure this time. The Fed and the markets seem quietly convinced they’ve got inflation in their rearview, even if they’re not shouting it from the rooftops. Recent economic snapshots—a jobs report sending mixed signals and a surprising dip in ISM’s services sector—are nudging us closer to a rate cut when the Fed convenes in December.All eyes are partially on the horizon, watching to see which version of the incoming administration steps up: will it be the “Dealmaker in Chief” or a resurgence of the “Tariff Man”? While this political suspense plays out, the bond market lounges in tranquillity. Oil prices are slinking lower, potentially setting up a further slide, and bond traders display a remarkable chill. With yields pulling back significantly from recent peaks and bonds enjoying a three-week gain streak, there’s a subdued vibe around the CPI release—hardly the drama one might expect. At a comfortable 4.15% on ten-year notes, the angst over spiking yields has fizzled out. Right now, bonds are taking a backseat, eclipsed by the equity markets’ exuberant post-election surge.OIL MARKETSThe fall of Syria’s government is stirring the geopolitical pot in the Middle East, posing potential implications for Russia and Iran, both staunch allies of Syria. This development could nudge oil prices slightly higher at the start of trading, though any upward momentum may be short-lived. Saudi Arabia’s recent decision to slash crude prices for Asia more than expected could dampen any rally. Since mid-October, crude oil prices have been locked in a narrow range, with escalating tensions in the Middle East and Ukraine providing bullish support. However, weak demand from China and a global supply surplus offset these worries, even more so with the market bracing for an oil glut next year.Click the banner below for a complete view of the oil market.   More By This Author:OIL MARKET: Pressure Among OPEC+ Member Mounting?
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