Last week, as the traditional Christmas holiday enveloped Europe and America, financial markets exhibited a decisive calmnessWith fewer risk events on the horizon, trading volumes were significantly lightIn the U.Smarkets, stocks took a noticeable upturn; the Dow Jones Industrial Average edged up by 0.29 percent over the week, the Nasdaq Composite gained 0.75 percent, while the S&P 500 saw an uplift of 0.70 percentOn the European front, the major stock indices mirrored this bullish sentimentThe UK’s FTSE 100 climbed by 0.81 percent, Germany's DAX 30 rose by 0.50 percent, and France’s CAC 40 soared by 1.11 percent, reflecting a unified rebound in investor sentiment across the Atlantic.

This week, the global market continues to feel the effects of the holiday season, sustaining a languid rhythmAs the year draws to a close, the manufacturing Purchasing Managers' Index (PMI) from the United States and Europe for December will be one of the primary indicators of economic recovery across nations

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Other significant observations in the debt and foreign exchange markets suggest that the direction of U.STreasury yields continues to exert considerable influence on investor sentimentFollowing the Bank of Japan's recent decision to maintain its monetary stance in December, the yen has entered a new phase of decline, currently not far from its annual lows which could elicit interventionist measuresAdditionally, the South Korean won crossed the threshold of 1480 won to the dollar last week, marking a notable devaluation, the first time it has dipped below this critical level since March 16, 2009, amid political turbulence in the region.

Turning our focus to U.Smanufacturing, this sector demonstrated robust performance in the first half of the year, yet it lagged significantly in the latter half, weighing down other economic indicatorsThe forthcoming December PMI for American manufacturing is anticipated to remain within the contraction zone, although preliminary signals suggest the price index may be nearing a neutral level of 50. The Institute for Supply Management (ISM) projects a slight decline in the December manufacturing PMI to 48.3 from 48.4, with the price index forecasted to rise from 50.3 to 52.2.

Among other critical metrics, the monthly change in existing home sales for November, the Chicago PMI for December, and initial jobless claims figures will be closely watched

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During the traditionally low-volatility holiday trading sessions, any developments concerning tariffs or fiscal policies could trigger significant fluctuations in Treasury yields, significantly impacting both forex and equity markets.

As of the close last Friday, the benchmark 10-year Treasury yield had surged past 4.60%, with predictions suggesting it could soon exceed the year’s anticipated peak of just below 4.74%. Meanwhile, the dollar index is perched at levels not witnessed in over two years, indicating strong investor confidence.

In commodities, oil prices made a rebound last week amid rising geopolitical tensions in the Middle East, where the concern for instability in this oil-rich region has intensifiedWest Texas Intermediate (WTI) light sweet crude saw an increase of 1.64% for the week, closing at $70.60 per barrel, while Brent crude rose by 1.69% to settle at $74.17.

Market analyst Tom Essee from Sevens Report Research remarked in comments sent to reporters, “Apart from the deteriorating geopolitical situation in the Middle Eastern oil-sensitive areas, last week’s report showcased a significant decrease in U.S

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commercial crude oil inventories, plummeting by 3.2 million barrels – a noteworthy indicator for oil prices.”

Moreover, oil prices have also been buoyed by optimistic sentiment towards the Chinese economy, supported by a recent revision from the World Bank that upgraded its forecast for economic growth in China for this year and nextThe latest report anticipates China’s GDP growth rate to reach 4.9% for this year, 0.1 percentage points higher than the June projections, with a forecast of 4.5% for 2025.

Contrastingly, gold prices marked a dip for the second consecutive week, as investors await cues from the U.Seconomy to anticipate the Federal Reserve's rate trajectory for 2025. The COMEX gold futures for December delivery fell by 0.44%, settling at $2,617.20 per ounceFueled by the Fed’s shift towards rate cuts and rising geopolitical tensions, gold prices have surged nearly 28% this year, previously soaring past the $2800 per ounce mark on October 31. Given its reputation as a hedge against geopolitical instability and inflation, the market is bracing for substantial policy shifts in 2025, covering tariffs, deregulation, and tax reforms.

Kyle Rodda, a financial market analyst at Capital.com, commented, “We find ourselves in a tranquil period due to the holiday season, thereby resulting in somewhat muted price movements where insufficient liquidity might exaggerate market fluctuations

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The Federal Reserve's decision to lean towards rate cuts has shaken market confidence regarding potential rate cut frequencies next year, which poses headwinds for gold.”

In the Eurozone, the pace of easing is poised to divergeThe European Central Bank (ECB) aims to reduce the deposit rate by 100 basis points to 3.0% in 2024, marking the lowest rate since early 2023. Financial markets are currently anticipating a further reduction of 125 basis points by the end of 2025, which would lower the deposit rate to 1.75%. Expectations suggest that while the central bank will maintain its current approach, doubts arise regarding whether it is sufficiently supporting the eurozone economy, especially since the region is trailing behind the U.Sand U.Kin economic recovery, necessitating a faster easing pace.

The Vanguard Group projects the ECB will reduce policy rates below neutral to an anticipated 1.75% by 2025. However, this outlook bears more downside risks, as escalating trade tensions and a substantial slowdown in global economic momentum could prompt a more dovish monetary policy stance.

Meanwhile, after two rate cuts this year, the Bank of England has reduced its rate by 50 basis points to 4.75%. Despite recent monetary policy votes being interpreted as a pivot toward dovishness, the phrasing of the rate statement remains cautious