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The S&P 500 continued to push higher yesterday as the US 2-year yield wavered around the 3.50% mark following a Federal Reserve (Fed) rate cut earlier this week that was ultimately perceived as not that hawkish after all. The cut is especially boosting the non-tech pockets of the market. The S&P 500’s equal-weight index is catching up with the tech-heavy, market-cap-weighted version, suggesting further upside potential from a rotation out of growth and into value. Normally, the tech and growth-heavy sectors react more to changes in borrowing costs because more of their future revenue gets discounted to today. But sky-high valuations in tech mean they’ve become less reactive to the rate cut. Investors clearly have bigger concerns.

The Nasdaq 100 failed to eke out gains after the Fed cut, as a more-than-10% slump in Oracle shares dampened sentiment across tech and dragged broader AI names lower. Nvidia, for example, lost more than 1.5% on worries about the circularity of AI deals — and for being situated at the centre of the largest AI loop to date: the one surrounding OpenAI.

If it’s any comfort, OpenAI announced a $1bn deal with Disney yesterday. Under the agreement, Disney will invest $1bn in OpenAI, and OpenAI will allow Sora users to generate short videos using more than 200 Disney, Marvel, Pixar and Star Wars characters. You might remain sceptical, but this is an interesting revenue channel for OpenAI, as content creators may be willing to spend more on Sora — which has faded somewhat since launch — because these characters can boost engagement and monetisation on platforms like YouTube.

This announcement is encouraging for those wondering how companies will monetise AI without relying heavily on advertising. The OpenAI–Disney partnership offers an alternative to flooding chatbots with ads — something that would make them feel as annoying as Facebook’s feed. It doesn’t have the same scale as ad revenue (Facebook earned $51.24 bn last quarter, with roughly $50.1 bn coming from advertising), but it does illustrate how OpenAI turns its models into dollars. The company has commercial deals across a wide range of industries. There is Microsoft, where Copilot uses OpenAI’s intelligence. There is Eli Lilly — a major pharma company — working with OpenAI on AI-enabled R&D and drug discovery. There are commerce-related partnerships, such as Walmart’s integration that lets users buy products through ChatGPT’s conversational interface. OpenAI previously supported Shopify and Etsy with chat-commerce capabilities in exchange for fees. And it has an enterprise partnership with Databricks to embed OpenAI models into its platform. OpenAI needs a continuous flow of such deals to justify its lofty valuation and those of its partners, but the negative press often feels disproportionate for a company that fundamentally changed how we interact with machines only three years ago.

Now, none of this answers whether “this is a bubble”. The internet outlived the dot-com crisis even as countless companies disappeared. But it does show how far AI capabilities can extend across industries and clients — from Microsoft and Eli Lilly to Walmart and Disney — and how productivity gains, in blue-collar sectors, could support long-term demand.

Turning to individual earnings, Broadcom reported very strong results yesterday. Revenue jumped 28% to $18 bn, and earnings surpassed expectations thanks to surging AI-chip demand. The company disclosed $73 bn in AI-related orders already booked, issued an upbeat Q1 revenue outlook of $19 bn, and raised its dividend by 10%. Not bad. The problem is that expectations were simply too high, and after an initial uptick the stock fell more than 4% in after-hours trading as investors focused on margin pressures and profit dynamics in AI.

So we’re back to square one. Taken together, Oracle and Broadcom reminded the market that while AI demand remains strong, leveraged investments and uncertain monetisation paths are preventing investors from adding exposure at current valuations.

Investors instead seem to prefer gold, silver, and copper. Gold is back in a solid uptrend after the October correction, supported by lower US yields and a softer dollar. Silver and copper benefit from the same bullish factors— plus tight supply conditions. Oil bulls, by contrast, remain impossible to cheer up. Despite earlier geopolitical tensions, WTI continues to test the $58 level on the downside, pressured by ample supply from the US, OPEC, and non-OPEC producers, even as the US dollar index falls below its 100-day moving average.

