Fed’s December Decision May Temper Market Cheers

Economic

Summary:

While the Fed is expected to cut rates by 25 basis points this week, investors are bracing for a “hawkish cut” a reduction paired with warnings of a pause which could mute market enthusiasm and dampen year-end gains....

Markets Prepare for a Dovish Move with a Hawkish Message

As the U.S. Federal Reserve concludes its final policy meeting of 2025, the markets are nearly unanimous in pricing in a 25-basis-point rate cut to a new target range of 3.5% to 3.75%. However, the optimism may be short-lived. Despite the expected easing, analysts and traders are increasingly discussing the likelihood of a “hawkish cut” a reduction in interest rates that is accompanied by cautious forward guidance or signals of a potential pause in 2026.

This scenario, if realized, could challenge bullish sentiment by suggesting that the path of monetary easing may not be as aggressive or prolonged as previously expected. The CME FedWatch tool shows an 88.6% probability of a cut, indicating the move is already priced into equities. Any shift toward policy restraint could therefore trigger disappointment rather than relief.

The Dot Plot and Powell’s Language Hold the Key

Much of the market reaction will hinge on the Fed’s updated “dot plot” its projection of future interest rate moves as well as Jerome Powell’s tone during the press conference. If the plot shows a flat or higher expected rate path for 2026, and if Powell emphasizes inflation vigilance or data dependency, traders could interpret the move as a signal that the Fed is nearing the end of its cutting cycle.

This dynamic reveals a causal relationship between forward guidance and asset repricing: rate cuts alone may no longer move markets unless paired with clear dovish momentum. In fact, restraint in the Fed’s outlook or signs of internal division among policymakers may be enough to halt the recent equity rally.

Equities Mixed Ahead of the Decision, While Risk Markets Surge

Ahead of the announcement, U.S. equity indexes reflected caution. The S&P 500 ended mostly flat, the Dow Jones Industrial Average slipped 0.38%, and the Nasdaq eked out a modest gain of 0.13%. Interestingly, the Russell 2000 small-cap index hit an intraday high, suggesting speculative appetite remains active even as uncertainty builds.

In global markets, Vietnam’s stock market continues to attract attention. The VanEck Vietnam ETF (VNM) is up approximately 62% year-to-date, driven by domestic reforms and trade tailwinds. Analysts suggest the rally may persist into 2026, with the country positioning itself as a beneficiary of supply chain diversification trends.

Geopolitics and Trade Data Add to Crosscurrents

Beyond monetary policy, geopolitical and trade-related developments continue to influence market expectations. The U.S. has adjusted its timeline for Chinese soybean purchases, following slower-than-expected progress. Meanwhile, optimism is building around Nvidia’s potential to sell more advanced AI chips to China. Though the market reaction has been subdued, analysts suggest this could meaningfully improve the company’s revenue outlook in 2026, depending on Beijing’s willingness to buy the newer H200 chip.

As the Fed prepares to cut rates again, the real market driver may not be the rate move itself but the messaging that accompanies it. A hawkish cut one that signals caution or a long pause could dull year-end celebrations, especially if economic projections show a more restrained path for 2026. The equity rally, while still alive, faces a credibility test as central banks signal their next moves with more nuance than force. Investors should remain alert not only to what the Fed does, but what it says and what it signals next.

Source: Bloomberg

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Winkelmann

Forex

Economic

Apartment buildings in Seoul, Dec. 7 / Yonhap

Household loans extended by Korean banks grew at a slower pace in November amid tightened lending regulations aimed at cooling the overheated property market in the capital region, central bank data showed Wednesday.

Banks' outstanding household loans stood at 1,175.6 trillion won ($799.62 billion) as of end-November, up 1.9 trillion won from a month earlier, according to the Bank of Korea (BOK).

The growth slowed from the 3.5 trillion-won increase tallied in the previous month.

Home-backed loans rose 700 billion won on-month to 935.5 trillion won, decelerating from a 2 trillion-won gain in October. Unsecured and other types of household loans climbed 1.2 trillion won to 239.2 trillion won in November, following a 1.4 trillion won gain a month earlier.

"Mortgage loans grew at a slower clip despite the increase in housing transactions prior to the Oct. 15 measures, as banks continued to tighten household lending and demand for jeonse loans declined," a BOK official said.

