8th December 2025

U.S.

Stock market performance:

• Major U.S. indexes rose over the first week of December, extending gains from the previous week as investors grew increasingly optimistic about a potential interest rate cut at the next Federal Reserve meeting.

• The Nasdaq Composite led with a weekly gain of 0.91%, supported by sustained strength in technology shares.

• The Russell 2000 Index advanced 0.84%, reflecting improved sentiment towards small-cap equities.

• The S&P 500 posted a smaller but still positive weekly gain as broad market sentiment remained constructive.

• Trading volumes remained light throughout much of the week, according to T. Rowe Price traders, suggesting some investor caution.

Manufacturing activity continues to slide; services expand at fastest pace since February:

• The U.S. manufacturing sector contracted for the ninth consecutive month in November as the ISM manufacturing PMI declined to 48.2% from 48.7%, remaining below the expansion threshold.

• Decreases in supplier deliveries, new orders, and employment contributed to the decline, signalling sustained weakness in industrial activity.

• Input prices rose for the 14th consecutive month and at a faster pace than in October, indicating ongoing cost pressures for manufacturers.

• The ISM services PMI rose to 52.6%, marking its highest level in nine months and signalling an acceleration in service-sector activity.

• The services prices index dropped by 4.6 percentage points to 65.4%, its lowest level since April, showing that service-sector price increases slowed.

Private payrolls drop by most since 2023:

• Private sector employment contracted by 32,000 jobs in November, reversing October’s revised gain of 47,000.

• The decline represented the largest monthly job loss since March 2023, pointing to weakening labour demand.

• ADP noted that hiring conditions have become increasingly erratic as businesses confront hesitant consumer behaviour and economic uncertainty.

• Small businesses accounted for much of the decline, reflecting heightened sensitivity to shifting economic conditions.

• Announced corporate layoffs exceeded 71,000 in November, bringing the total for the year to approximately 1.17 million, the highest level since 2020.

• Initial jobless claims fell unexpectedly to 191,000, reaching their lowest level since September 2022 and suggesting some resilience in the labour market.

September inflation little changed; consumer sentiment improves modestly:

• The PCE index rose 0.3% month on month in September, matching the August reading and indicating consistent inflationary pressures.

• Core PCE increased 0.2%, also in line with the previous month, pointing to stable underlying inflation trends.

• Both headline and core PCE rose 2.8% year on year.

• September’s inflation release had been delayed by the federal government shutdown, and a new release date for October data has not been scheduled.

• The University of Michigan’s consumer sentiment index increased by 2.3 points to 53.3 in December, supported by improved expectations for personal finances.

• Sentiment remained subdued overall due to ongoing concerns about high prices.

• One-year inflation expectations fell to 4.1%, the lowest reading since January 2025.

Treasuries underperform amid increase in long-term yields:

• Treasury yields rose across most maturities, particularly the long end, leading to negative returns for U.S. government bonds.

• Short-term yields exhibited slight declines in some maturities, providing limited offset.

• Municipal bonds also posted losses but outperformed Treasuries thanks to steady demand despite a heavy issuance calendar.

• High yield bonds delivered gains as market liquidity improved following the Thanksgiving holiday and macroeconomic conditions strengthened.

Europe

Stock market performance:

• The STOXX Europe 600 Index rose 0.41% in local currency terms as expectations increased for interest rate cuts in both the U.S. and UK.

• Germany’s DAX gained 0.80%, reflecting continued strength in large industrial and export-focused firms.

• Italy’s FTSE MIB edged up 0.17%, delivering a modest weekly advance.

• France’s CAC 40 registered a slight decline as investors reacted cautiously to domestic economic signals.

• The UK’s FTSE 100 fell 0.55%, underperforming its European peers amid concerns over domestic economic prospects.

Eurozone inflation picks up, GDP revised higher, labour market remains tight:

• Eurozone headline inflation edged up to 2.2% in November from 2.1% in October, marginally above consensus expectations.

• Higher services costs drove the increase, partially offset by continued declines in energy prices.

• Core inflation held steady at 2.4%, indicating limited movement in underlying price pressures.

• Eurozone GDP for the third quarter was revised higher to 0.3%, supported by an improvement in fixed investment.

• France and Spain were the main contributors to economic growth, while Germany experienced no growth during the period.

• The unemployment rate remained at 6.4% in November, showing ongoing labour-market tightness.

• Retail sales were unchanged from September but grew 1.5% year on year, surpassing analyst expectations.

German manufacturing orders rise more than expected:

• German factory orders increased 1.5% month on month in October, beating expectations of a 0.5% rise.

• Demand was particularly strong for aircraft, ships, trains, and military equipment.

• Orders for metal production and processing surged 11.9%, contributing significantly to the headline improvement.

UK housing market resilient despite budget worries:

• UK house prices rose 0.3% in November, surpassing expectations for flat growth and continuing October’s upward trend.

