Fin-X Weekly 8th December 2025

Global markets adjusted to an end to Federal Reserve quantitative tightening and rising expectations for a US rate cut this week. Equity investors welcomed the prospect of lower short-term rates while bond prices fell and long-term rates rose.

Australian data showed moderate growth with resilient private demand but pressure on household budgets. The RBA is highly unlikely to alter the overnight cash rate tomorrow.

This week’s publications include the NAB Business survey, Australian employment figures, and more delayed US data. The Australian social media ban also comes into force.

Asset classes produced diverging returns over the week as markets continued to adjust to changing liquidity conditions, shifting central bank expectations, and hopes for a peace deal in Ukraine again faded. 

In China, the central bank reaffirmed its tough stance on cryptocurrencies. Over the weekend, it warned of a resurgence in speculation and vowed to crack down on illegal activities involving stablecoins. The statement arrived as Bitcoin remained volatile and continued to struggle despite signs of improving liquidity conditions in broader financial markets.

In the United States, the Federal Reserve’s balance sheet reduction (“quantitative tightening”) programme officially ended. At the same time, investors began to price in a prospective Federal Reserve rate cut amid disappointing incoming data.

Equity markets responded positively to the improvement in liquidity.

In significant stock news, OpenAI responded to Google’s Gemini model catching up to the erstwhile market leader. The Wall Street Journal reported that CEO Sam Altman told employees on Monday that the company was declaring a “code red” effort to improve the quality of ChatGPT and was delaying other products and initiatives as a result.

Netflix also announced it will acquire Warner Bros. Discovery’s streaming and film studio assets for US$72 billion, a transaction that would combine two of the largest global streaming services. Regulators are expected to scrutinise the deal closely. According to CNBC, the Trump administration already views the proposed transaction with “heavy scepticism”.

Bond markets weakened even as economic data disappointed, with prices falling and yields rising, and weighing on interest-sensitive sectors such as property and infrastructure.

President Trump said he had chosen his preferred replacement for Fed Chair Powell, raising concerns that he might nominate a candidate perceived as too eager to cut rates, thereby increasing inflation risk premia.

The near-term inflation outlook in the US nevertheless improved. The personal consumption expenditures (PCE) price index rose by +0.3% in September, leaving the annual rate at +2.8%, in line with consensus forecasts. Core PCE, which excludes food and energy prices, also rose by +2.8% over the year, again matching expectations.

Black Friday and Cyber Monday sales were up +4.1% and +3.3%, respectively, excluding autos, according to Mastercard estimates. Shoppers chased bargains in electronics, apparel and furniture, with a larger proportion of transactions taking place online. Buy-Now-Pay-Later volumes rose by a record US$1 billion on Cyber Monday alone, while overall spending from 1^st November to 1^st December reached US$10.1 billion, a +9% annual increase, according to Adobe Analytics.

Despite the positive retail headlines, concerns about the health of the US economy persisted. ISM surveys showed new manufacturing orders contracting at a faster pace, while services improved slightly. In both surveys, the employment sub-indices remained in contraction territory, pointing to softer labour demand.

Timely labour-market statistics reinforced this picture. Processing firm ADP reported that private payrolls unexpectedly fell by -32,000 in November, with small businesses most affected. Economists surveyed by Bloomberg had expected an increase of +10,000 for the month.

Challenger, Gray & Christmas later reported that layoff plans totalled 71,321 in November. While this represented a step down from the significant cuts announced in October, it was still sufficient to lift the 2025 total to 1.17 million planned job losses.

Chinese data were similarly subdued. RatingDog reported that the Chinese manufacturing PMI unexpectedly slipped into contraction at 49.9, while the services PMI remained in expansionary territory at 52.1.

Australian data was more upbeat and contributed to higher local bond yields. Q3 GDP slightly undershot expectations, rising +0.4%, held back by weak inventory investment in the resources sector. However, the annual growth rate of +2.1% was well-received, driven by robust private demand and population growth. GDP per capita grew by a comparatively modest +0.4% year-on-year. Inventory rebuild is likely to provide some support this quarter, but there are still concerns about the high share of household spending devoted to everyday essentials. Against this balanced backdrop, the RBA is highly unlikely to make any changes to monetary policy tomorrow.

The Bank of Canada and the Swiss National Bank are also expected to keep rates unchanged this week.

Eurozone inflation printed at +2.4% year-on-year, supporting expectations that the ECB will stay on hold later this month. The Bank of Japan is likely to raise rates in just over a week.

Besides this week’s rate-setting meetings, several central bank officials are due to speak, excluding the Fed, which is now in its blackout period. In the United Kingdom, Chancellor Reeves will appear before a parliamentary committee in Westminster to answer questions on her recent budget.

Key data releases include the NAB Business Survey and Australian employment figures, with the jobless rate expected to tick up to 4.4%. Investors will also closely watch Chinese inflation data and delayed JOLTS numbers for September and October for further clues on future policy.

In Australia, the under-16 social media ban takes effect on Wednesday.

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