Holiday Week Preview: Tech leads, US GDP and Japan CPI in focus

Risk appetite appears to have returned to global markets, with major equity indices ending last week on a strong note, driven largely by a rebound in the technology sector. In Asia, the Nikkei has led the gains, benefiting from a weaker yen following Friday’s Bank of Japan meeting, which further bolstered already-improving sentiment. In Europe, the upside has been more measured, with a tentative start to the week, though the near-term bias could remain constructive if broader risk sentiment holds. With markets heading into the Christmas holiday, this will be a shortened trading week, meaning any momentum is likely to be concentrated in the days ahead.

S&P 500 daily chart
 
Past performance is not a reliable indicator of future results.

The economic calendar is relatively light, but US growth data will be in focus on Tuesday before many traders step away for the holidays. Third-quarter GDP is expected to ease to 3.2% from 3.8%, and any meaningful deviation from expectations could influence market sentiment. While a 3.2% growth rate remains impressive at this stage of the economic cycle, the key question for markets is how the data fits into the Federal Reserve’s easing narrative. A stronger-than-expected print may be received negatively, as it could undermine expectations for future rate cuts—particularly after recent comments from Fed’s Hammack, who argued for holding rates steady into spring, flagged concerns that November’s 2.7% CPI may understate true inflation pressures, and suggested the neutral rate may be higher than markets assume. Such a scenario could weigh on equities and potentially dampen hopes of a late “Santa rally.” Conversely, a softer GDP reading could support risk assets, provided the downside surprise is not severe enough to revive growth concerns.

Later in the week, for those monitoring markets through the holiday period, attention will turn to Japan, with Tokyo CPI due on Thursday. The data follows the Bank of Japan’s recent 25bp rate hike, which was widely expected. However, Governor Ueda’s press conference struck a more cautious tone, hinting at a possible pause as policymakers assess the economic impact of tighter policy. Ueda also suggested that consumer inflation could dip below 2% in the first half of the next fiscal year before picking up again. As a result, the Tokyo CPI release will be closely watched, particularly by USD/JPY traders, for clues on the BoJ’s next move.

USD/JPY daily chart
 
Past performance is not a reliable indicator of future results.