China’s Economic Engine Stalls as Factory Output and Retail Sales Lose Momentum

Economic

Summary:

China’s factory output and retail sales both slowed in November, signaling weakening domestic demand and heightening pressure on policymakers to shift away from production-led growth....

Weakened Output and Consumption Underscore Domestic Fragility

In November, China's industrial production expanded by 4.8% year-on-year, slightly below the 4.9% growth recorded in October and missing the 5.0% projection from a Reuters poll. This mild deceleration, while modest on paper, points to underlying structural fatigue in the world’s second-largest economy, particularly as global demand plateaus and domestic consumption remains tepid.

More concerning was the sharp slowdown in retail sales, which rose just 1.3% compared to the 2.9% gain seen in October. This marks a notable deterioration in consumer sentiment, especially worrying as it comes during a period typically characterized by increased seasonal spending. The underperformance reflects a broader pattern of weak demand and declining consumer confidence that is proving resistant to recent policy efforts.

Consumer Caution Deepens Despite Promotional Efforts

November's slump in retail activity is further highlighted by a significant 8.5% year-on-year drop in auto sales the steepest contraction in ten months. This outcome defies the usual fourth-quarter boost from year-end promotions and reveals that discretionary spending remains under intense pressure. Even the extended Singles' Day festival, which was prolonged to five weeks by major e-commerce platforms to boost sales, failed to revive demand meaningfully. This suggests a fundamental lack of willingness or ability among households to spend, despite aggressive marketing and discounting.

The muted performance indicates that the ongoing property sector turmoil continues to erode household wealth, thereby constraining consumption. Given that consumer spending is a critical pillar for rebalancing China's economic model, these results raise concerns about the sustainability of domestic-led recovery.

Fixed Asset Investment Falls, Raising Concerns on Investment-Led Growth

In a parallel trend, fixed asset investment also contracted by 1.3% in the January–November period, narrowing from a 1.7% decline in the first ten months but still reflective of sluggish momentum. The slight improvement was not enough to offset broader skepticism, especially as analysts had forecast a larger 2.3% drop.

This decline underscores a broader investment slowdown, particularly in real estate and infrastructure areas long relied upon to fuel GDP expansion. Persistent weakness in these sectors casts doubt on the effectiveness of traditional stimulus levers and highlights the limitations of a policy framework still centered around heavy production and capital deployment.

Policymakers Under Pressure Amid Growth Target Ambitions

Despite the growing signs of economic strain, Beijing appears determined to pursue a 5% growth target for 2026, as the country enters the first year of a new five-year development plan. This ambition, while politically important, faces increasing skepticism from global institutions such as the World Bank and the IMF, both of which have issued more conservative forecasts for China’s growth trajectory.

At a recent high-level policy meeting, Chinese leaders reaffirmed their commitment to a “proactive” fiscal stance, promising to stimulate both consumption and investment. However, their rhetoric also acknowledged a growing contradiction between strong domestic supply and faltering demand. This admission highlights a lingering reluctance to fully transition away from supply-side, export-driven policies toward a consumption-oriented economic model.

Geopolitical Frictions Threaten External Demand Resilience

China’s exports have remained relatively resilient, surprising analysts who expected sharper declines due to higher U.S. tariffs. However, this strength may not last. The nation’s substantial trade surplus exceeding a trillion dollars has provoked increasing pushback from trading partners. French President Emmanuel Macron, during a state visit, publicly criticized China’s trade imbalances and hinted at potential retaliatory tariffs. Similarly, Mexico approved tariffs of up to 50% on certain Chinese imports beginning next year.

These actions introduce new risks to China's export engine, potentially weakening one of the few bright spots in the country’s current economic landscape. If retaliation spreads, external demand could contract sharply, compounding domestic vulnerabilities.

China’s November data paints a sobering picture of an economy caught between weakening internal demand and growing external scrutiny. Industrial production and retail sales have lost momentum, while fixed investment continues to decline. Despite public commitments to rebalance the economy, the current policy response remains tethered to legacy models of growth. Until consumer confidence returns and structural imbalances are addressed, China’s path to sustainable recovery will likely remain uneven and vulnerable to both internal pressures and external frictions.

