The second half of December began with a disappointing session in the stock markets. Despite futures suggesting a strong start following Friday’s sell-off, sellers emerged immediately at the open, pushing stocks down. Trading remained choppy throughout the day as year-end flows continued to dominate. Notably, Broadcom experienced a sharp decline of nearly 6%, while Costco shares dropped to their lowest levels since August 2024. On the upside, Tesla reached its highest price of the year.

In the currency markets, the US dollar showed general strength but without any clear catalyst. Treasury yields initially fell early in the day but subsequently retraced those losses. USD/JPY dipped to a low of 154.68 before bouncing back about 40 pips. Among currencies, the Japanese yen led gains, while the New Zealand dollar underperformed.

Oil prices came under pressure amid renewed talks of a ceasefire in Ukraine, which appeared to gain momentum. A series of phone calls involving parties in Europe, Moscow, and Washington suggested possible progress. Traders will be closely watching these developments, as any agreement that leads to an easing of sanctions on Russian oil would likely exert additional downward pressure on crude prices. WTI crude fell 75 cents to $56.69.

Key economic data included Canada’s November Consumer Price Index rising 2.2% year on year, slightly below the expected 2.3%. The US December NAHB Housing Market Index met expectations at 39, while the New York Fed’s manufacturing index came in much weaker than forecast at -3.9 versus a 10.0 estimate.

In Federal Reserve commentary, President John Williams noted that labour market risks have increased even as inflation risks have eased. He expressed strong support for the US central bank’s recent interest rate cut. Similarly, Fed Governor Michelle Bowman described the decision as a ‘close call’ but ultimately supported it. Fed’s Miran observed that prices are now “once again stable” and suggested policy should reflect this.

Elsewhere, a report indicated that Larry Kudlow’s candidacy for a key position faced pushback from individuals close to former President Trump.

Market moves included gold rising $2 to $1,303, bitcoin dropping 3% to $85,800, and the US 10-year Treasury yield falling 1.4 basis points to 4.18%. The S&P 500 declined modestly by 0.15%.

Forex traders should monitor ongoing geopolitical developments around Ukraine, Federal Reserve signals on interest rates and inflation, and reactions across key asset classes as year-end positioning continues to influence markets.

Original Source: Adam Button of investinglive.com