This week ends on a dovish note for the Fed, a positive one for Treasuries, metals, and value stocks, and a negative one for the dollar, oil, and tech stocks. Next week’s US CPI release — the first one since the shutdown — will either confirm or challenge the post-Fed trend. The last headline figure pointed to 3% inflation, still above the Fed’s 2% target. A sufficiently soft CPI print would likely reinforce the recent price action into year-end and could deliver fresh all-time highs in some indices, especially the smaller and non-tech ones. A stronger reading could cool risk appetite and revive concerns that the Fed may not be able to cut rates next year if inflation remains sticky.

UK GDP contracted by -0.1% mom in October, undershooting expectations for a 0.1% gain and marking a third consecutive month of stagnation or contraction. The economy had already shrunk by -0.1% in September after flat growth in August, reinforcing concerns that momentum is fading as the year draws to a close.

The monthly breakdown was weak across key domestic sectors. Services output fell -0.3% mom and construction declined -0.6%, offsetting a 1.1% rise in production. The continued softness in services is particularly concerning given its dominant share of UK economic activity.

On a three-month basis, GDP fell -0.1% in the period to October compared with the previous three months. Services recorded no growth, extending the recent trend of slowing activity, while production output dropped -0.5% due largely to weaker motor vehicle manufacturing. Construction also declined by -0.3%.

Full UK GDP release here.

In focus today

In Sweden, the Swedish labour force survey (LFS) for November is set to be released. We anticipate the unemployment rate to come in at 7.90% (8.80% seasonally adjusted). Recent indicators, including the Sweden's Public Employment Servies (SPES), has continued to show an improvement of the Swedish labour market. As SPES typically serves as a leading indicator for the LFS, we might see some improvement today. However, it could well be too early for significant changes to appear.

In Germany, we receive the final inflation data for November. While CPI was unchanged at 2.3% y/y there was a large upside surprise in the HICP index which rose to 2.6% y/y. HICP services inflation was the culprit behind the surprise as it rose to 4.2% y/y (prior: 3.6%) and the final print will shed more light on the drivers.

In the UK, October GDP data is released. After a couple of weak prints, job losses becoming more prominent, and inflation edging somewhat lower, the Bank of England looks ready to cut rates again next week.

In Japan, the Bank of Japan (BoJ) releases its extensive quarterly Tankan business survey on Sunday night. This will be scrutinised by the BoJ ahead of its rate decision Friday next week. Business sentiment is strong in Japan, particularly in the service sector, where tourism is contributing to solid demand.

Also, early Monday, China brings the release of the monthly batch of data for retail sales, industrial production, housing and investments. We expect it to show more of the same, i.e. still weak consumer spending, low home sales, further declines in home prices but decent increase in industrial production supported by robust exports. China is a two-speed economy with strong exports and tech development but weak demand in domestic demand.

Have a good weekend!

Economic and market news

What happened yesterday

In the US, the Federal Reserve has unanimously reappointed its 11 regional presidents in a vote held every five years. While this process typically attracts little attention, scrutiny from the Trump administration and debates about central bank independence raised concerns that some terms could have been blocked.

In Norway, Norges Bank Regional Survey showed that the aggregated production index for next quarter (Q1/26) dropped to 0.3, marginally lower than Norges Bank's expected growth in the September MPR. More importantly, capacity utilization fell from 35% to 33% and the indicator for labour shortage dropped from 25% to 22%. Combined with lower inflation and higher unemployment, this points to a lower rate path in the MPR published next week. Lastly, wage growth this year fell from 4.5% to 4.4%, a bit lower than Norges Bank expected in September.