Under the tightened rules announced in mid-October, the government designated 21 more districts in Seoul as speculative zones, placing all 25 districts in the capital under stricter regulations. It also toughened lending limits, capping mortgage loans at as little as 200 million won.

Jeonse is a unique housing rental system in Korea in which tenants make a large lump-sum deposit that is fully returned at the end of the lease.

"Other household loans continued to increase markedly amid an expansion in both domestic and overseas stock investments," the official added.

The benchmark Korea Composite Stock Price Index (KOSPI) has surged nearly 70 percent so far this year, driven by the semiconductor market upcycle, optimism over the artificial intelligence (AI) boom and government-led market reform measures.

The data also showed that corporate loans increased 6.2 trillion won on-month in November, up from a 5.9 trillion-won rise the previous month.

Outstanding corporate loans stood at 1,372.2 trillion won at the end of November, the BOK said.

Source: Koreatimes

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Gerik

Political

Border Conflict Resurfaces Despite Previous Peace Agreement

Violent clashes have resumed between Thailand and Cambodia, reigniting long-standing tensions along their shared 800-kilometer border. Over the weekend, artillery exchanges escalated, with Thailand deploying F-16 fighter jets after accusing Cambodia of rocket attacks on civilian areas. This latest outbreak of hostilities marks a resurgence in one of Southeast Asia’s most persistent flashpoints, despite the recent diplomatic progress marked by the signing of the Kuala Lumpur Accords in October.

The renewed fighting undermines earlier hopes of stabilization following trade-linked peace efforts orchestrated by the Trump administration. The volatility reflects a recurring pattern in Thai-Cambodian relations, often exacerbated by shifting domestic political agendas and nationalist sentiment on both sides.

Trump’s Response: Diplomacy Coupled With Trade Threats

Speaking at an event in Pennsylvania on Tuesday night, President Trump pledged to personally intervene by calling both nations' leaders, repeating his claim of having resolved multiple global conflicts through direct pressure and tariff threats. “We’re making peace through strength,” he said, positioning himself once again as a dealmaker capable of halting conflict through economic leverage.

Earlier in July, Trump had threatened trade penalties against both nations amid border violence that resulted in dozens of deaths. This was followed by the Kuala Lumpur Accords, signed in late October, which outlined a roadmap for de-escalation and economic cooperation. Trump’s use of trade tools as geopolitical levers illustrates a causal strategy leveraging economic incentives and threats to secure political stability though its sustainability remains in question given the current relapse.

Washington's Official Response and International Pressure

U.S. Secretary of State Marco Rubio issued a firm statement urging an “immediate cessation of hostilities” and reiterating the need to adhere to the de-escalatory steps defined in the October agreement. The call emphasized the protection of civilians and a return to diplomatic channels, highlighting Washington’s concern about the risk of regional destabilization.

This aligns with a broader shift in U.S. foreign policy toward conditional engagement: offering trade benefits in exchange for peace while threatening isolation or tariffs in response to aggression. However, the recurring nature of the Thailand-Cambodia conflict raises doubts about whether such short-term transactional diplomacy can ensure long-term regional stability.

Historical Context and the Challenge of Lasting Peace

Tensions between Thailand and Cambodia have historically flared over border demarcation, cultural heritage sites, and nationalist politics. These outbreaks are often less about territorial disputes per se and more about domestic political posturing. The conflict’s cyclical nature suggests a correlation rather than causation between external peace initiatives and temporary ceasefires. Without structural solutions or multilateral enforcement mechanisms, the peace agreements risk becoming symbolic rather than transformative.

The resurgence of conflict between Thailand and Cambodia just weeks after signing peace accords challenges the effectiveness of Trump’s trade-linked diplomacy model. While his pledge to intervene directly underscores a bold and personalized approach to foreign policy, it also reflects the fragility of peace when built on economic coercion rather than institutional reconciliation. As tensions mount, the international community will watch closely to see whether Washington’s influence can again deliver a ceasefire and whether it will hold this time.