Source: Reuters

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Pepperstone

Commodity

Forex

Last week, gold showed resilience amid heightened volatility. Persistent dollar weakness, ongoing central bank purchases, and safe-haven demand driven by geopolitical uncertainty all supported the rally. At the same time, hawkish comments from Fed officials put some pressure on prices at elevated levels.

This week, markets face several key risk events, including the US November nonfarm payrolls and CPI data, as well as rate decisions from the Bank of England and the Bank of Japan. The outcomes of these events could influence interest rate expectations and risk sentiment, significantly shaping gold's trajectory into year-end.

Technical Observation: Bullish Momentum Accelerates, $4,300 Faces a Key Test

On the XAUUSD daily chart, gold's bullish momentum picked up sharply last week, with four consecutive daily gains, shifting the trend from consolidation to an active uptrend. On Thursday, prices broke above the key $4,250 resistance, and on Friday, intraday highs reached $4,353, marking a seven-week peak.

Although there was a rapid pullback of nearly $100 during the US session on Friday, with a long upper shadow highlighting high-level selling pressure, gold ultimately held above $4,300, posting a weekly gain of nearly 2.5%, signaling that bulls remained firmly in control.

Gold Outlook: Volatility Rises As US Data And Central Banks Take Spotlight_1

Entering Monday, gold continued its upward push, with RSI re-entering the overbought zone above 70, indicating sustained short-term momentum. If the daily candle closes above $4,300, market confidence in the uptrend will strengthen, with prices likely to test the previous high at $4,381.

However, considering the short-term strength, a dip below $4,300 could see support emerge around the $4,180 consolidation low and the uptrend line extending from late October, potentially attracting dip buyers.

Bullish "Base" Intact: Dollar, Central Banks, and Geopolitical Risks in Sync

Gold's ability to hold gains at high levels remains supported by three key factors: the weaker dollar trend, continued central bank purchases, and hedging demand amid geopolitical uncertainty. Together, these elements provide the underlying framework for gold's price support.

On the policy front, December saw a Fed rate cut alongside the resumption of short-term Treasury purchases to ease liquidity pressure, which helped short-term US yields ease. The dollar index fell for the third consecutive week, briefly testing near-term lows around 98.

Dollar weakness lowers the opportunity cost of holding gold and diminishes the relative appeal of higher-yielding assets, redirecting capital flows back into gold.

Gold Outlook: Volatility Rises As US Data And Central Banks Take Spotlight_2

Meanwhile, central bank buying continues to act as a long-term "anchor" for gold. According to the World Gold Council, global central banks added a net 53 tonnes of gold in October, a significant month-on-month increase and the highest single-month total this year. Consistent official purchases provide a solid base for gold at high levels and support market acceptance of current price ranges.

Geopolitical uncertainty also remains a factor. From US interception of Venezuelan oil shipments, the ongoing Russia-Ukraine stalemate, to tensions in Southeast Asia, these events continually reinforce demand for hedging. While each may have limited immediate impact, collectively they offer marginal support to gold amid broader uncertainty.

Hawkish Fed Voices Emerge, Capping Short-Term Bullish Momentum

Although Fed Chair Powell has clearly signaled that rate hikes are not being considered in the near term, hawkish voices persist within the Fed.

Last Friday, Cleveland Fed President Harker (2026 voting member), Chicago Fed President Goolsby, and Kansas City Fed President George highlighted persistent inflation concerns, favoring a more restrictive stance. These comments pushed down market expectations for 2026 rate cuts, naturally weighing on short-term demand for non-yielding gold.

In my view, this is more of a sentiment recalibration at high levels than the start of a trend reversal. As long as the dollar remains relatively weak, coupled with ongoing central bank purchases and geopolitical hedging demand, the medium-term bullish structure for gold remains intact.

Focus on US Data and Central Bank Decisions, Watch for Volatility

Overall, the bullish structure for gold remains intact, but short-term volatility has increased. With the holiday season approaching, active capital is winding down and market liquidity is thinner. Any deviation from expectations in major risk events is more likely to trigger trend moves rather than just intraday noise. In this environment, risk management is more important than directional calls.