In Sweden, final inflation figures aligned closely with the flash estimate. November CPI was 0.3% y/y and -0.4% m/m, while CPIF came in at 2.3% y/y and -0.2% m/m, slightly above the flash estimate by 0.1 percentage point. Core inflation was 2.4% y/y and -0.6% m/m. The larger-than-usual monthly decline was driven by a sharper drop in recreation and hotels. Goods prices also fell, including clothing and furniture, with clothing declining slightly more than anticipated, likely driven by earlier and more Black Friday sales. Core inflation was 0.4 percentage points below our forecast, with 0.3 percentage points explained by the unexpected dip in recreation, primarily from package holidays.

In Switzerland, The SNB kept the policy rate at 0%, as widely expected, and maintained its stance on FX intervention. Inflation forecasts were lowered due to recent weaker-than-expected inflation, and the SNB signalled continued monitoring and readiness to adjust policy if needed.

In Turkey, the Central Bank of Turkey surprised markets by lowering its key policy rate by 150 bp to 38%.

In geopolitics, Ukraine has presented its revised 20-point framework to the US, with territorial concessions remaining a key hurdle. The US proposed a 'free economic zone' in part of Donbas and potential joint governance of the Zaporizhzhia Nuclear Power Plant. The broader plan includes security guarantees, rebuilding efforts, and maintaining a strong Ukrainian military. While Washington seeks clarity by Christmas, Zelenskiy insists on a referendum for any territorial concessions.

Equities: Equities were generally higher yesterday despite some emerging weakness in the tech sector. The S&P 500 gained 0.2% but equal-weight S&P 500 0.8%, and the Stoxx 600 advanced 0.6%. The tech pullback was driven by a disappointing report from Oracle, which showed slowing revenue growth and a notable increase in spending. Had this occurred three weeks ago, the market reaction would likely have been pronounced. However, yesterday the weakness remained contained within tech. In fact, materials, financials, and industrials extended their post-Fed-meeting gains, rising another 1-2%. So, the rotation was notable. Futures are little changed this morning.

FI and FX: Norges Bank will publish their funding outlook for 2026, whereas the Riksbank is closing in on their second last nominal SGB QT-auction. The SNB left its policy rate unchanged but stands ready to act in foreign exchange markets, at the same time as they try to withstand a negative policy rate. Net movement in US and EUR rates were relatively muted during yesterday's session. EUR/USD continued to edge higher and touched 1.176 yesterday afternoon.

DOW decisively to a new record high yesterday, reinforcing the view that the Santa rally is firmly in force after clearly this week's FOMC risk. With momentum accelerating, the index is now on track to challenge the 50,000 psychological level before year-end, a milestone that reflects renewed confidence in the outlook for growth and monetary policy.

Markets have looked past persistent debate over AI valuations, focusing instead on the Fed’s less-hawkish-than-expected rate cut earlier this week. The shift has favored cyclical and traditional sectors. Russell 2000’s surge to a record close adds further confirmation. Smaller companies are typically more sensitive to changes in borrowing costs, and their leadership highlights expectations that easing financial conditions will filter through to the real economy.

Technically, near-term outlook for DOW remains bullish as long as 47,462.94 support holds. The current uptrend is targeting 78.6% projection of 28,660.94 to 45,071.29 from 36,611.78 at 49,510.32, with scope to stretch above 50,000 handle. Attention now turns to whether S&P 500 joins the breakout to confirm momentum, even as NASDAQ's participation remains less certain.

New Zealand’s BNZ Performance of Manufacturing Index edged up from 51.2 to 51.4 in November, remaining in expansionary territory but still below the long-run average of 52.4.

Production strengthened from 52.0 to 52.8, while employment rebounded sharply from contractionary 48.3 to 52.4, suggesting manufacturers are becoming more confident about staffing needs. That said, new orders softened notably, slipping from 54.5 to 51.9, highlighting lingering caution about the sustainability of demand beyond the seasonal boost.

Survey commentary was more encouraging. The share of negative comments fell to 45.6% from 54.1% in October and 60.2% in September. Respondents cited stronger Christmas-related demand, improving economic conditions, rising customer confidence, and a pickup in both domestic and overseas orders, alongside firmer construction activity and new product launches.

Full NZ BNZ PMI release here.

