UK Inflation Expectations Cool From Two-Year High Before BOE Vote

Forex

Economic

Summary:

British households' inflation expectations edged down from their highest in two years, a slight easing that may soothe concerns at the Bank of England as officials decide whether to cut interest rates further.

Households anticipate prices rising 3.5% over the next 12 months, down from the two-year high of 3.6% in August, according to a survey by the central bank. They predicted prices would climb 3.7% annually in five years' time, also down 0.1 percentage point from the last time the survey was done.

While the figures suggest household inflation expectations remain at elevated levels, the cooling was the latest sign that the BOE is beginning to contain the threat from a fresh spike in inflation. It is expected to resume its cutting cycle at its meeting on Thursday, though economists predict a close result with Governor Andrew Bailey seen as the key swing voter.

The rate decision will be announced the day after official inflation data is released for November, which may indicate whether price pressures have peaked. CPI is expected to cool to 3.4%, according to a Bloomberg survey of economists, compared with 3.6% in October.

The forward-looking inflation expectations survey is closely watched by the central bank for signs that elevated price pressures will persist. Households fearing high inflation to continue could demand bigger wage rises that feed back into prices.

UK Economy Risks Quarterly Contraction After Surprise GDP Slump

Robert Wood, chief UK economist at Pantheon Macroeconomics, said the small fall "helps the case for a rate" cut next week. "This will give rate-setters some comfort that expectations can continue falling as headline inflation slows through to next summer," he added.

High expectations have kept some on the Monetary Policy Committee wary over reducing rates further. However, there is growing evidence of inflation cooling and the economy stalling with figures earlier on Friday showing gross domestic product contracting again in October.

Hawks on the panel are resisting a further easing in interest rates after raising concerns about signs that households expect sticky inflation to linger. The MPC's doves argue that a weak labor market will reduce workers' ability to get bumper pay hikes, limiting the inflation impact from high expectations.

The survey also showed Britons increasingly fear the BOE will raise rates to stamp out sticky inflation. The net share of households expecting hikes in the next 12 months hit the highest since November 2023.

Source: Bloomberg Europe

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Warren Takunda

Economic

London stocks rose in early trade on Friday as the latest UK GDP data cemented expectations of a rate cut from the Bank of England next week.

At 0825 GMT, the FTSE 100 was up 0.4% at 9,739.93.

Figures released earlier by the Office for National Statistics showed the economy unexpectedly contracted in October amid uncertainty ahead of the Budget.

The economy shrank 0.1% following a 0.1% decline in September and no growth in August. Economists had been expecting growth of 0.1%.

Services saw a 0.3% decline, while construction fell by 0.6%, but production grew by 1.1% in October.

ONS director of economic statistics Liz McKeown said: "The economy contracted slightly in the latest three months, as production fell again and services growth stalled.

"Within production, there was continued weakness in car manufacturing, with the industry only making a slight recovery in October from the substantial fall in output seen in the previous month.

"Overall services showed no growth in the latest three months, continuing the recent trend of slowing in this sector. There were falls in wholesale and scientific research, offset by growth in rental and leasing and retail."

Richard Hunter, head of markets at Interactive Investor, said: "The 0.1% increase which had been expected simply did not materialise and was not helped by a high level of uncertainty around the Budget and its stultifying actions.

"With the economy heading closer to a technical recession, the Bank of England may be forced to take action and ease interest rates more aggressively in an effort to inject some enthusiasm into the ailing economy at its meeting next week."

In equity markets, Standard Chartered rallied after an upgrade to ‘buy’ at Goldman Sachs, while InterContinental Hotels was boosted by an upgrade to ‘buy’ at Jefferies.

Premier Inn owner Whitbread was knocked lower by a downgrade to ‘hold’ at Jefferies.

Playtech was also in the red after a downgrade to ‘underweight’ at Morgan Stanley.

Independent oil and gas company Harbour Energy rose after agreeing to buy all the subsidiaries of Waldorf Energy Partners and Walford Production Ltd in a $170m deal.

WH Smith edged lower after saying it would publish annual results on 19 December to give auditors more time to finish their work in the wake of an accounting error that wiped almost £600m from the company’s stock market value last month and led to the departure of chief executive Carl Cowling.