In the US, key focus this week is on November nonfarm payrolls (Thursday AEDT) and CPI (Friday AEDT). Markets expect around 50k new jobs, a slight rise in the unemployment rate to 4.5%, and core inflation near 3%.

If labor data comes in slightly stronger, say 60–70k new jobs with unemployment at 4.4–4.5% and inflation broadly as expected, it would suggest the economy is not slowing sharply and that rate cuts still have room, potentially putting modest pressure on gold bulls.

Conversely, if the labor market shows a clear weakness—negative job growth, unemployment rising to 4.6% or higher, and core inflation falling to 2.8–2.9%—markets may price in a "recession trade," which would clearly benefit gold.

Additionally, several Fed officials, including Williams and Bostic, are scheduled to speak this week. Their comments on economic prospects and policy direction could further influence expectations for future easing, amplifying short-term price swings.

Globally, central bank policy divergence is also significant. The market widely expects the Bank of England to cut rates by 25bps, while the Bank of Japan has over a 90% chance of a rate hike. Diverging paths among major central banks could, via currency and rate channels, further intensify short-term gold volatility.

Source: Pepperstone

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Gerik

Economic

Business Confidence Rises as Japan Navigates External Pressures

In the final quarter of 2025, business confidence among large Japanese manufacturers rose to its highest level in four years, with the Bank of Japan’s December Tankan survey reporting a sentiment index of +15, up from +14 in September. This marks the third consecutive quarterly improvement, indicating that firms have thus far absorbed the impact of increased U.S. tariffs without a significant decline in operational outlook. The figure aligned with market expectations and reflects continued resilience in Japan’s industrial sector.

Non-manufacturers maintained a robust sentiment index of +34, unchanged from the previous quarter. This consistency across both manufacturing and service sectors provides support for the prevailing market view that the Bank of Japan will proceed with a policy rate hike during its December 18–19 meeting. The central bank is reportedly preparing to raise its short-term policy rate from 0.5% to 0.75%.

Strength in Capital Investment Supports Policy Shift

In addition to rising sentiment, capital expenditure projections further reinforce expectations of monetary tightening. Large firms anticipate a 12.6% increase in capital investment for the fiscal year ending March 2026, surpassing the median forecast of 12%. This commitment to investment suggests business confidence in underlying demand conditions, despite ongoing external uncertainties.

The Tankan survey also revealed that firms observed rising sales prices in the fourth quarter and expect this trend to persist in the near term. This ability to pass on higher costs indicates that pricing power remains intact, a key condition that allows the central bank to continue phasing out its ultra-loose monetary policy framework.

Short-Term Optimism Dampened by Medium-Term Caution

Despite these positive indicators, Japanese businesses expressed concern about worsening conditions in the next three months. These concerns primarily relate to the uncertain impact of prolonged U.S. tariff policies, subdued domestic consumption, and the persistent challenge of labor shortages. A Bank of Japan official highlighted that while trade tensions have eased, inflation and demographic constraints continue to cloud the medium-term outlook.

The index measuring labor market conditions indicated the tightest environment since 1991, during Japan’s bubble era. While such tightness risks slowing growth, analysts suggest it could also support wage inflation a necessary component in the BOJ’s framework for a sustained rate normalization process. According to Capital Economics, this wage-price dynamic could justify a further rate increase to 1.75% by 2027, assuming consistent gains in income and consumption.

Mixed Economic Signals Offer Conditional Support for BOJ Hike

Japan’s economy contracted in the third quarter as exports weakened under pressure from U.S. tariffs. However, recent data signals a potential rebound in the current quarter, with recovery in both exports and factory output. This supports the BOJ’s cautious optimism that Japan can withstand moderate tightening without derailing growth.

Nevertheless, firms remain wary of structural issues. The aging population and shrinking labor pool pose long-term challenges that may limit potential growth. These underlying demographic pressures make the current wage growth both a necessity and a constraint: while it supports policy tightening, it also reflects an economy straining to maintain productivity without sufficient workforce expansion.