• Despite concerns over stamp duty adjustments and possible tax changes in the autumn budget, the housing market showed underlying resilience.

• Underlying mortgage demand remained healthy, although net mortgage approvals edged slightly lower to 65,018 from September’s 65,647.

Japan

Stock market performance:

• Japanese equity markets delivered mixed results, with the Nikkei 225 rising 0.47% while the TOPIX declined 0.47%.

• Market performance was influenced by rising global bond yields and hawkish signals from the Bank of Japan, which increased expectations of a potential rate hike.

• Strengthening of the yen added pressure to exporters, contributing to divergence between the two major indices.

Japanese equities mixed as BoJ commentary boosts yields and the yen:

• A speech by BoJ Governor Ueda raised expectations for monetary tightening, pushing the 10-year JGB yield to 1.93%, its highest level since 2007.

• The yen appreciated to the upper JPY 154 per U.S. dollar range, strengthening from around JPY 156 the previous week.

• Investors responded by reassessing interest rate expectations and sector exposures.

BoJ Governor Ueda signals increasing likelihood of policy tightening:

• Governor Ueda stated that Japan’s economy continued to recover moderately, with prices rising for goods, services, and food.

• He indicated that if the economic outlook materialised as expected, the BoJ would continue to raise the policy interest rate.

• Reduced uncertainty surrounding the U.S. economic outlook and tariff policy was cited as a factor improving the likelihood of Japan’s baseline economic scenario.

• The BoJ will evaluate the case for a rate hike at its 18–19 December meeting, with markets interpreting the remarks as a signal of potential tightening.

Household spending contracts sharply:

• Household spending fell 3.0% year on year in October, marking the sharpest decline since January 2024.

• This compared with a 1.8% increase in September and reflected weaker spending on food, entertainment, and automobiles.

• Persistent cost pressures continued to erode consumer purchasing power.

China

Stock market performance:

• Chinese equities advanced, with the CSI 300 rising 1.28% and the Shanghai Composite gaining 0.37% as investors rotated into technology and AI-related stocks.

• Hong Kong’s Hang Seng Index increased 0.87%, supported by renewed interest from mainland investors.

• Gains occurred despite economic data pointing to continued slowing momentum.

Chinese equities advance despite weak economic signals:

• Investors showed enthusiasm for domestic technology and AI sectors, helping equity markets rise despite broader economic concerns.

• Market sentiment remained relatively constructive even as economic data indicated sustained challenges.

PMI data shows continued manufacturing contraction and first services decline in nearly three years:

• The manufacturing PMI rose slightly to 49.2 but remained below 50 for an eighth consecutive month, marking the longest contraction streak on record.

• The non-manufacturing PMI fell to 49.5, its first reading below 50 since early 2021, reflecting weakness in both construction and services.

• The downturn was driven heavily by the ongoing real estate crisis and weak household confidence.

• Analysts still expect China to reach its 5% full-year growth target without further stimulus measures.

Other Key Markets

Poland:

• Polish equities traded with a generally positive tone during the week as investors reacted favourably to declining inflation and expectations of further monetary easing.

• Sentiment improved following the central bank’s decision to cut interest rates, reinforcing expectations of continued policy support.

• Market strength was concentrated in rate-sensitive sectors such as banking and real estate.

• Poland’s central bank lowered its reference rate by 25 basis points to 4.00%, citing improving inflation dynamics.

• Policymakers noted that GDP growth picked up to 3.8% year on year in the third quarter due to stronger domestic demand.

• October data showed increases in retail sales, industrial production, and construction activity.

• Wage growth slowed and enterprise-sector employment declined, indicating some labour-market softening.

• CPI inflation fell to 2.4% in November, reinforcing the case for additional easing.

Turkey:

• Turkish equity performance remained relatively steady as markets absorbed updated economic growth projections and expectations for future monetary policy.

• Investor sentiment was supported by signs of economic resilience despite slower quarterly growth.

• Rate-sensitive sectors displayed cautious optimism as expectations for gradual policy loosening strengthened.

• Türkiye’s economy grew by 1.1% quarter on quarter in Q3, down from 1.6% in Q2 but still robust relative to earlier expectations.

• Full-year growth is now projected at 3.5%, above prior estimates.

• Analysts believe the current growth trajectory provides a solid foundation for the government’s macroeconomic adjustment strategy.

• Tight monetary policy and fiscal measures are expected to continue at least through the first half of 2026.

• The central bank is likely to pursue a gradual rate-cutting cycle as inflation trends improve.

• Minimum wage adjustments for 2026 are expected to be in the range of 20% to 25%, aligning with forward-looking inflation estimates.

PLEASE NOTE:

This content is for informational purposes only and should not be construed as investment advice or a specific recommendation to act on any investment. It is importnat to assess your own circumstances before making investment decisions. The views expressed are as of the date indicated and whilst we believe the information is from reliable sources, we do not guarantee it’s accuracy. Past performance is not indicative of future results, and all investments carry market risks, including the potential loss of the principal.