Card Factory tumbled as it warned on profits, pointing to weak consumer confidence and soft high street footfall.

The company, which sells greetings cards and gifts, now expects to deliver full-year adjusted pre-tax profit of between £55m and £60m. It had previously guided to mid-to-high single-digit percentage growth for FY26, from £66m.

Source: Sharecast

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Glendon

Stocks

Economic

Solid U.S. growth and a weaker U.S. dollar, as well as artificial intelligence productivity gains, are anticipated to support an increase in S&P 500 earnings next year, according to analysts at Goldman Sachs.

Stay ahead of every breaking move with real-time news, stock impact analysis, and Wall Street commentary on InvestingPro - get 55% off today.

In a note, the strategists including Ben Snider and Ryan Hammond predicted that profit per share in stocks in the benchmark index would rise by an annualized 12% in 2026 to $305.

Revenue is also tipped to grow by 7% next, with 70 basis points of profit margin expansion, the analysts added.

For 2027, meanwhile, S&P 500 income per share is tipped to rise a further 10% to $336.

Underpinning these forecasts are Goldman Sachs's predictions for accelerating gross domestic product growth in the U.S., along with a further softening in the dollar. The dollar index, which tracks the greenback against a basket of currency pairs, has slipped by more than 7% over the past one-year period.

"Beyond the macro drivers, the profitability of the largest stocks will continue to be a key driver of S&P 500 earnings growth," they argued, adding that returns from the seven largest stocks in the index -- Nvidia, Apple, Microsoft, Google, Amazon, Broadcom, and Meta -- account for roughly a quarter of its total earnings.

The Goldman Sachs analysts projected that these stocks will raise their collective earnings by 29% in 2026, similar to a pace set in 2025. These shares have been buoyed by hopes that massive investments in AI will eventually pay off for investors, although some concerns have recently swirled around when these profits will be seen.

Worries have also surrounded whether the -- often debt-powered -- AI expenditures will squeeze profit margins, potentially denting the case for frothy tech valuations. A string of circular dealmaking in the AI sector has also raised eyebrows among some observers.

Still, "continued strength in AI investment alongside healthy growth in other businesses will support roughly +20% sales growth for these stocks in 2026," the Goldman analysts said.

Broader, AI-driven productivity gains are also expected to lift S&P 500 earnings per share by 0.4% in 2026 and 1.5% in 2027, with the analysts suggesting that the process of widespread AI adoption remains in its infancy.

"We [...] assume both corporate adoption and the realized share of the total potential productivity boost will gradually build over time," they wrote.

Source: Investing

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Winkelmann

Stocks

Political

Reddit app is seen on a smartphone in this illustration taken, July 13, 2021. REUTERS/Dado Ruvic/Illustration/File Photo

Message board website Reddit filed a lawsuit on Friday asking Australia's High Court to overturn the country's social media ban for people under 16 as well as its inclusion in it, calling the law an infringement of free political expression.

The U.S.-listed firm, which has operations in Australia, called the ban "invalid on the ground that it infringes the implied freedom of political communication," in a court filing signed by its lawyers, Perry Herzfeld and Jackson Wherrett.

The filing named the Commonwealth of Australia and Communications Minister Anika Wells as defendants.

"We will stand firm to protect young Australians from experiencing harm on social media," a spokesperson for Wells said in response to Reddit's action, declining to comment further while the matter was before the courts.

The Australian government has previously said it is ready to fight any legal challenges to the law.

Australia went live with the world's first legally enforced age minimum to access social media on December 10. Reddit and nine other platforms, including Meta's Instagram, Alphabet's YouTube and TikTok campaigned against the measure for more than a year before ultimately saying they would comply.

The platforms are required to bar underage users or face a fine of up to A$49.5 million ($32.98 million), while underage users and their caregivers do not face punishment. Platforms say they are using measures like age inference, based on a person's online activity, and age estimation, based on a selfie, to follow the rule.

But the law "carries some serious privacy and political expression issues for everyone on the internet," Reddit said in a statement published alongside its court filing. "So, we are filing an application to have the law reviewed."