The December Tankan survey reinforces expectations that the Bank of Japan will raise interest rates this week for the first time in months. Strong business sentiment, improved capital investment plans, and pricing power signal that conditions are in place for such a move. However, caution persists among firms due to trade uncertainties, soft consumption, and a critically tight labor market. The BOJ must now navigate a delicate balance normalizing policy to reflect improved fundamentals, while remaining responsive to the persistent vulnerabilities that could temper Japan’s recovery in the longer term.

Source: Reuters

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FXOpen

Forex

Economic

AUD/USD is attempting a fresh increase from 0.6630. NZD/USD is consolidating and could aim for a move above 0.5800 in the short term.

Important Takeaways for AUD/USD and NZD/USD Analysis Today

· The Aussie Dollar started a minor pullback from 0.6685 against the US Dollar.

· There is a key bullish trend line forming with support at 0.6645 on the hourly chart of AUD/USD at FXOpen.

· NZD/USD is consolidating above 0.5765 and 0.5755.

· There is a major bullish trend line forming with support at 0.5765 on the hourly chart of NZD/USD at FXOpen.

AUD/USD Technical Analysis

On the hourly chart of AUD/USD at FXOpen, the pair formed a base above 0.6600. The Aussie Dollar started a decent increase above 0.6630 against the US Dollar to enter a short-term positive zone.

The pair struggled above 0.6680 and recently corrected some gains. The recent low was formed at 0.6632. The pair is now consolidating and facing resistance near the 50% Fib retracement level of the downward move from the 0.6677 swing high to the 0.6632 low at 0.6655 and the 50-hour simple moving average.

The AUD/USD chart indicates that the pair could struggle to clear the 76.4% Fib retracement at 0.6665. The first major hurdle for the bulls could be 0.6685.

An upside break above 0.6685 resistance might send the pair further higher. The next major target is near the 0.6720 level. Any more gains could clear the path for a move toward 0.6750. If there is no close above 0.6665, the pair might start a fresh decline.

Immediate bid zone could be near the 0.6645 level. There is also a key bullish trend line forming with support at 0.6645. The next area of interest is 0.6630. If there is a downside break below 0.6630, the pair could extend its decline toward 0.6600. Any more losses might signal a move toward 0.6570.

NZD/USD Technical Analysis

On the hourly chart of NZD/USD on FXOpen, the pair also followed AUD/USD. The New Zealand Dollar failed to stay above 0.5800 and corrected gains against the US Dollar.

The pair dipped below 0.5790 and the 50-hour simple moving average and 0.5830. A low was formed at 0.5765, and the pair is now consolidating below the 23.6% Fib retracement level of the downward move from the 0.5831 swing high to the 0.5765 low.

The NZD/USD chart suggests that the RSI is below 40, signaling a short-term negative bias. On the upside, the pair is facing resistance near the 50% Fib retracement level at 0.5800.

The next major hurdle for buyers could be 0.5815. A clear move above 0.5815 might even push the pair toward 0.5830. Any more gains might clear the path for a move toward the 0.5880 pivot zone in the coming sessions.

On the downside, there is support forming near the 0.5765 zone and a bullish trend line. If there is a downside break below 0.5765, the pair might slide toward 0.5740. Any more losses could lead NZD/USD into a bearish zone to 0.5710.

Source: FXOpen

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SAXO

Forex

Cryptocurrency

Stocks

Commodity

Market drivers and catalysts

· Equities: Wall Street slides on artificial intelligence margin worries, Europe slips with tech drag, while Asia firms on China fiscal support hopes

· Volatility: VIX mid-teens, event-heavy week, macro and central banks in focus

· Digital assets: BTC/ETH stable, ETHA weaker, UK crypto regulation, MSTR pressure

· Fixed Income: US yield curve steepens to new 2025 extreme as long dated US treasuries under pressure.

· Currencies: Yen firms Monday ahead of Friday's key Bank of Japan meeting. The US dollar quiet.

· Commodities: Metals rebound after equity-led correction; oil steadies above key support

· Macro events: US Dec Empire Manufacturing & NAHB Housing Market Index

Macro headlines

· Confidence among Japan's large manufacturers hit a four-year high, with the BOJ's quarterly Tankan business survey index rising to 15 from 14 in September, while large non-manufacturers held at 34, near early-1990s highs. A result that strengnthens the case for the BOJ to raise interest rates this week.

