Dec 22, 2014

    Hopes up for a Santa Claus rally

    THE last full trading week of the year started off bumpily but ended on an upbeat note, bringing a dose of much-needed Christmas cheer to traders who are hoping for a Santa Claus rally as the year winds down.

    Stocks in the United States finished within striking distance of their record highs on Friday, with the exuberance expected to spill over to Asia.

    Wall Street's massive rally in the later part of last week came after the US Federal Reserve said that it would be "patient" in raising interest rates in the world's biggest economy, soothing traders' fears of an earlier-than-expected rate hike.

    This sparked a 5 per cent climb in the S&P 500 index over Wednesday through Friday, its best three-day stretch since 2011.

    Prices of benchmark Brent crude oil traded in London also rebounded above the US$60 (S$79) per barrel threshold at the end of last week, helping to cushion the battered Russian rouble.

    Brent crude oil recovered to around US$62 per barrel on Friday, signalling that traders think the worst is over for oil prices.

    "Fears have been at least pushed once again to the sidelines," Michael James, managing director of equity trading at Wedbush Securities in Los Angeles, said in a Reuters report on Saturday.

    The benchmark Straits Times Index climbed 1.1 per cent on Friday to around 3,280 points, its biggest one-day gain since Oct 31.

    The index of blue-chip stocks has gained 3.5 per cent since the start of the year.

    The bullish sentiments are giving investors renewed hope for a Santa rally this year, which often occurs between Christmas and New Year's Day.

    "Seasonally, we are in a very bullish time for equities, between now and next spring...I think we can still push higher into early next year," said Mark Newton, chief technical analyst at Greywolf Execution Partners in the US, according to a Xinhua report.

    Asian markets may also get a lift from better economic data in the coming weeks.

    Japan's central bank painted a rosy picture of the world's third-largest economy on Friday, saying that the country's exports were showing signs of a pick-up and factory output had begun to bottom out.

    The Bank of Japan also indicated that it would maintain its pace of monetary easing, which means it will keep pumping about 80 trillion yen (S$880.8 billion) a year into the banking system in a bid to stimulate the economy and meet its inflation target.

    Despite the general atmosphere of good cheer, however, trading is likely to be thin over the next few days as traders will be taking a holiday break.

    The Tokyo Stock Exchange will be closed tomorrow for a national holiday, the Emperor's birthday.

    In Singapore, trading on Wednesday, which is Christmas Eve, will end at 12.30pm. The market will be closed on Thursday.