In the 12-page legal filing, Reddit said barring children under 16 would impede political discourse in the country.

"Australian citizens under the age of 16 will, within years if not months, become electors. The choices to be made by those citizens will be informed by political communication in which they engage prior to the age of 18," it read.

The lawsuit makes a second High Court challenge to the ban. Last month, two teenagers backed by an Australian libertarian state lawmaker filed a challenge which has a hearing in February.

Reddit has no plans to join other parties challenging the ban, a person familiar with the situation said.

($1 = 1.5011 Australian dollars)

Source: Reuters

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Dark Current

Commodity

Economic

Russian state oil and gas revenue is likely to almost halve in December compared with a year ago to 410 billion roubles ($5.17 billion) as a result of lower crude prices and a stronger rouble, Reuters calculations showed on Friday.

For the entire year, the revenue is set to fall by almost a quarter to 8.44 trillion roubles, below the Finance Ministry's 8.65 trillion rouble forecast, according to the calculations based on data from industry sources and official statistics on production, refining and supplies.

Russia reported the lowest monthly oil and gas revenues of 405 billion roubles in August 2020, when oil prices tumbled during the COVID-19 pandemic.

Oil and gas revenue is the number one source of cash for the Kremlin, making up a quarter of total federal budget proceeds. The decline is painful for Russia, which has heavily boosted defence and security spending since launching its military campaign in Ukraine in February 2022.

Ukraine and its Western backers have repeatedly said they want to force Russia, the world's second-largest oil exporter, to stop its war by undermining its economy.

The Finance Ministry had initially expected 10.94 trillion roubles in oil and gas revenues this year, but revised down its forecast in October to account for declining global oil prices, which have been falling, pressured by worries over a supply glut.

In November, the price of Russian oil in roubles used for tax purposes slumped 17.1% from October to 3,605 roubles per barrel.

The Finance Ministry will publish its oil and gas revenue estimates for Decemberon January 14.

Source: Reuters

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Michelle

Forex

Economic

The U.S. dollar steadied Friday, but was on course for a third consecutive weekly fall after the Federal Reserve cut interest rates earlier this week, bringing borrowing costs to a near three-year low.

At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 97.995, but was set for a weekly drop of 0.7%.

The index is down more than 9% this year, on pace for its steepest annual drop since 2017.

Dollar slips after Fed meeting

The U.S. central bank lowered rates by 25 basis points this week, as expected, but remarks from Chair Jerome Powell at his post-meeting press conference were more balanced and less hawkish than many had anticipated.

The Fed policymakers also forecast another rate cut next year, even with members of the central bank showing divisions over December's move.

"The bearish wind is coming not only from interest rates but also from end-of-year seasonality," said analysts at ING, in a note. "Dollar rates saw another calibration of Fed expectations lower, with the 2y falling to 3.50% and the market pricing in 3.05% as the Fed terminal rate at the end of next year, keeping pressure on the U.S. dollar."

The focus going forward will hinge on economic data that is still lagging from the impact of the 43-day federal government shutdown in October and November, as well as the identity of the next Fed chair.

Euro undervalued versus dollar - ING

In Europe, GBP/USD dropped 0.1% to 1.3383, falling back from its highest level since October after data showed that the U.K. economy unexpectedly contracted in October, with uncertainty ahead of the Autumn budget by Chancellor Rachel Reeves likely curtailing growth.

Data released earlier Friday by the Office for National Statistics showed that U.K. gross domestic product fell by 0.1% on a monthly basis in October, matching the drop seen during the prior month and below the 0.1% growth expected.

The Bank of England holds its final policy-setting meeting of the year next week, and is widely expected to cut interest rates by a quarter point to 3.75% as recent data has shown inflation drifting lower.

EUR/USD edged lower to 1.1736, but the single currency was poised to register weekly gains of 0.8%, on course for a third weekly gain.

German inflation rose to 2.6% in November, confirming preliminary data, while consumer prices harmonised to compare with other European Union countries, stood at 2.3% year-on-year in October.