Source: Bloomberg

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Gerik

Economic

Shifting Tides for Yield Seekers as Fed Easing Continues

The era of effortless income through safe assets is nearing its end. For over a year, income investors enjoyed unusually high short-term yields as U.S. Treasuries hovered above 5%, offering an appealing refuge without the need to take on significant risk. But that window is rapidly closing. With the Federal Reserve expected to deliver its third consecutive interest rate cut this week, yields are falling back toward historical norms. The implications for pensions, insurers, and other institutional investors managing long-term liabilities are significant: the days of sitting safely on cash and collecting meaningful returns are numbered.

There is a clear causal relationship between the Fed’s rate cuts and the diminishing attractiveness of low-risk fixed-income assets. The easing cycle, launched in response to slowing inflation and decelerating growth, is suppressing short-term yields. At the same time, the AI-driven equity rally and resilient U.S. economy have led to a broad compression of returns across asset classes, exacerbating the dilemma for income-focused portfolios. Dividend yields on global equities remain near two-decade lows, and investment-grade credit spreads offer little compensation for risk, particularly if the economic outlook deteriorates.

Long-Term Allocators Pivoting Toward Risk and Illiquidity

As safe yields decline, institutional portfolios are being pushed toward longer-duration, higher-risk, or less-liquid exposures. BlackRock reports increasing interest in high-yield debt, emerging-market bonds, AAA-rated collateralized loan obligations, and structured securitizations. Private credit, in particular, has re-emerged as a favored destination. Despite concerns over deal quality and market saturation, the relative yield advantage of private loans over public bonds is once again drawing attention. JPMorgan and Vantage Point Asset Management both note a revival in appetite for private credit strategies, with selective allocations supporting new income-focused vehicles.

Capital is also flowing into specialized, non-traditional yield instruments. Catastrophe bonds and insurance-linked securities are attracting institutional demand, with their uncorrelated payouts offering rare-event risk premiums. Funds like the Victory Pioneer CAT Bond Fund have grown substantially since their inception, reflecting investors' growing need to diversify away from public credit and equity markets.

The global equity landscape is offering little relief. Soaring valuations especially in technology stocks have reduced dividend yields across the MSCI All Country World Index. At the same time, more firms are prioritizing share buybacks over dividend payouts, limiting the reliability of equities as a source of steady income. According to Vanguard, this structural shift is intensifying the challenge of building income-generating portfolios without assuming elevated market volatility.

Yield Curve Dynamics Add Complexity to Portfolio Construction

While short-term rates are directly responsive to Fed actions, longer-dated Treasury yields are being shaped by broader macroeconomic forces, including inflation expectations, growth prospects, and fiscal dynamics. Even as the Fed trims its policy rate, 10- and 30-year bond yields have climbed in recent weeks, highlighting a disconnect between monetary policy and market sentiment. This introduces timing risk into duration-based strategies and complicates income optimization for fixed-income managers.

In a few regions, yield opportunities remain. Sticky inflation in Australia and increased government borrowing in the UK have pushed local rates higher, creating selective openings for yield seekers. However, these are exceptions rather than the norm. Across most developed markets, the tightening income environment is a shared reality, leaving few easy options for conservative allocators.

The combination of falling Treasury yields, compressed credit spreads, and low equity dividends marks the onset of what may be called the "Great Income Squeeze." For income investors, the era of earning high returns from low-risk assets is drawing to a close. The causal force behind this shift is unmistakable: the Federal Reserve’s easing cycle is lowering the floor for safe yields. In response, portfolios are being reshaped toward riskier, longer-dated, or less-liquid assets with a growing reliance on private and alternative markets. As the incentive to stretch across the risk curve grows stronger, the balance between yield and safety is becoming more difficult to strike.

Source: Bloomberg

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Justin

Stocks

Economic

Airlines in the Middle East stand to earn $28.60 in profit per passenger next year, the highest for all regions, as they benefit from strong passenger demand, supportive regulations and public investment in infrastructure.

That is more than triple the average net profit per passenger for global airlines of $7.90 in 2026 and 2025, according to the International Air Transport Association's latest annual report, issued on Tuesday. It is slightly below the $28.90 figure for regional carriers this year.

Middle East airlines will end 2025 with an estimated $6.6 billion in net profit, up from a June forecast of $6.2 billion and an increase from $6 billion in 2024. It is also the strongest region in terms of net profit margin, at 9.3 per cent.

