General Market Analysis – 4/12/25

Forex

Stocks

Summary:

US stocks pushed higher in the latest session, extending their recent momentum as weaker-than-expected US jobs data strengthened expectations for an imminent Federal Reserve rate cut.

US Stocks Push Higher after Weaker Data – Dow up 0.8%

US stocks pushed higher in the latest session, extending their recent momentum as weaker-than-expected US jobs data strengthened expectations for an imminent Federal Reserve rate cut. The Dow led the gains, rising 0.86% to close at 47,882, while the S&P 500 added 0.30% to finish at 6,849. The Nasdaq advanced more modestly, up 0.17% at 23,454.

The softer ADP Non-Farm figures drove Treasury yields lower, with the 2-year slipping 2.4 basis points to 3.484% and the 10-year easing 2.7 basis points to 4.059%. The US dollar also weakened further, with the USD Index falling 0.46% to 98.87. Oil prices continued to move higher as faltering Russia–Ukraine peace talks kept geopolitical tensions elevated. Brent crude rose 0.56% to settle at $62.80, while WTI crude climbed 0.82% to $59.12. Gold traded in another rare tight range, slipping marginally by 0.05% to close at $4,204.13.

Pound in Focus for FX Markets

Sterling jumped into trader focus yesterday as the FX Gods aligned to see it drive higher against the dollar and on the crosses. Cable powered over 1% on the day with little respite in the move, and it was a similar story on the crosses with EUR/GBP losing 0.6% across all three trading sessions. There was no definitive driver of the move, but it does appear that a few different factors combined to see the outsized move occur. Most traders agree that the speculative side of the market was short, and stop-losses in Cable above 1.3270 and 1.3300 would have contributed to the move.

Services and Composite PMI data also came in stronger than expected, but not by a degree that you would normally expect to move the market by that degree. The weaker US ADP number would have contributed to the move in Cable, and this could have fed through to cross moves as well, but overall traders feel that the move may have been overdone given other moves in the majors. Now, traders will be watching the pound closely in coming sessions to see whether the move is justified or whether we see a bit of retracement back into recent ranges.

Quieter Day on the Economic Calendar Today

The macroeconomic calendar is quieter during the first two sessions of the day today, but attention will shift back to the US tonight with some more key labour-market indicators due. Investors will be watching Challenger job cuts data earlier in the session, which has sprung up in importance since the government shutdown; last time out, they came in at 173%, and anything higher is likely to back last night's ADP data miss and push rate-cut expectations up even further.

Later in the session, we have the release of the weekly unemployment claims, with expectations for a 219k print firmly priced in. Canada's Ivey PMI is also scheduled north of the border, with anything significantly off the expected 53.6 print likely to see volatility in the loonie.

Source: IC Markets

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Economic

Commodity

A Strategic Push on China’s Doorstep

In a decisive move to loosen China’s grip on the global rare earths market, Europe has launched its largest magnet manufacturing plant in Narva, Estonia mere meters from the Russian border. Developed by Neo Performance Materials, the plant’s location is not only geopolitically symbolic but also logistically aligned with the EU’s efforts to secure a resilient and autonomous supply chain for critical raw materials essential to electric vehicles, renewable energy, and defense systems.

With China currently responsible for over 90% of global rare earth magnet production, Europe’s overreliance has been a longstanding vulnerability. The Narva plant is expected to produce 2,000 metric tons in 2025 and scale to 5,000 tons and beyond, potentially fulfilling around 10% of the EU’s annual demand for rare earth magnets.

From Dependency to Diversification

Neo’s CEO Rahim Suleman emphasized that the objective is not independence from China but rather the diversification of supply chains. The plant, already backed by contracts with auto suppliers like Schaeffler and Bosch, aims to supply magnet materials for electric vehicles, wind turbines, medical devices, and AI technologies. These are trillion-dollar downstream sectors, according to Adamas Intelligence’s Ryan Castilloux, making the rare earths bottleneck a billion-dollar upstream risk that Europe can no longer ignore.

While China recently delayed additional export controls as part of a temporary U.S.-China agreement, existing restrictions remain in place, maintaining uncertainty over future access. This prolonged exposure has sharpened the West’s focus on domestic processing and refining capacity, of which Estonia’s new facility is a prime example.