"Following the Fed meeting this week, the market's attention will shift to the ECB meeting next Thursday. President Christine Lagarde will present a new forecast, which should be the first test of the current pricing of no further rate cuts, in line with our view," ING added.

BOJ looms large

In Asia, USD/JPY gained 0.1% to 155.73, with the yen slightly lower ahead of next week's Bank of Japan meeting where the broad expectation is for a rate hike.

The market focus is on comments from the policymakers on how the Japanese rate path will look in 2026.

USD/CNY traded 0.1% lower to 7.0556, while AUD/USD gained 0.1% to 0.6673, set for a weekly gain of 0.5% as persistent inflationary pressures suggests the Reserve Bank of Australia could hike rates in the near-term.

Source: Investing

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Gerik

Economic

Stocks

Stock Market Soars While Tech Sector Shows Cracks

U.S. equities rallied on Thursday, with the S&P 500 and Dow Jones Industrial Average reaching fresh record highs. The Russell 2000 also climbed to a new peak, signaling renewed optimism across small-cap stocks following the Federal Reserve’s decision to cut interest rates by 25 basis points on Wednesday. This rate adjustment is expected to support broader economic activity into year-end.

Yet, the Nasdaq Composite failed to join the rally, declining 0.26% due to weakness in high-profile tech names. Oracle led the losses, with shares tumbling nearly 11% after the company posted weak quarterly revenue and disclosed rising capital expenditures and lease obligations. This triggered broader skepticism around the AI growth narrative, dragging down other key players like Nvidia and Micron.

Broadcom Beats But Market Reacts to Strategic Uncertainty

Chipmaker Broadcom also reported fourth-quarter earnings and revenue that surpassed analyst estimates, along with confirmation that AI firm Anthropic is now a $10 billion customer. Despite strong financials and a doubling in net income from a year ago, Broadcom's stock dropped 4.5% in extended trading. Investors were unsettled by comments from CEO Hock Tan, who failed to ease concerns over Google’s potential pivot to in-house chip design and the uncertain terms of Broadcom’s AI-related contract with OpenAI.

Rising memory prices also surfaced as a margin threat for the company, compounding worries about profitability in the next fiscal year. These developments underline a growing trend where top-line growth in the AI space is being met with skepticism about sustainability and earnings leverage.

Sector Rotation Signals Broader Market Strength

While the tech sector faltered, investors poured into other industries. The S&P 500 financials sector, for instance, reached a new high, driven by strong performance in Visa and Mastercard. This reflects a healthy rotation into value and cyclical stocks, supported by the perception that the U.S. economy remains resilient under a lower rate regime.

The Fed’s dovish move has helped boost investor sentiment, providing momentum for risk-on positioning across various asset classes. Despite concerns about the AI sector, the broader market appears poised for a bullish end to the year assuming no major economic or geopolitical shocks intervene.

Corporate Headlines: Disney, Reddit, and Oracle

Disney announced a $1 billion investment in OpenAI and will license its iconic characters to Sora, OpenAI’s video generation platform. CEO Bob Iger framed the deal as a forward-looking play on content innovation, marking a major convergence between entertainment and generative AI.

Meanwhile, Reddit has launched a legal challenge against Australia’s recent social media ban for users under 16, arguing that the law infringes on freedom of political communication. The challenge could set a precedent for how digital rights are interpreted in age-restricted internet access laws.

Finally, Oracle’s future remains in question after its latest earnings report sparked a sell-off. Analysts are re-evaluating their price targets, citing concerns about its long-term AI strategy and high operational costs. The company’s recent investments have yet to translate into the kind of growth or clarity seen from AI peers like Microsoft or Nvidia.

Diverging Paths Define Year-End Market Narrative

The contrasting performances of traditional and tech stocks highlight an important inflection point. While AI and big tech have led markets for most of 2025, recent earnings disappointments are prompting a reassessment. Investors are increasingly seeking value in sectors with clearer profitability profiles as economic data stabilizes and monetary policy shifts to support.

With the Fed’s support now firmly in place and economic indicators showing resilience, market rotation rather than retreat appears to be the prevailing strategy heading into the holiday season. However, the future of AI-linked valuations and the ability of tech firms to meet elevated expectations will remain key themes into early 2026.