The Japan Times - European, US markets wobble awaiting Santa rally

Global stock markets had a tumultuous time last week, spiralling lower after the US Federal Reserve signalled fewer interest rate cuts than had been expected for 2025.

But it ended on a positive note as traders welcomed below-forecast US inflation data that raised hopes about the health of the world's biggest economy.

US inflation data for November came in lower than expected, providing some optimism that policymakers were winning the battle against rising prices and would have room to keep cutting rates.

That helped Asian markets move higher on Monday, but the positive trend faltered in Europe and the United States.

"Another up leg in US yields not only put pressure on stock indices but also drove the greenback higher," said IG analyst Axel Rudolph.

But Briefing.com analyst Patrick O'Hare said many expect a rebound this week.

"That expectation is rooted in the understanding that the last five trading days of the year and the first two trading days of the new year are typically accented with a positive bias," he said.

Known as a Santa Claus rally, there are various explanations for the phenomenon including seasonal optimism and end-of-year tax considerations.

Sentiment was boosted by news that US lawmakers had reached a deal over the weekend to avert a Christmas-time government shutdown.

Still, there remains some trepidation among investors as Donald Trump prepares to return to the White House, pledging to cut taxes, slash regulations and impose tariffs on imports, which some economists warn could reignite inflation.

"The initial response to the US election was positive as investors focused on the obvious tailwinds to profitability: lower corporate tax rates and less regulation," said Ronald Temple, chief market strategist at Lazard.

"However, I expect much more dispersion within the equity market when the reality of a much-less-friendly trade environment sets in."

In Europe, the FTSE 100 moved higher as the pound slid following data that showed that the UK economy stagnated in the third quarter, revised down from initial estimates of 0.1 percent growth.

"The economy stood still between July and September, and that was before the budget cast another chill, and caused output to shrink in October," said Susannah Streeter, head of money and markets at Hargreaves.

Official data out of Spain on Monday showed that the Spanish economy grew 0.8 percent in the third quarter as domestic consumption and exports increased, comfortably outstripping the European Union average.

In company news, shares in crisis-hit German auto giant Volkswagen lost more than three percent on the back of news Friday that it plans to axe 35,000 jobs by 2030 in a drastic cost-cutting plan.

Shares in Japanese auto giant Honda rose over three percent after it announced Monday an agreement to launch merger talks with struggling compatriot Nissan that could create the world's third largest automaker.

- Key figures around 1630 GMT -

New York - Dow: DOWN 0.5 percent at 42,632.25 points

New York - S&P 500: FLAT at 5,932.07

New York - Nasdaq Composite: UP 0.4 percent at 19,647.60

London - FTSE 100: UP 0.2 percent at 8,102.72 (close)

Paris - CAC 40: FLAT at 7,272.32 (close)

Frankfurt - DAX: DOWN 0.2 percent at 19,848.77 (close)

Tokyo - Nikkei 225: UP 1.2 percent at 39,161.34 (close)

Hong Kong - Hang Seng Index: UP 0.8 percent at 19,883.13 (close)

Shanghai - Composite: DOWN 0.5 percent at 3,351.26 (close)

Euro/dollar: DOWN at $1.0400 from $1.0431 on Friday

Pound/dollar: DOWN at $1.2515 from $1.2567

Dollar/yen: UP at 157.17 yen from 156.45 yen

Euro/pound: UP at 83.09 pence from 82.98 pence

West Texas Intermediate: DOWN 1.0 percent at $68.79 per barrel

Brent North Sea Crude: DOWN 1.1 percent at $72.11 per barrel

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M.Ito--JT