Challenges to Europe’s Resource Autonomy

Despite its symbolic importance, the Narva project illustrates the steep road ahead for Europe. The EU’s critical raw materials strategy faces numerous structural hurdles: fragmented internal supply chains, heavy regulatory burdens, high production costs, and limited domestic deposits. These factors raise concerns about whether Europe’s ambitions for a self-sustaining rare earths ecosystem are feasible without significant additional investment and political coordination.

Analyst Caroline Messecar from Fastmarkets highlighted that Europe still lacks sufficient magnet manufacturing capacity to reduce its supply risk meaningfully. The EU’s “RESourceEU” initiative modeled on the REPowerEU energy strategy is a step toward addressing these issues, but the roadmap remains long.

The Narva Factor: Security and Symbolism

The plant’s location in Narva, just across the river from Russia’s Ivangorod fortress, adds an additional layer of geopolitical sensitivity. President Vladimir Putin previously suggested Narva historically belongs to Russia, underscoring the latent territorial risks. Nevertheless, Neo defends its location choice based on existing infrastructure and Estonia’s skilled labor pool.

Estonia, a NATO member, has welcomed the investment. Officials view it as a timely development that complements the country’s transition away from fossil fuels and aligns with the EU’s green industrial goals. Jaanus Uiga, Estonia’s Deputy Secretary General for Energy and Mineral Resources, called the project “very on time” in light of rising global tensions over rare earth supply chains.

A Calculated Step Toward Supply Chain Security

The Narva rare earths facility marks a bold step in Europe’s journey to secure critical mineral independence. Although its production capacity currently represents a small fraction of total EU demand, it is an important proof of concept for a more distributed and resilient supply strategy.

As geopolitical competition with China intensifies and trade barriers become strategic levers, Europe’s ability to localize essential materials will be key to protecting its green and digital transformation goals. Whether Narva’s model can be replicated at scale across the continent will depend on EU funding, regulatory reform, and political will all of which remain under pressure from both market forces and regional tensions.

Source: CNBC

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Economic

BOJ Signals December Rate Hike as Political Support Aligns

The Bank of Japan (BOJ) appears ready to increase its policy interest rate to 0.75% from the current 0.5% at its upcoming meeting on December 18–19. This move, flagged earlier this week by Governor Kazuo Ueda, would mark the central bank’s first hike in nearly a year. Importantly, three sources close to the government indicated that Prime Minister Sanae Takaichi’s administration is prepared to tolerate this shift, signaling a key departure from prior political resistance to rate increases.

One government source noted that the administration has taken a hands-off stance, effectively giving Ueda the freedom to act independently: “If the BOJ wants to raise rates this month, please make your own decision.” This comment underscores a notable policy shift, especially under a Prime Minister known for dovish leanings. Even Takaichi’s traditionally reflationist aides have not voiced opposition, further clearing the path for a rate increase.

Economic Coordination and Weak Yen Create Room for Policy Shift

Finance Minister Satsuki Katayama reinforced the alignment between fiscal and monetary policymakers, stating that there was no gap in how the government and BOJ assess current economic conditions. Notably, one of the BOJ’s key considerations is the continued weakness of the yen, which has amplified import costs and complicated inflation dynamics.

Government insiders suggest the administration could accept a rate hike if the yen remains soft, which has indeed been the case. This creates a conditional causal pathway: if currency weakness persists, then rate normalization becomes politically and economically justifiable, even within a traditionally dovish framework.

Market Expectations Build Amid BOJ and Fed Divergence

The BOJ’s openness to a hike comes at a time when global central banks, especially the U.S. Federal Reserve, are leaning toward easing. Markets currently assign an 80% probability to a December BOJ hike, pricing in divergence from the Fed, which is widely expected to cut rates next week.

This policy divergence has implications for financial flows and currency markets. A BOJ hike would signal Japan's move away from ultra-loose monetary policy, potentially narrowing the interest rate gap with the U.S. and reducing downward pressure on the yen. However, investors remain focused on how far the BOJ is willing to go after this move, given Governor Ueda’s continued ambiguity on the longer-term rate trajectory.

Upcoming Data Will Shape Final Decision

While the tone suggests a high likelihood of a December rate increase, final confirmation will depend on several data points still to come. The BOJ board is expected to scrutinize domestic wage developments, as wage growth is critical for Japan’s inflation sustainability. Additionally, the Fed’s upcoming policy decision and its impact on global financial markets will also be taken into account before the BOJ finalizes its stance.

