Meagre Xmas optimism as medium-term risks prevail [Video]

US stocks rebounded and the US dollar retreated on Friday on the back of softer-than-expected PCE numbers from the US and in the absence of major economic data, this Xmas-shortened week could see a further rebound in the US equities – no one wants to miss the Santa rally – and a further retreat in the US dollar in favour of its major counterparts. Yet, beyond tactical trades based on last week’s softer-than-expected PCE measures, the story remains unchanged. The core PCE in the US has been moving up since the summer dip and settled at 2.8% for the second consecutive month, and – I can never repeat this enough but – Trump’s pro-growth policies, tariffs, mass deportations hint that the US inflation risks are tilted toward the upside.

In commodities, US crude is better bid above the 50-DMA – few cents below the $70pb level – but without a strong conviction to extend this rebound. Gold is better bid this morning. Lately, the yellow metal has been pressured by the rising US yields that increase the opportunity cost of holding the non-interest-bearing gold - but an accelerated selloff in global equities could drive capital into the safe-haven metal regardless of the upswing in yields. Copper is at an interesting dip-buying level for those betting for recovery in 2025 on the back of softer global financial conditions.