Festive cheer is driving the markets this morning led by US indices that had another decent session ahead of the extended festive week end. 

Bullishness seems to be in the air despite rising Italian government bond yields even though Italian technocrat Prime Minister Mario Monti managed to vote through his austerity measures.  The FTSE is higher and touching positive territory for the month of December but still has to breach 5500 in order to record a gain.  With only three and a half trading sessions of 2011 left thin volumes are getting the better of investors by dragging the markets higher.

Market participants seem to be more bearish than they have been for a long time which is usually seen by contrarian investors as the time to get into stocks so pressing back towards 5500 may not be the last of any moves higher for 2011.

The reality is however that Europe will have to do a great deal more than a few austerity measures here or there to get through the predicament that it finds itself in, especially if it wants to find some foreign investors in its various funds.  Many international investors look to Europe and see an economic block that on the whole works less than many people, lives longer and demands more when they finish working.  

Of course a great deal of this is paid for by the profligate governments who have borrowed in order to create the standard of living that Western economies enjoy today.  Now those economies are having to rebalance the books and before any outside help will be happy to invest in us there needs to be a clear indication that the debt is being dealt with.  For now debt is being thrown at debt as a short term fix to the problem as opposed to swallowing the hard medicine.

Despite Christmas being a couple of days away the US has a few bits of economic data in store for us with new homes sales and durable goods being a couple of things to focus on.

In line with equity markets currencies are in a risk on mood with the euro benefiting from a bit of support.  For currency traders the new Italian austerity measures are a step in the right direction and so for now EUR/USD is drifting higher albeit not to the extent of gains yesterday when it touched on 1.3200.  At the time of writing the pair is at 1.3070 and near term support and resistance is seen at 1.3020/2980 and 1.3120/40 respectively.

Gold traders seem to have gone on holiday early as the precious metal has traded sideways for the past few sessions.  At 1611 this morning key near term levels are 1597/82 to the downside and 1641/50 to the upside.

With Christmas around the corner trading volumes are likely to be thin and all that leaves me to say is I hope you have a very Happy Christmas!