The anticipated December rate hike by the Bank of Japan would mark a significant step in its slow exit from ultra-accommodative policy, made more notable by the government’s implicit endorsement. With the yen weak, wages recovering modestly, and inflation above target, the BOJ is positioned to act without facing strong political resistance — a shift that reflects maturing consensus over the need for normalization. The market’s attention will now turn to whether this hike marks the beginning of a gradual path upward or simply a one-off adjustment in a cautious environment.

Source: Bloomberg

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Economic

Forex

Portable Wealth Becomes a Lifeline in Post-War Iran

The aftermath of the June 12-day war with Israel has intensified financial insecurity across Iran, driving a growing wave of citizens toward “portable wealth” assets that are easy to move, store, and preserve in value. In Tehran’s Grand Bazaar, demand for gold and silver has surged to unprecedented levels as the Iranian rial continues to weaken, sanctions tighten, and public anxiety mounts over a potential second conflict.

Merchants report surging sales of small gold bars, coins, and even investment-grade diamonds, as Iranians increasingly view hard assets as a safer alternative to holding depreciating cash or unstable real estate. The behavior reflects both a causal response to monetary instability and a historical memory of crisis migration, where liquid and mobile wealth proved critical.

Gold and Silver Outpace Real Estate as Inflation Hedges

With the rial recently breaching the psychological threshold of 1 million per U.S. dollar, public trust in the national currency has eroded further. One-gram, 18-karat gold bars, now selling at around 115 million rials (roughly $100), have become entry-level hedges for middle-class families. A standard gold coin crossed 1.2 billion rials for the first time, while silver bars particularly 100-gram variants are increasingly favored by families unable to afford gold.

Mansour, a 28-year-old gold seller, remarked that he has sold 6 kilograms of gold in just two weeks a volume previously unseen in retail trade. Meanwhile, middle-income citizens such as Fatemeh Parsa regret past investments in illiquid real estate, noting that gold would have not only preserved value better but also offered more flexibility in a crisis.

The correlation between inflation, weak currency, and shifting asset preferences is unmistakable. As savings are rapidly devalued, tangible assets with international value rise in appeal. Even affluent families are now selling off jewelry to maintain their lifestyle, according to veteran trader Amir Ramezani a reversal of roles that underscores economic stress penetrating all strata of society.

Diamonds, Currency, and Crypto Reflect Upper-Class Caution

While gold and silver dominate the popular market, wealthier Iranians are also turning to small-carat diamonds and other gems. These assets serve a dual function: as discreet stores of wealth and as physically portable forms of capital in the event of renewed conflict. Several jewelers in Tehran and Mashhad confirm a spike in demand for investment-grade gemstones, particularly among the upper middle class.

Foreign currency remains another crucial hedge, especially for Iranians looking to preserve mobility. As crypto trading faces tighter U.S. scrutiny and restrictions on Iranian platforms increase, citizens have pivoted to physical assets. This shift reflects a rational strategy in which perceived legal risks from sanctions outweigh the convenience of digital assets.

Preparedness Rooted in Historical Precedents

Beyond financial motives, fears of repeat displacement have reinforced the drive for mobility. During the recent war, thousands fled Tehran for the northern provinces or rural areas, often facing overwhelmed infrastructure, cash shortages, and ATM failures. Many could only bring what valuables they could quickly access.

This echoes Iran’s past. The 1980s Iran-Iraq war and the 1979 revolution prompted mass migrations where jewelry, gold, carpets, and foreign currency served as the last resort for wealth preservation. The memory of currency collapse and forced exits continues to inform asset behavior today, particularly among older generations.

Inflation, Instability, and the Psychology of Flight

Iran’s latest shift toward portable wealth highlights a deep, rational mistrust of domestic economic institutions amid political volatility, monetary decay, and war anxiety. As sanctions isolate the country and the rial’s purchasing power erodes, citizens are falling back on centuries-old methods of preserving value turning their savings into something they can carry, hide, or flee with.

Whether this trend deepens depends on geopolitical developments, the government’s response to currency pressure, and the global economy’s treatment of Iranian financial flows. For now, in Tehran’s bazaars, the glitter of gold is more than a symbol of wealth it is a tool of survival.