"This performance attests to the difference a positive regulatory operating environment can make, and to the region's strategic position as a global connecting hub," Iata said in a statement on Tuesday.

The region continues to record "robust" passenger demand, driven by long-haul traffic and the expansion of hub carriers such as Emirates, Etihad Airways and Qatar Airways.

Governments and airlines are also doubling down on infrastructure investment to secure long-term growth, Iata said. Dubai is building a $35 billion terminal at Al Maktoum International Airport (DWC), while Saudi Arabia is planning the King Salman International Airport in Riyadh.

While geopolitical tensions, including conflicts and airspace closures, have disrupted operations throughout 2025, they are not expected to negatively impact growth, Iata said.

"With ongoing efforts to achieve lasting peace, the region is expected to stay on its growth trajectory," the airline lobby group said.

There is a fragile ceasefire in the Israel-Gaza war after more than two years of conflict, but Israel has continued attacks in Gaza and Lebanon.

Middle Eastern airlines are mitigating supply chain disruptions and aircraft delivery delays through retrofitting and fleet life extensions, Iata said. However, capacity growth will remain constrained in the near term, it warned.

Regional airlines are forecast to earn $6.8 billion in net profit in 2026, as demand grows faster than capacity.

Passenger traffic will grow 6.1 per cent next year, compared to capacity growth of 5.4 per cent in the Middle East.

Global outlook

Global airlines are set for a record profitability in 2026, despite the persistent supply chain crunch that is delaying delivery of aircraft and replacement of old fleets with more fuel-efficient jets.

Globally, airlines will end the year with a net profit of $41 billion in 2026, up from $39.5 billion in 2025. Total revenue is expected to reach $1.053 trillion in 2026, up 4.5 per cent on the $1.008 trillion revenue in 2025.

Airlines will carry 5.2 billion passengers in 2026, up 4.4 per cent on 2025, and planes will be 83.8 per cent full next year.

"That's extremely welcome news considering the headwinds that the industry faces – rising costs from bottlenecks in the aerospace supply chain, geopolitical conflict, sluggish global trade, and growing regulatory burdens among them," Willie Walsh, Iata's director general, said.

"Airlines have successfully built shock-absorbing resilience into their businesses that is delivering stable profitability."

However, industry-level margins are "still a pittance considering the value that airlines create by connecting people and economies", he said.

Airlines are at the core of a value chain that underpins nearly 4 per cent of the global economy and supports 87 million jobs.

"Yet Apple will earn more selling an iPhone cover than the $7.90 airlines will make transporting the average passenger," Mr Walsh said, referring to the global figure.

Source: THENATIONALNEWS

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Gerik

Economic

Fed Set to Cut Again, But Future Moves in Doubt

The Federal Reserve is poised to reduce interest rates by 25 basis points this week, continuing its easing cycle that began in 2024. However, this third consecutive cut may also be the last in the near term. Policymakers are becoming increasingly cautious, with some officials warning that monetary policy may have already reached a neutral stance that neither hinders nor stimulates economic activity.

The debate is unfolding amid a data vacuum caused by a prolonged government shutdown, which delayed the release of key employment and inflation statistics. As a result, Chair Jerome Powell is likely to take a noncommittal stance during his post-meeting press conference, avoiding any strong forward guidance for early 2026.

Cautious Language Expected in Official Statement

Analysts anticipate that Wednesday's policy statement will highlight persistent inflation risks and only cautious references to labor market softening. The Fed’s preferred inflation gauge recently ticked up to 2.8%, still nearly a full percentage point above the 2% target. This data supports a causal link between inflation’s stickiness and the hesitation among Fed members to continue easing aggressively.

Meanwhile, consumer spending has remained flat, and announced layoffs have picked up including from major employers like Amazon and Verizon. The labor market's evolving structure, described by some economists as “low-hire, low-fire,” further complicates the Fed’s assessment. While employment remains strong on paper, sluggish job creation could signal latent weakness, especially in the context of rising borrowing costs.

Deepening Divisions Inside the Fed

A growing number of policymakers are now publicly expressing dissent. Several regional Fed presidents including Kansas City’s Jeff Schmid and St. Louis’s Alberto Musalem are expected to oppose this week’s rate cut. Others, such as Governor Stephen Miran, continue to advocate for more aggressive easing, pushing for a half-point cut.