· The four-year downturn in China's home prices, which has weighed on consumer sentiment and become a hurdle for economic growth, continued in November, with new-home sales and resale home values both falling. Officials are considering measures including mortgage subsidies and tax rebates to address the crisis. Retail sales and industrial production, also for November, both rose by less than expected, up 1.3% and 4.8% YoY versus expectations of 2.9% and 5%.

· Trump stated he is leaning towards Kevin Warsh or Kevin Hassett to lead the Fed and believes the next Fed Chair should consult him on interest rates.

· Fed comments on recent rate change: Goolsbee dissented from last week's cut, preferring to await more inflation data despite expecting 2026 cuts, while Paulson was more dovish, prioritising labour market risks and seeing inflation easing next year. Cleveland Fed's Hammack meanwhile said policy is around neutral, but she would prefer a slightly more restrictive stance to keep pressure on inflation, which remains above target and has been stuck near 3%. San Francisco Fed's Daly ultimately backed this week's rate cut despite calling it a difficult decision.

Equities

· USA: The S&P 500 fell 1.1% to 6,827.41, the Dow slipped 0.5% to 48,458.05, and the Nasdaq dropped 1.7% to 23,195.17. Tech led losses as investors worried that the artificial intelligence (AI) build-out is starting to squeeze margins, rather than lift them. Broadcom sank 11.4% after warning that more AI system sales mean thinner margins, while Oracle slid 4.6% on fresh concerns about data center timing and heavy spending. Nvidia fell 3.3% in the chip selloff, while Lululemon jumped 9.6% on upbeat guidance and a CEO transition; next up is the delayed run of U.S. data, including retail sales on 16 December.

· Europe: The STOXX 600 fell 0.5% to 578.24 and the Euro STOXX 50 eased 0.6% to 5,720.71, while the FTSE 100 slipped 0.6% to 9,649.03. Morning gains faded as U.S. tech weakness revived artificial intelligence valuation worries. ASML dropped 1.7% and Schneider Electric fell 1.6%, while UBS rose 2.5% on hopes Swiss capital rules may be softened and Lufthansa climbed 4.8% after a broker upgrade. Attention now turns to this week's European Central Bank and Bank of England decisions later this week.

· Asia: Asia finished mostly higher on Friday: Japan's Nikkei 225 rose 1.4% to 50,836.55, Hong Kong's Hang Seng gained 1.8% to 25,976.79, and China's CSI 300 added 0.6% to 4,580.95. Sentiment improved after Beijing signalled a more proactive fiscal stance for 2026 and markets digested last week's Fed rate cut. Alibaba climbed 2.3% and Xiaomi rose 1.9% as internet and consumer tech rebounded, while China Life Insurance jumped 5.5% as financials outperformed. This week's key watchpoints are fresh China data and the Bank of Japan meeting on 18–19 December.

Volatility

· Volatility picked up slightly as investors prepare for a packed macro week. The VIX rose 5.99% to 15.74, while short-term fear gauges like VIX1D (+16.07%) and VIX9D (+8.19%) jumped more noticeably, hinting at near-term nerves. Despite the SPX dropping -1.07% to 6,827, options positioning suggests no panic, just preparation.

· This week's SPX expected move into the 19 Dec expiry is ±96.5 points (~1.41%), based on straddle pricing around the 6,825 strike. Skew check: the options chain remains moderately inverted, with calls near the money trading richer than puts, a possible signal of interest in upside hedges, or call overwriting.

· Macro triggers include U.S. CPI (Thursday), core PCE (Friday), and four central bank rate decisions (BoE, ECB, BoJ, Fed follow-through). With liquidity drying into year-end, even modest surprises may spark disproportionate moves. Watch central bank tone and inflation surprises for volatility spikes.

Digital Assets

· Bitcoin held ground near $89.6k (+1.63%), while ether rebounded to $3,123 (+1.97%), showing resilience despite a broader pullback in crypto equities. Solana outperformed at +2.05%, while XRP was more muted at +0.93%. The move came as politics increasingly dominates the crypto narrative, with UK regulators setting a timeline to integrate crypto into mainstream finance by 2027.