Soiurce: Bloomberg

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Daniel Carter

Central Bank

Economic

Key points:

● BOJ set to hike in December as flagged by governor Ueda.

● Bond yield rise as markets increase already high bets of action.

● Markets shift focus on hints of future rate-hike path.

● BOJ to meet December 18-19, Ueda to hold news conference.

The Bank of Japan is likely to raise interest rates in December with the government expected to tolerate such a decision, three government sources familiar with the deliberations said.

The BOJ looks set to proceed with a hike in its policy rate to 0.75% from 0.5%, which was flagged by Governor Kazuo Ueda in a speech on Monday, the sources said. It would be the first hike since January.

"If the BOJ wants to raise rates this month, please make your own decision. That's the government's stance," said one of the sources, adding it was nearly certain the bank will proceed with a hike this month.

The administration is prepared to tolerate a December hike, another source said. The sources spoke on condition of anonymity as they were not authorised to speak publicly.

The benchmark 10-year Japanese government bond (JGB) yield (JP10YTN=JBTC) hit an 18-year high of 1.930% after the report.

Ueda said on Monday the BOJ will consider the "pros and cons" of raising rates this month, signaling a strong chance of a hike at the December 18-19 meeting.

The remarks led the market to price in a roughly 80% chance of a December rate hike, though some market players focused on how the administration of dovish Prime Minister Sanae Takaichi could react.

Finance Minister Satsuki Katayama said on Tuesday she saw no gap between the government and the BOJ on their assessment of the economy, when asked about Ueda's remarks.

Even reflationist aides of Takaichi have not expressed opposition, including government panel member Toshihiro Nagahama who told Reuters on Wednesday the premier may accept a December hike if the yen stayed weak.

The BOJ's board is expected to make a final decision after scrutinising upcoming data on domestic wage developments, the U.S. Federal Reserve's policy decision next week and its impact on financial markets.

The market's focus will likely shift to the central bank's messaging on how far it will eventually raise interest rates, a topic Ueda remains ambiguous about.

Any clarity on the future rate-hike path will likely come from Ueda's news conference after the December policy meeting.

Speaking in parliament on Thursday, Ueda said there was uncertainty on how far the BOJ should hike rates due to the difficulty of estimating the country's neutral rate of interest, or the level that neither stimulates nor cools growth.

The BOJ has produced estimates suggesting Japan's nominal neutral rate lies somewhere in a range of 1% to 2.5%.

Source: Reuters

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Economic

Commodity

Ukraine Diplomacy and Venezuela Tensions Support Crude

Crude oil prices held modest gains on Thursday, underpinned by a delicate geopolitical balance. Brent traded just under $63 per barrel following a 0.4% uptick on Wednesday, while West Texas Intermediate hovered near $59. Market sentiment remains cautiously optimistic following U.S. President Donald Trump’s remarks that recent Ukraine peace discussions were “reasonably good,” though he acknowledged that a deal was far from certain.

In parallel, Trump's comments on Venezuela added a fresh layer of geopolitical risk. The President reaffirmed that the U.S. would begin strikes against drug cartels operating on Venezuelan soil “very soon,” with American forces reportedly building up in the region. This has introduced a new source of geopolitical premium in crude markets, offsetting ongoing concerns about oversupply and weak demand.

Analyst Gao Jian of Qisheng Futures highlighted that while the Venezuela situation introduces near-term uncertainty, the broader supply picture remains bearish, which may ultimately cap any sustained upside in oil prices.

Supply Glut Continues to Apply Downward Pressure

Despite short-term geopolitical risks, the fundamental balance of supply and demand continues to weigh heavily on the oil market. OPEC+ nations have resumed previously curtailed production, while non-OPEC producers have also increased output. At the same time, demand signals from key markets like China remain muted.

According to Janet Hong, CEO of Hengli Petrochemical International, Chinese demand for crude is unlikely to rebound significantly before mid-2026. This projection underscores a structural weakness in global consumption, particularly from what had been a key demand growth engine in previous years.

Further compounding bearish sentiment, Trafigura Group’s Chief Economist Saad Rahim stated at the FT Commodities Asia Summit that the market remains oversupplied and that “the path of least resistance for prices is likely down.” His assessment reflects a causal link between the ongoing supply glut and price suppression, even as temporary geopolitical risks offer intermittent support.