The upcoming vote could see an unusually high number of dissents. Analysts forecast anywhere from three to five opposing votes, depending on the final outcome a level of division not seen since 1992. The possibility of four dissenting members underscores how fragmented the policy consensus has become. Fed Governor Christopher Waller even preemptively dismissed claims of “group think,” anticipating public scrutiny of the Fed's internal disagreements.

This internal rift reflects not only divergent views on inflation and employment but also a broader lack of clarity regarding the long-term economic outlook. Geopolitical risks, tariff-induced inflation, and technological disruptions such as artificial intelligence are all contributing to the uncertainty.

Limited Forward Visibility and a Divided Forecast

The new economic projections to be released Wednesday will likely reflect the Fed's split stance. September’s projections already showed that nearly half of the committee favored no further cuts beyond December, while the other half anticipated at least two more reductions in 2026. These internal disparities are expected to persist, especially with inflation still above target and real-time indicators sending mixed signals.

At the same time, the Fed’s median forecast for GDP growth in 2025 may be revised upward, while projections for unemployment and inflation are likely to show minor adjustments, reflecting the Fed’s balancing act between optimism and caution.

Powell’s Uncertain Future and Political Pressures

Jerome Powell’s leadership of the Fed is also under growing scrutiny. President Donald Trump has been openly critical, accusing Powell of being too slow to ease policy. With Powell’s term as chair set to expire in May 2026, the White House is expected to announce a replacement early next year. Kevin Hassett, Trump’s economic advisor and a proponent of rate cuts, is considered the leading candidate. A transition in Fed leadership could further shift policy direction, especially if Trump seeks a chair more aligned with his economic agenda and more supportive of dovish moves.

The December rate cut appears highly likely, but it may also signal the end of the current easing streak. Fed officials are navigating an increasingly complex and polarized environment, where inflation remains elevated, data is incomplete, and political pressures are rising. The causal relationship between uncertain economic data and a divided policymaking body underscores the challenges the Fed faces in setting clear policy for 2026. Unless inflation subsides decisively or growth slows more sharply, the Fed may pause to assess the effects of its recent actions leaving financial markets and households in a prolonged period of interest rate limbo.

Source: Bloomberg

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FastBull Featured

Daily News

[Quick Facts]

1. Zelenskyy says Ukraine is consulting with the U.S. and Europe on three key documents.

2. Fed Chair final-round interviews imminent, Hassett leads for now, but uncertainties remain.

3. Hassett: Current Fed rate-cut room is more than 25 bps.

4. U.S.–Indonesia trade deal on the verge of collapse, Greer rushes to a meeting to salvage negotiations.

5. From Australia to Europe and the U.S., traders bet central bank easing will slow or stop altogether.

6. U.S. job openings in October rose to a five-month high, possibly easing fears of labor market deterioration.

7. Ramsden: Bank of England should continue gradual rate cuts.

[News Details]

Zelenskyy says Ukraine is consulting with the U.S. and Europe on three key documents

On the local time of the 9th, Ukrainian President Volodymyr Zelenskyy said in an interview that Ukraine is currently negotiating three core documents with its partners, covering framework agreements, security guarantees, and post-war reconstruction. Zelenskyy first confirmed the basic scope of the documents under discussion, stating that Ukraine is holding consultations with the United States and European sides on three documents.

Fed Chair final-round interviews imminent, Hassett leads for now, but uncertainties remain

U.S. President Donald Trump will conduct final-round interviews for the Fed chair position this week, with White House National Economic Council Director Kevin Hassett competing alongside three other candidates. According to three senior government officials, Trump and Treasury Secretary Scott Bessent have scheduled an interview on Wednesday with former Fed Governor Kevin Warsh before the final round.

Although some Wall Street investors worry that Hassett's close ties with the president could lead to overly aggressive rate cuts, he is still regarded as the most likely successor to Jerome Powell and is expected to take office next May. However, the fact that additional interviews are being arranged shows the final choice is not yet fully settled. Some officials have proposed a scenario in which Hassett's term might be shortened.

