Start of Santa Claus rally - 24.12.2015

US stocks advanced for the third session in a row on continued oil rebound while many market participants wondered would there be a Santa Claus rally this year. The dollar strengthened with the live dollar index showing the ICE US Dollar index, a measure of the dollar’s strength against a basket of six currencies, rose 0.1% to 98.311. The Dow Jones Industrial Average rose 1% and the Nasdaq Composite added 0.8%. The S&P 500 rallied 1.1% with all ten major sectors trading higher, led by energy sector. Sharp increase in oil prices lifted all energy stocks with energy sector posting a 3.9% gain, while materials rose 2.4%. Investor confidence was buoyed also by positive economic data which were slightly better-than-expected. Consumer spending rose 0.3% in November as expected, suggesting that consumers are in reasonably good shape. The 4.3% rise on month in new home sales in November was higher than the expected 2% increase and the highest in three months at seasonally adjusted annual rate of 490,000. Consumer sentiment index rose to 92.6 in December from 91.3. At the same time orders for durable goods were flat in November following a 2.9% increase in October, slightly better-than-expected. Today at 14:30 CET initial jobless claims and unemployment claims will be released. The tentative outlook is positive.

European stocks rallied to a more than two-week high on Wednesday as bargain hunting drove up commodity shares. The euro weakened against the dollar after third quarter GDP in France was revised down to 1.1% year-over-year from 1.2% previously. The Stoxx Europe 600 index jumped 2.7%, both Germany’s DAX 30 and France’s CAC 40 gained 2.3%. Miners Anglo American, Glencore and Sweden’s Boliden added between 7.7% and 9.1%. Energy stocks also rose with British oil producer Tullow Oil rallying 11.3%, Spain’s Repsol climbing 6.7% and Norway’s Statoil finishing 5.2% higher. No important economic data are expected today in euro-zone. German market will be closed in observance of Christmas Eve.

Nikkei fell 0.5% today as yen strengthened against the dollar in thin trade. Japanese government approved a record budget for 2016, premised on higher growth and tax revenues to accomplish Prime Minister Shinzo Abe's goal of reviving the economy.

Oil futures prices are rising today after closing sharply higher on Wednesday helped by official data showing US crude stockpiles fell by 5.9 million barrels. WTI for delivery in February rose 3.8% to end at $37.50 a barrel on Nymex, and February Brent crude on London’s ICE Futures exchange gained 3.5% finishing at $37.36 a barrel. The report by Baker Hughes, the oil-field services firm, indicating the number of US oil rigs fell by three in the last week, and a forecast by OPEC saying oil prices were set to rise, published in its World Oil Outlook, also contributed to oil rebound. However global supply glut with output exceeding demand will continue to weigh on global prices until a balance is restored.

Gold prices are rising today while the dollar index is edging lower. Gold futures prices closed lower for two sessions in a row, gold for February delivery ending 0.6% lower at $1,0682.0 an ounce on Wednesday. A weaker dollar bolsters demand for dollar denominated commodities. However, the outlook for gold, which doesn’t pay interest income, remains bearish after US Federal Reserve announced the start of monetary tightening and hiked the interest rates by 0.25 basis points last week, indicating also a gradual path for future interest rate increases.