· ETF sentiment diverged. IBIT fell 1.73%, while ETHA dropped 4.55%, despite recent net inflows (latest reported +$51m IBIT, +$23m ETHA on 12 Dec). This points to rotation, not capitulation. Crypto treasury names like MSTR (-3.74%) and CIFR (-9.69%) underperformed, echoing ETF weakness. Concerns persist over MSTR's continued inclusion in the Nasdaq 100 amid its high BTC beta.

· Politics, liquidity, and regulation, not just halving cycles, are setting the tone heading into 2026.

Fixed Income

· The focus in US treasuries is on the steepening yield curve as further Fed rate cuts are seen next year and the 2-year benchmark treasury yield remains anchored near 3.50% while the 10-year benchmark rose a few basis points again on Friday despite heavy selling in risky assets, suggesting that US treasuries are failing to serve as a safe haven. The 10-year dipped back to 4.17% in the Asian session on Monday after closing above 4.18% on Friday, near the three-month highs just above 4.20% The 2-10 yield spread closed north of 66 basis points for the first time in 2025 on Friday, the steepest the yield curve has been since early 2022.

· Japanese government bonds were rangebound to start the week, with the key focus of late on the 10-year benchmark yield, which traded slightly higher near 1.96% in Tokyo late Monday as the high since 1999 just above the 2.00% level has been eyed in its recent surge.

Commodities

· Oil trades higher with Brent holding above key support in the USD 60-61 area following Friday's broad risk-off session. Today's modest rebound is supported by signs of robust Chinese demand in November and ongoing geopolitical supply risks. However, expectations of a growing surplus as OPEC+ and other producers lift output amid sluggish consumption growth continue to weigh on sentiment and may, for now, cap the upside in the absence of a material disruption, notably from Russia or Venezuela.

· Silver suffered a sharp 6% peak-to-trough pullback on Friday from a fresh record high near USD 64.5 as a sell-off in overvalued AI-related equities dragged broader risk sentiment lower. Despite this setback, silver still ended the week up a solid 5% before bouncing during the Asian session to trade around USD 63.2. Just like platinum which trades at a fresh 14-year high above USD 1,800, silver is being underpinned by continued demand for hard assets and a tight, price-supportive supply outlook,

· Gold trades less than 1% below its October record high at USD 4,380 after Friday's dip once again attracted fresh buying interest. While Wednesday's rate cut sparked dissent and renewed debate over the rate trajectory into 2026, gold continues to find support from sustained buying by non-western central banks—not as a hedge against the dollar, but increasingly as a replacement for it.

Currencies

· The US dollar traded in a tight range to start the week as the focus on Monday was on the more volatile Japanese yen. Friday saw a muted session for the US dollar as well as there was no additional momentum lower for the greenback after what was seen as a dovish Fed last Wednesday.

· Looking ahead, the focus this week will be intense on sterling on Thursday as the market anticipates another rate cut from the Bank of England, but it unsure how committed the bank is to further easing. But the greatest anticipation is likely how the Bank of Japan guides for future policy moves after the profound recent yen weakness as it is seen finally hiking its policy rate this Friday for the first time since January.

· The JPY found support overnight on the strong Tankan business sentiment surveys and as unnamed sources cited by Bloomberg suggest that the Bank of Japan would begin selling its ETFs soon in what could prove a multi-decade unwinding process. USDJPY pushed just below the 155.00 at its lowest in the Asian session on Monday after closing Friday at 155.80, while EURJPY traded near 182.00 after closing Friday just below 183.00.

Source: SAXO

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Danske Bank

Forex

Economic

Central Bank

In focus this week

Today is expected to be somewhat quiet on the data front, although we highlight speeches from New York Fed President John Williams and Fed Governor Stephen Miran in the evening. Markets will be looking for comments on US monetary policy.

The rest of the week will offer many interesting figures ahead of key central bank meetings on Thursday. Important for the euro area, flash PMIs will be released on Tuesday, the final inflation print for November on Wednesday and the ECB growth forecast on Thursday.

