Market Report
📉 U.S. stocks slipped Friday, led lower by AI‑related names, pulling major indexes back after hitting record highs the day before. In Europe, the Stoxx 600 fell nearly 0.5%. Separately, new data showed the U.K. economy unexpectedly contracted 0.1% in the three months through October.
📉 The broad market sell-off was led by a more than 11% drop in Broadcom, which some analysts attribute to margin compression concerns, despite the company beating Q4 expectations and giving a strong forecast. Stocks in other sectors like financials, healthcare, and industrials received a boost, as investors rotated out of growth/AI-related names and into more value-oriented areas.
⚠️ Top 3 Weekly Risks: Central Bank Triple-Header: BoE, ECB, and BoJ rate decisions & guidance. US Inflation Data: November CPI and Core PCE Price Index, and UK Inflation & Jobs: Key data ahead of BoE decision.
🏦 Several major central banks are set to decide policy this week. The Bank of Japan is expected to raise rates by 25 basis points to 0.75%, while the Bank of England may deliver a 25‑bp cut to 3.75%. The European Central Bank, Sweden’s Riksbank, and Norway’s Norges Bank are all expected to leave rates unchanged.
🏦 The Bank of England’s upcoming interest rate decision and the challenges they face as they approach the neutral rate. The Bank of England is expected to implement a 25 basis point interest rate cut this week, bringing the benchmark rate to 3.75%.
🗳️ The BOE’s Monetary Policy Committee has been evenly split between hawks and doves, with Governor Andrew Bailey as the key swing vote. Divisions have centered on whether to prioritize the UK’s high inflation or its weakening job market, making rate reductions progressively more difficult.
📊 There is significant uncertainty around the precise level of the neutral rate, with the BOE endorsing a broad range of 2-4%.
📉 The easing cycle in advanced economies is either lacking fresh impetus or effectively over.
🌫️ The Federal Reserve’s outlook for further rate cuts following its latest quarter-point reduction is cloudy. The Bank of England’s probable rate cut may draw the most scrutiny, as investors look for clues on whether it could be one of the BOE’s final moves of the cycle. The ECB is set to present higher growth forecasts, which may cement its tentative rate hold, with questions on when a pivot to tightening could transpire. Other European central banks, like the Riksbank and Norges Bank, are expected to keep rates unchanged. In contrast, several other central banks, from Mexico to Thailand, are set to extend their easing cycles.
🚗 The EU is Preparing to Soften the 2035 Combustion-Engine Ban: The EU is considering loopholes that could lead to a 5-year extension of the 2035 ban on new combustion-engine vehicles, or even taking the ban off the table entirely.
🏭 This is the result of intense lobbying from automakers like Stellantis and Mercedes-Benz, as well as pressure from major auto-producing countries like Germany.
⚡ Incentives for buying or operating electric vehicles are costly, and fiscal headroom is unlikely to increase, making it difficult for policymakers to make the transition more palatable for consumers. The cost of the green transition is a sensitive issue, with concerns about triggering a backlash from voters amid rising populism.
🌍 France’s efforts to delay the EU’s vote on a free-trade agreement with the Mercosur group of South American nations. The proposed accord aims to create an integrated market of 780 million consumers, providing a boost to the EU’s manufacturing sector and Mercosur’s agricultural industry.
🇫🇷 France is seeking to delay the EU vote scheduled for this week, saying the measures to protect the bloc’s farmers and consumers are insufficient. The European Commission has presented some safeguards, but the European Parliament has not yet approved them, and their effectiveness needs to be guaranteed.
⚖️ France wants the Commission to make proposals to ensure a level-playing field for European producers before the agreement can be signed. Lecornu stated that the conditions for signing the agreement at the EU leaders’ summit on Dec. 20 have not been met, as more work is needed to protect European agriculture.
🚜 Several European countries, particularly France and Poland, have long opposed the accord over concerns about the impact on the European agriculture sector. European farmers fear an influx of goods from Latin America, produced at lower standards, would put them at a disadvantage.