Key insights from the week that was.

The RBA’s decision to leave the cash rate unchanged came as no surprise to the market, but the focus was always going to be on the RBA's take on the recent dataflow. In the event, the Monetary Policy Board conceded that part of the recent lift in underlying inflation “may be persistent”, but also that some was due to “temporary factors”. On activity, “private demand has strengthened, driven by both consumption and investment”, and, if it were to persist, would “likely add to capacity pressures”. Though the “risks to inflation have tilted to the upside” in the RBA's view, they do not appear to be in any rush to pre-emptively react to these risks, noting that “it will take a little longer to assess the persistence of inflationary pressures.”

Underlying the RBA’s assessment on the balance of risks is a somewhat more pessimistic view on supply capacity which, in the context of an economic upswing, begets a more hawkish tone around the inflation outlook. Our view on productivity, population and participation is more constructive, implying that the economy can handle a higher rate of growth without sparking excessive inflation. As temporary factors wash out, inflation should resume its trajectory toward the mid-point of the target range, providing scope to deliver two more rate cuts next year. If inflation dynamics take longer to normalise, the risk is that the cash rate could remain on hold for longer than our current base case.

Developments around the labour market will also be key for policy hence. The data continues to speak to a gradual softening as jobs growth across broad industry segments normalises. The November update revealed a decline in employment (–21.3k) which was ‘cushioned’ by an unexpected fall in the participation rate, resulting in the unemployment rate holding steady at 4.3%. We expect a bit more slack to open up over the next year, putting a lid on any upside risks to inflation stemming from the labour market.

Before moving offshore, a final note on business. The latest NAB business survey indicated that business conditions remained positive and generally steady around long-run average levels in November, notwithstanding a small decline. Business confidence was a little shakier in the month, but a more constructive picture around forward orders has allowed businesses to remain cautiously optimistic. As evidence of a sustained recovery continues to build, businesses will be able to expand capacity with a greater degree of confidence.

In the US, the FOMC cut the fed funds rate by 25bps to 3.625% at their December meeting but maintained its projection of only one further cut in 2026 and another in 2027, reaching a broadly neutral rate of 3.125% by end-2027. This cautious approach reflects expectations of above-trend growth through 2028, supported by real income gains and AI-driven infrastructure investment, seeing the unemployment rate ease back to 4.2%.

Inflation is only forecast to decline gradually from 3.0% in 2025 to 2.0% by 2028, implying moderately restrictive policy will achieve the dual mandate, eventually. We anticipate capacity constraints and persistent inflation risks will limit further easing by the FOMC to just one more cut, which is most likely to be seen in Q1 2026 before inflation proves more persistent than the Committee currently expects. The fed funds rate on hold at 3.375% with persistent inflation risks is likely to bias up long-term yields, particularly amid elevated fiscal uncertainty.

The Bank of Canada subsequently kept rates steady at 2.25%, maintaining an accommodative stance to support the economy as it navigates excess capacity and trade uncertainty. The Governing Council remain confident inflation will remain at target with the inflation rate having held close to their target of 2.0% for over a year and excess capacity and softer wage growth likely to offset any upside risk to consumer prices from trade. The labour market has strengthened in recent months but still remains weak compared to where it was prior to the pandemic.

In China meanwhile, consumer inflation accelerated to 0.7%yr in November as producer prices deflation became more even entrenched, with prices down 2.2%yr. The rise in consumer prices reflects increases in the cost of food and gold jewellery versus demand-led inflation which there is little-to-no evidence of. Further support centred on household consumption should broaden consumer inflation through 2026.

Producer prices are unlikely to sustainably grow until capacity tightens, however. This could be a long way off. 'Anti-involution' policies champion profitability, but this does not preclude new more productive supply being invested in to replace old ineffective capacity or to meet demand for new goods and services. Price declines and profitability can therefore co-exist sustainably.