U.S. Inventory Data Reinforces Bearish Outlook

The latest U.S. Energy Information Administration (EIA) report added to the bearish undertone, showing a 574,000-barrel increase in domestic crude inventories. Gasoline and distillate stockpiles also rose, reflecting sluggish refined product demand and continued strong output from U.S. producers.

This inventory build reinforces the view that supply continues to outpace demand, creating a fundamental ceiling for prices despite current support from international conflict scenarios. The market’s recent resilience appears to be driven more by speculative positioning around headlines than by structural rebalancing in physical flows.

Risk Premium Clashes with Oversupply Reality

While oil prices are currently buoyed by geopolitical uncertainty surrounding both Ukraine and Venezuela, the durability of this support remains questionable. As OPEC+ production returns and China’s demand stays subdued, the physical oversupply of crude remains a significant drag.

In the absence of a major supply disruption or a breakthrough in peace talks that could shift the demand landscape, prices are likely to remain under pressure. For now, oil markets are navigating between headline-driven volatility and a stubbornly bearish underlying trend.

Source: Bloomberg

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Economic

Stocks

Muted Start Expected Amid Currency and FII Pressures

India’s equity markets are poised for a cautious start Thursday, with GIFT Nifty futures indicating the Nifty 50 index will open near Wednesday’s close at 25,986. Investor sentiment remains fragile amid continued selling by foreign portfolio investors (FPIs) and sharp depreciation in the Indian rupee.

Provisional data shows FPIs sold ₹32.07 billion ($355.7 million) worth of Indian equities on Wednesday, marking their fifth consecutive session of net outflows. This ongoing capital flight has dragged the Nifty 50 down by 0.9% and the BSE Sensex by 0.7% over the past four trading sessions, eroding some gains after both benchmarks touched 14-month highs last week.

Rupee Breaches 90 per Dollar, Hits All-Time Low

The Indian rupee extended its downtrend to an eighth consecutive month, falling past the critical 90 mark against the U.S. dollar for the first time. This depreciation has reached an all-time low, driven by weak trade and investment inflows and a notable increase in corporate hedging activity in anticipation of further currency weakness.

This steep currency decline has a direct causal effect on foreign investment behavior. A weaker rupee increases currency risk for dollar-based investors, discouraging further inflows and contributing to outflows. The trend also complicates inflation management, as import costs rise.

Markets Await RBI Decision as Rate Expectations Shift

Investor attention is now turning to the Reserve Bank of India’s policy decision on Friday. Although a Reuters poll conducted before last week’s robust Q2 GDP data suggested a possible 25-basis-point rate cut, the strong growth print has shifted expectations. The RBI may now be less inclined to ease rates, given inflation risks and currency instability.

Here, the relationship between GDP data and monetary policy expectations is crucial. While rate cuts typically support equity valuations, the combination of strong growth and a falling rupee may lead policymakers to prioritize currency defense over rate stimulus.

Sector Highlights and Corporate Developments

Several stocks are in focus due to sector-specific developments and policy changes. Indigo (InterGlobe Aviation) faced major operational disruption, cancelling at least 150 flights on Wednesday due to pilot shortages caused by new government fatigue management regulations. These disruptions are likely to impact investor confidence in the short term, particularly in aviation-related stocks.

Cigarette manufacturers ITC and Godfrey Phillips will also be under scrutiny following parliamentary approval of a new tax law that could lead to higher cigarette prices. If passed onto consumers, the move may dampen demand, affecting revenue projections for tobacco firms.

In a more positive development, fintech firm Pine Labs reported a consolidated profit of ₹59.7 million for Q2, reversing a year-ago loss, supported by rising revenue. This reversal could bolster confidence in India’s tech-driven financial services sector, offering a bright spot amid broader market uncertainty.

Despite earlier record highs and solid macroeconomic performance, Indian equity markets now face headwinds from global and domestic factors. Persistent foreign outflows, rupee depreciation, and uncertainty over RBI policy direction are clouding investor sentiment. Unless clarity emerges from Friday’s policy announcement and currency pressures stabilize, equity performance may remain range-bound in the near term. The market’s resilience will likely be tested by capital flows, interest rate decisions, and ongoing geopolitical risks.