Across the Atlantic, the delayed US nonfarm payrolls and full November Jobs Report are set for release on Tuesday along with October retail sales data and December flash PMIs. On Thursday, the November CPI is due for release in the afternoon.

All eyes will be on the Thursday central bank meetings from the ECB, Riksbank, Norges Bank and Bank of England (BoE). Market consensus expects the ECB to leave the deposit rate unchanged on the back of data coming in stronger than expected by the ECB staff. We also expect the Riksbank and Norges bank to keep interest rates steady in line with market pricing. The BoE is expected to cut the bank rate, but the labour market report on Tuesday and November CPI figures on Wednesday may play a role in the final outcome.

Rounding off the week, the Bank of Japan (BoJ) will hold its meeting. Markets have increasingly expected the BoJ to hike the interest rate in recent weeks as Governor Ueda said he will "consider pros and cons".

Economic and market news

What happened overnight

In China, the monthly batch of data showed retail sales growth declining to 1.3% in November from 2.9% in October. Industrial output growth slowed marginally to 4.8% y/y in November from 4.9% y/y in October. The figures were below expectations of 2.8% and 5.0% respectively. The housing market continued to weaken, with home prices declining 0.4% m/m and 2.4% y/y in November. As expected, China continues to be a two-speed economy with strong exports and tech development but weak domestic demand.

In Japan, the quarterly Tankan business survey showed manufacturing sentiment rising to +17 in December from the already high level of +15 in September. Sentiment improved in manufacturing to +11 from +7, while the non-manufacturing sentiment stayed at +21. The overall sentiment was +24, +21 and +11 for Large-, Medium- and Small Enterprises respectively. The business sentiment remained fairly strong, however the forecast for next quarter expects sentiment to take a smaller decline as businesses eye a BoJ hike this week.

What happened over the weekend

In the US, we had the first comments following the FOMC December meeting, however they did not provide any clear new signals. Goolsbee was not "hawkish" on interest rates next year, but felt optimistic that they could fall this year, although he felt uncomfortable front loading looser monetary policy. Hammock commented on the labour market gradually cooling but also pointed at inflation remaining above target.

In Sweden, the labour force survey (LFS) for November showed encouraging employment growth of 0.6% m/m. The unemployment rate remained at high levels but edged down to 9.1% SA from 9.3%. The Riksbank will likely continue to express concerns about the labour market during their meeting on Thursday. SPES unemployment declined for the fourth consecutive month in November to 6.7%.

In Germany, the final inflation data for November confirmed the flash estimates. CPI held steady at 2.3% y/y with electricity prices declining 1.5% y/y and food inflation remaining at low levels of 1.2% y/y. The large upside surprise in the HICP index was also confirmed, which rose to 2.6% y/y. HICP services inflation was the culprit behind the surprise as it rose to 4.2% y/y from 3.6% y/y.

Equities: Global equities had a rough end to the week, as renewed concerns around lofty tech valuations weighed on risk sentiment and pushed major indices lower. The S&P 500 ended Friday down 1.1%, resulting in a negative week overall. Friday's session showed a clear defensive tilt, with cyclicals underperforming by almost 1 percentage point. The Nasdaq ended the day 1.7% lower, while the Russell 2000 declined by around the same magnitude. Over the week as a whole, the MSCI World index ended the week down only around 0.2%.

FI and FX: We have a busy week ahead of us with plenty of central bank meetings and with very different outcomes. We have Norges Bank and the Riksbank meeting on Thursday together with the ECB and Bank of England and finally, Bank of Japan on Friday. The Bank of England is expected to cut rates, while BoJ is expected to hike rates – both by 25bp. ECB, Norges Bank and the Riksbank are all on hold, although Norges Bank is expected to signal a cut in March and the ECB is expected to signal they are on hold and possibly reverse some of the repricing we have seen lately.

Source: Danske Bank

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Swissquote

Stocks

Central Bank

Political

Last week ended on a mixed note for equities. Looking at global index performance, the message was fairly clear: investor appetite is waning for AI-related technology stocks, while non-tech and more value-oriented pockets of the market are benefiting from the latest Federal Reserve (Fed) rate cut.

