Global Indices Monthly Outlook – December 2017

The global stock markets were pretty much mixed during the month of November with the American stock indices continuing to move higher, the Asian stock indices being mixed and the European stock indices under pressure for a variety of reasons. This was another month when the developments in certain parts of the globe seem to have little impact on the other stock markets and that is the reason why we saw the global stock markets move in different directions during the month. As we enter the last month of the year, we expect the markets to consolidate as the liquidity begins to dry up slowly.

US Stock Indexes Continue Higher

The US stock indices continued to move from strength to strength as the markets priced in the rate hike in December and also the tax reform bill which looks as though it would get passed in due course of time in the Senate. The various Fed members, along with the outgoing and the incoming Fed Chiefs, confirmed the rate hike in December and this was supported in the FOMC statement as well. This helped the stock indices to move higher and continue to make new all time highs. The tax reform bill also made smooth progress in the Senate and if and when it is passed, it looks as though it is only a matter of time before it is passed, we are likely to see the indices to get another boost.

Looking ahead to the month of December, it is a holiday season towards the second half of the month and hence we expect the indices to slow down their momentum. But the first half of the month is likely to be eventful with the passing of the tax reform bill and the hiking of the rates from the Fed. This is likely to push the indices higher for the short term but we should seem some moderate correction during the second half of the month when the liquidity dries up.

European Stock Markets Under Pressure

The European stock markets, especially the DAX, closed lower during the month as the developments in Germany dominated the headlines for much of the month of November. We saw the breakdown of coalition talks in Germany and what looked like a certainty as far as the government formation by Merkel was concerned, has now led to a situation where there are some tense talks going on to thrash out a deal. This led to the DAX correcting lower during the course of the month as the uncertainty began to prolong for weeks. The Brexit talks also put some pressure on the London stock market and a combination of these helped to keep the European stock markets lower.

In December, we are likely to see the finalisation of the coalition talks and if and when that happens, the DAX should get a boost. Also, if reports are to be believed, we are likely to see some sort of a deal being announced as part of the Brexit talks and this would be a win-win for both the UK and the Eurozone as well. Considering these developments, we see the European stock markets remaining bullish during the month of December with some sluggish trading later in the month.

Asian Stock Indices Turn Mixed

The Asian stock markets were largely mixed during November as the continued tension in the Korean region put some pressure on the stock markets. Some of the markets were under pressure while some others took their cue from the US stock indices and moved higher during this month. The market has learnt to largely ignore the developments in the Korean region and that is why we are seeing less of an impact of these developments on the regional stock indices like the Nikkei and this is likely to be the case in the short term as well.

Looking ahead to the month of December, we expect the Asian stock markets continuing to remain mixed and with the holiday season upon us, we can expect some consolidation and ranging in these markets during the upcoming month The rate hike from the Fed is likely to boost the markets for the short term but this is likely to remain short lived.