The cycle from the April 2025 low in Dow Futures (YM) continues to unfold as a clear impulse. Within this structure, wave (4) concluded at 45,810, as illustrated by the one‑hour chart. Following that completion, wave (5) began to develop as another sequence of five waves of lesser degree. From the termination of wave (4), wave (i) advanced to 46,656, while the corrective pullback in wave (ii) reached 46,165. The Index then extended upward in wave (iii), achieving 47,796, before a modest retracement in wave (iv) ended at 47,270.

The final push in wave (v) carried prices to 48,184, thereby completing wave ((i)) of higher degree. Subsequent declines in wave ((ii)) unfolded in the form of a zigzag, consistent with Elliott Wave principles. From the peak of wave ((i)), wave (a) dropped to 47,663, followed by a rebound in wave (b) that reached 48,004. The final leg, wave (c), declined to 47,504, marking the completion of wave ((ii)) at the higher degree.

The Index has since resumed its upward trajectory in wave ((iii)). From the low of wave ((ii)), wave (i) advanced to 48,245, while the corrective wave (ii) ended at 47,859. In the near term, as long as the pivotal low at 45,810 remains intact, dips are expected to attract buyers. These corrective phases should unfold in the familiar 3, 7, or 11 swing sequences, supporting the continuation of the broader bullish cycle.

Dow Futures (YM) 60-Minute Elliott Wave Chart From 12.12.2025

YM Elliott Wave Video:

https://www.youtube.com/watch?v=mnZVSwMZypM

Key Highlights

• USD/JPY failed to continue higher above 157.00 and corrected gains.
• It traded below a bullish trend line with support at 155.70 on the 4-hour chart.
• EUR/USD rallied above 1.1700 and 1.1720.
• GBP/USD regained momentum and cleared the 1.3380 resistance.

USD/JPY Technical Analysis

The US Dollar struggled to surpass 157.00 against the Japanese Yen. USD/JPY started a fresh decline below 156.50 and 156.00.

Looking at the 4-hour chart, the pair dipped below a bullish trend line with support at 155.70. The pair traded below the 50% Fib retracement level of the upward move from the 154.35 swing low to the 156.94 high.

The pair settled below the 100 simple moving average (red, 4-hour). On the downside, there is key support at 154.95 and the 200 simple moving average (green, 4-hour). It coincides with the 76.4% Fib retracement level of the upward move from the 154.35 swing low to the 156.94 high.

The next support is 154.35. A close below 154.35 could open the doors for a test of 154.00. Any more losses might call for a drop to 152.50.

Immediate resistance sits near 156.00. The first key hurdle is seen near 156.30. A close above 156.30 could open the doors for a move toward 157.00. Any more gains could set the pace for a steady increase toward 158.00.

Looking at GBP/USD, the pair gained pace for a strong increase and was able to clear the 1.3380 resistance zone.

Upcoming Key Economic Events:

• Fed's Hammack speech.
• Fed's Goolsbee speech.
• Fed's Paulson speech.

Bitcoin: ⬇️ Sell

• Bitcoin reversed from resistance area
• Likely to fall to support level 87330.00

Bitcoin cryptocurrency recently reversed down from the resistance area between the pivotal resistance level 93285.00 (which has been reversing the price from November) and the upper daily Bollinger Band.

This resistance area was further strengthened by the 50% Fibonacci correction of the downward impulse from last month.

Bitcoin cryptocurrency can be expected to fall to the next support level 87330.00 (which reversed the earlier wave ii).

USDJPY: ⬇️ Sell

• USDJPY reversed from resistance area
• Likely to fall to support level 154.50

USDJPY currency pair recently reversed down from the resistance area between the strong resistance level 157.20 (former monthly high from November) and the upper daily Bollinger Band.

The downward reversal from this resistance area created the daily Japanese candlesticks reversal pattern Bearish Engulfing.

Given the strongly bearish US dollar sentiment seen today, USDJPY currency pair can be expected to fall to the next support level 154.50 (low of the previous waves (a) and (c)).