🐉 China’s factory output and retail sales grew at their weakest pace in over a year in November, compounding challenges for policymakers. Factors contributing to the slowdown include fading consumer trade-in subsidies, a drawn-out property crisis, and industrial investment risking further deflation.
🌐 World leaders, such as France’s Macron and Mexico, are threatening to erect import barriers and impose tariffs on Chinese goods. Chinese leaders have promised to maintain a “proactive” fiscal policy to spur consumption and investment, while acknowledging the “prominent” contradiction between strong supply and weak demand.
Geopolitics.
🔫 On a Sunday afternoon, gunshots rang out at Bondi Beach as over 1,000 members of the Jewish community were gathered to celebrate Hanukkah. Two gunmen, later identified as a father and son, opened fire on the crowd, killing at least 16 people and injuring 40 others, including two police officers. A heroic bystander, Ahmed el Ahmed, tackled and disarmed one of the shooters, but was shot twice in the process.
🇦🇺 The attack is the deadliest terrorist incident in Australia’s history and the worst mass shooting since the Port Arthur massacre in 1996. Prime Minister Anthony Albanese called the shooting “a targeted attack on Jewish Australians” and “an act of evil, antisemitism, terrorism.”
📨 In August 2025, dozens of prominent Jewish donors and communal leaders from 18 countries sent a letter to Netanyahu warning that his government’s policies were harming Israel’s global standing and endangering Jewish communities worldwide. The signatories included major philanthropists Charles Bronfman, Susie Gelman, and Dame Vivien Duffield.
⚖️ According to The Guardian, ICC Chief Prosecutor Karim Khan disclosed that the British government threatened to defund the ICC and withdraw from the Rome Statute if the court proceeded with issuing arrest warrants for Israeli Prime Minister Benjamin Netanyahu and former Defense Minister Yoav Gallant.
🇬🇧 The threat came from the Conservative government under Boris Johnson, but the Labour government under Keir Starmer later reversed the UK’s approach and dropped its legal challenges to the ICC’s jurisdiction over Israeli officials.
🇩🇪 Reuters reports that German Foreign Minister Johann Wadephul traveled to China to negotiate access to rare earth materials, but the Chinese government refused to meet with him.
🛑 China froze rare earth exports in October, prompting immediate warnings from German automakers about potential production shutdowns since these metals are vital for EVs, wind turbines, electronics, and other industries.
🚫 Wadephul sought meetings with Foreign Minister Wang Yi and Commerce Minister Wang Wentao, but China denied both requests.
🇪🇺 At the EU summit this week, leaders will address how to use billions of frozen Russian assets to underpin a €210 billion loan to Ukraine. Zelenskyy propose a vote or referendum on ceding parts of Donbas to Russia. Tensions between the White House and Europe following Trump’s comments will challenge this process, with NATO’s Rutte warning that “we are Russia’s next target.”
Market View.
📉 Fears have returned to the technology sector, triggering another round of portfolio rotation. Friday’s session closed in negative territory on Wall Street: S&P 500 futures fell more than 1.50%, while Nasdaq futures dropped over 2.20% at the worst point of the decline. At present, Mini S&P 500 futures trade near 6,845 points, and Nasdaq futures around 25,245 points.
💵 The US dollar held steady and remains near 98.40, after previously losing the 99 level. EUR/USD, which broke above 1.1750 on Thursday, pulled back slightly on Friday and now trades around 1.1730.
📉 In Europe, DAX 40 futures fell more than 1.30% on Friday but have recovered slightly, now trading around 24,315 points. Euro Stoxx 50 futures, which opened Friday strongly, also dropped sharply — falling below 5,725 points — before rebounding to 5,745.
🛢️ Crude oil continues to weaken, with Brent trading near $61.30.
🥇 Gold futures have once again reached new all‑time highs, although not without considerable volatility. They are currently trading around $4,375 per ounce.
💰 Bitcoin continues to struggle at the $92,000 resistance, repeatedly failing to break it. It currently trades near $89,740.