It is reported that Bessent has submitted a list of four candidates to the White House. Besides Hassett and Warsh, the other two will be selected from among other finalists, including Fed Governors Christopher Waller and Michelle Bowman, as well as BlackRock executive Rick Rieder.

Hassett: Current Fed rate-cut room is more than 25 bps

White House National Economic Council Director Kevin Hassett said he believes the Fed still has considerable room to cut rates. Sources say Hassett is the favorite among Trump's advisers and allies among the Fed chair candidates. At the CEO Council Summit hosted by The Wall Street Journal on Tuesday, Hassett was asked whether, if appointed chair, he would push for the large rate cuts desired by the president. He replied that if economic data support it — as they do now — he thinks there is substantial room for significant rate reductions. When asked if this means more than 25 basis points, he answered, "Yes." Hassett's stance aligns closely with Trump's, raising questions about whether he would uphold the Fed's decades-long tradition of political independence in interest-rate decisions if he led the central bank. Trump himself said in a Politico interview on Tuesday that the pace of rate cuts would be a litmus test for his choice of Fed chair.

U.S.–Indonesia trade deal on the verge of collapse, Greer rushes to a meeting to salvage negotiations

U.S. Trade Representative Greer will hold emergency meetings with senior Indonesian officials this week in an effort to rescue a critical trade agreement that is on the brink of collapse. The deal was initially reached in July and centers on the U.S. cutting its average tariffs on Indonesian goods from 32% to 19%, in exchange for concessions from Indonesia in multiple areas. Talks are now deadlocked over several key issues:

Non-tariff barriers: Washington believes Indonesia is “backsliding” on the elimination of non-tariff barriers on industrial and agricultural exports from the US.

Digital trade rules: Disputes exist over provisions related to digital trade.

Economic sovereignty: Indonesia was resisting attempts by the US to accept coercive clauses on grounds that they impinged on its "economic sovereignty".

This meeting represents a last-ditch effort to prevent the complete breakdown of the agreement. Failure could mean not only the collapse of U.S. tariff reduction plans for Indonesian goods, but also damage to broader economic relations between the two countries.

From Australia to Europe and the U.S., traders bet central bank easing will slow or stop altogether

Across Australia, Europe, and the U.S., traders are broadly betting that central bank monetary easing will slow or even stop. Current money-market pricing almost completely rules out further rate cuts by the European Central Bank, while data suggest roughly a 30% probability of rate hikes by the end of 2026.

Reserve Bank of Australia Governor Bullock made clear on Tuesday that further easing is off the table, prompting interest rate swap markets to price in nearly two 25-basis-point hikes by the end of next year.

Traders are almost certain the Bank of Japan will raise its benchmark rate by 25 basis points next week to 0.75%, and expect at least one more hike next year. Even in the U.S., although markets widely expect the Fed to begin cutting rates this month, the 2026 rate outlook has shifted noticeably. Traders now anticipate only two rate cuts next year, down from the previous forecast of three cuts at the end of last month.

In a client note, Jim Reid, Global Head of Macro Research at Deutsche Bank, noted that, surprisingly, more regions are beginning to price in possible rate hikes as the next policy move. If the U.S. follows this trend, risk asset performance and next year's market outlook could be completely upended.

U.S. job openings in October rose to a five-month high, possibly easing fears of labor market deterioration

U.S. job openings climbed to a five-month high in October, potentially alleviating market concerns about a significant deterioration in the labor market. Data released by the Bureau of Labor Statistics on Tuesday showed job openings rose slightly from 7.66 million in September to 7.67 million in October. Economists had expected a median forecast of 7.12 million. Note that releases for both months were delayed due to the government shutdown.

Ramsden: Bank of England should continue gradual rate cuts

Bank of England Deputy Governor Ramsden stated in a written report to lawmakers on Tuesday that, given uncertainty around estimates of the neutral interest rate, the BoE should continue to cut borrowing costs gradually. Ramsden pointed out that as the policy rate moves closer to the neutral level, the impact of monetary policy on inflation becomes harder to gauge precisely.

"I therefore think a gradual removal of policy restraint remains appropriate, allowing the MPC to assess carefully the balance of risks to inflation as the evidence evolves...," Ramsden said. He added that the neutral rate is estimated near the midpoint of the 2%–4% range, and that there is no evidence showing economic developments deviating from baseline forecasts.