United States

US stocks showed signs of recovery, with the S&P 500 rising 0.3%, paring earlier gains of 1.1%. The Dow Jones Industrial Average climbed 0.5%, while the Nasdaq 100 wavered between slight gains and losses. Big tech stocks, excluding Tesla, acted as a safe haven, with Nvidia up 2% and Apple rising 1%. Conversely, Micron Technology Inc. plunged 11.7%, marking its steepest drop in over four years after delivering a weak sales outlook, which weighed on the broader semiconductor sector.

The Federal Reserve’s hawkish stance continued to reverberate through markets. Chair Jerome Powell highlighted the need for further evidence of inflation progress before easing monetary policy, leading to the recalibration of rate cut expectations for 2025. The swaps market now predicts fewer than two quarter-point reductions next year, a more conservative outlook than reflected in the Fed’s recent dot plot.

Treasury yields remained elevated, with the 10-year yield rising 4 basis points to 4.56%, while the 2-year yield eased slightly to 4.31%. The Bloomberg Dollar Spot Index edged up 0.2%, nearing its 2022 peak. The yen fell 1.7% to 157.39 per dollar after the Bank of Japan left rates unchanged, casting doubt on potential tightening in January.

Macroeconomic data reinforced the narrative of resilience in the US economy. Q3 GDP was revised higher, showing the economy expanded at a 3.1% annualised rate for Q3, up from 2.8% previously and consumer spending showed improvement, revised higher to 3.7% for the quarter from 3.5% initially. Weekly jobless claims dropped significantly to 220,000, signaling a robust labour market despite seasonal fluctuations. As the year winds down, investors will closely monitor Friday’s personal consumption expenditure (PCE) data for further insights into inflationary trends.

Note: U.S. market prices are as of 7:30 a.m. Sydney time (3:30 p.m. NY).

Europe

European stocks declined sharply following the Federal Reserve’s hawkish comments, which signaled fewer-than-expected interest rate cuts in 2025. The Stoxx Europe 600 Index dropped 1.5%, marking its worst session in over a month, with all sectors in the red. Semiconductor stocks were among the hardest hit, as Micron Technology Inc.’s weak revenue forecast weighed on European chip equipment makers such as ASML Holding NV and BE Semiconductor Industries NV.

The Federal Reserve’s decision to cut rates by 25 basis points was overshadowed by a cautious outlook, as officials reiterated their commitment to achieving the elusive 2% inflation target. Markets remained volatile, with analysts suggesting further turbulence could arise as investors reassess monetary policy and its implications for growth.

“The signs that inflation will pick up and it’s not under control serve as a wake-up call that all the underlying problems the market faces may now emerge,” said Ricardo Gil, deputy CIO at Trea Asset Management. “January is set to be a more chaotic month.”

The Stoxx 600 is now 4% below its September record high, with the anticipated end-of-year rally faltering amid concerns over regional economic growth and political instability in France and Germany. The UK’s FTSE 100 pared earlier losses, ending 1.1% lower after falling as much as 1.5%. The Bank of England held its main rate at 4.75% and signaled a gradual approach to easing in 2025, offering limited support to investor sentiment. Despite the decline, the FTSE 100 has gained nearly 5% this year, although it continues to underperform the Euro Stoxx 50 and S&P 500.

Elsewhere, Sweden’s Riksbank cut its benchmark interest rate by 25 basis points, hinting that the current easing cycle is nearing its conclusion. In contrast, Norway’s Norges Bank left its deposit rate unchanged, opting for a wait-and-see approach.

Individual stocks reflected the broader market downturn. Roche Holding AG dropped after announcing that its experimental Parkinson’s disease drug failed a clinical trial. Insurance giants Zurich Insurance Group and Munich Re fell following a downgrade by UBS Group AG. Telecom Italia SpA also declined, impacted by a selloff in the Brazilian real, which hurt its operations in Brazil.

European markets are bracing for further volatility, with analysts warning of heightened risks in early 2025 as growth uncertainties and geopolitical tensions remain unresolved.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

Commodities

Commodity markets saw mixed movements. Oil prices declined as the stronger US dollar dampened demand expectations. West Texas Intermediate fell 0.9% to US$69.91 per barrel, while Brent crude dropped 0.98% to US$72.79. Weaker-than-expected Chinese demand and OPEC+ production adjustments added to bearish sentiment.

Gold edged higher, up 0.51% to US$2,598 an ounce, as investors sought safe-haven assets amid ongoing monetary policy uncertainty, while silver lost -0.68%.

Iron ore prices slipped 0.41% to US$104.25 per tonne, as concerns over Chinese steel demand weighed on the outlook, with copper also weaker by 1.94%.

Bitcoin extended its losses, falling 4.75% to US$96,156. The cryptocurrency has faced increased selling pressure this week as regulatory discussions and a stronger dollar dampen sentiment in digital assets along with a a risk-off investor mentality after broad losses in equity markets on Wednesday.

Economic Calendar

UK Retail Sales 18:00

US PCE Inflation 00:30

Eurozone Consumer Confidence 02:00