In the US, the Dow Jones briefly hit a fresh all-time high on Friday before retreating, while the tech-heavy Nasdaq fell 1.9%, sliding into its 50-day moving average. Earnings from Oracle and Broadcom were not strong enough to reignite enthusiasm, with investors instead focusing on high leverage, elevated debt levels and cloudy revenue visibility.

To rub salt in the wound, Oracle said it is pushing back the completion dates of some data centres developed for Nvidia from 2027 to 2028, citing labour and material shortages. That announcement proved to be the final blow: Oracle shares fell another 4.5% on Friday, after plunging more than 10% the day before following its Q3 results. Stress is also visible across related assets: Oracle's new investment-grade bonds are trading at distressed levels, while its five-year CDS spiked to the highest level since 2009.

When the market's AI risk barometer struggles, the sector's kingpin is unlikely to remain unscathed. Nvidia shares fell more than 3%, despite reports that Chinese demand for its H200 chips exceeds current production capacity. Nvidia is now allowed to sell these chips to China provided a 25% cut of revenues is paid to the US government. The issue, however, is that there is no guarantee Beijing will allow Chinese firms to purchase them freely, given its determination to build domestic chip capacity. China, therefore, may not provide the safety net investors are hoping for.

More broadly, while Nvidia's revenues continue to grow thanks to massive investment in AI infrastructure, investors increasingly want to see monetisation through AI-enabled end products, not just spending. That matters because investors ultimately finance this capex cycle through equity and bond markets. If their support fades, spending will need to be trimmed — and Nvidia would inevitably feel the impact.

Against this backdrop, Bitcoin — often seen as a bellwether of tech and risk appetite — remained under pressure over the weekend. While slightly firmer this morning, it is still trading below $90'000. Asian tech stocks also opened the week on the back foot, with SoftBank down more than 6%. If the global tech sell-off deepens, Bitcoin could retest — and potentially break — the key $80'000 support level.

Looking ahead, Micron's earnings this week could add to the gloom for the tech sector. A deeper tech correction would likely accelerate rotation into non-tech and non-US assets. In the US, the Dow Jones could continue to attract flows, while in Europe the Stoxx 600 and FTSE 100 may benefit from their value tilt. For the UK market, a potential Bank of England (BoE) rate cut on Thursday could provide additional support. The BoE is expected to lower rates by 25bp, as it continues to support a weakening economy. Recent UK growth data were particularly poor, and upcoming budget measures are unlikely to improve the outlook in the near term.

China is also struggling. Recent growth, retail sales and industrial production data disappointed sharply, underscoring how reliant Chinese markets have become on tech optimism. The silver lining is that Beijing is likely to respond with further stimulus, which typically resonates well with investors.

Elsewhere, both the European Central Bank (ECB) and the Bank of Japan (BoJ) will deliver their final policy decisions of the year. The ECB is expected to stay on hold, arguing that policy is close to equilibrium while remaining data-dependent. In contrast, the BoJ is widely expected to hike rates. That move appears largely priced in, with Japanese yields rising sharply: the 10-year has pushed above 1.95%, while the 30-year is flirting with 3.40%, narrowing the gap with US yields. This raises the risk of Japanese investors repatriating capital from US Treasuries.

But, Keep Calm! The Federal Reserve has begun buying roughly $40bn per month of short-term Treasury bills to support bank reserves and stabilise short-term funding markets after years of quantitative tightening weighed on liquidity. Officials stress this is not QE, but a "reserve management" operation aimed at ensuring sufficient reserves to keep policy rates under control.

Better news: According to the New York Fed's operational schedule, total transactions could exceed $54bn over the next month, including reserve-management purchases and reinvestments. And frankly, regardless of the label, $40bn of central-bank Treasury buying is still $40bn of liquidity entering the system — liquidity that tends to find its way into stocks, bonds and metals.

The final test this week will be US CPI and non-farm payrolls. Investors want soft labour data to justify further rate cuts — but not numbers too weak to signal a sharp earnings slowdown. And everyone wants inflation to continue easing toward the Fed's 2% target. Lower inflation remains the key ingredient for sustaining risk appetite.