Week commencing 8 December 2025

US stocks rise on Fed cut hopes, ASX 200 flat ahead of RBA

United States (US) stock markets are on track for modest weekly gains to start December. This week’s rally is supported by expectations of a 25 basis point (bp) rate cut at next week’s Federal Open Market Committee (FOMC) meeting.

In contrast, the Australia 200 (ASX 200) is set to finish the week near the flat line. This subdued activity reflects a cautious approach among investors as they await next week’s Reserve Bank of Australia (RBA) interest rate meeting, where rates are expected to remain on hold at 3.60%.

The focus will be on how the RBA’s communication evolves after a run of stronger inflation, firmer components in this week’s third-quarter (Q3) gross domestic product (GDP) reading, and robust household spending data for October.

The week that was: highlights

• In the US, the ADP employment report showed private businesses cut 32,000 jobs in November, following an upwardly revised gain of 47,000 jobs in October
• The Institute for Supply Management (ISM) services purchasing managers’ index (PMI) rose to 52.6 in November from 52.4 prior, signalling the strongest growth in the services sector in nine months
• The ISM manufacturing PMI eased to 48.2 in November from 48.7 prior
• Initial jobless claims dropped by 27,000 to 191,000 in the last week of November
• In China (CN), the RatingDog Manufacturing PMI eased to 49.8 in November from 50.6 prior, to the lowest since July
• In the Euro Area, headline inflation rose by 2.2% in November, up from 2.1% prior. Core inflation rose by 2.4% for the third consecutive month
• In Australia (AU), Q3 GDP rose by 0.4% quarter-on-quarter (QoQ), for an annual growth rate of 2.1%, the fastest since Q3 2023
• Household spending for October increased 1.3% month-on-month (MoM) and 5.6% year-on-year (YoY), the fastest annual pace since September 2023
• Crude oil gained 1.81% to $59.61
• Gold dipped 0.37% to $4,200
• Bitcoin gained 2.40% to $92,608
• Wall Street’s gauge of fear, the volatility index (VIX), fell to 15.79 from 16.34 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU – National Australia Bank (NAB) business confidence: Tuesday, 9 December at 11.30am AEDT
• AU – RBA interest rate decision: Tuesday, 9 December at 2.30pm AEDT
• AU – RBA press conference: Tuesday, 9 December at 3.30pm AEDT
• New Zealand (NZ) – Business NZ PMI: Friday, 12 December at 8.30am AEDT

China & Japan

• CN – Balance of trade: Monday, 8 December at 2.00pm AEDT
• CN – Inflation: Wednesday, 10 December at 12.30pm AEDT

United States

• US – ADP employment change: Wednesday, 10 December at 12.15am AEDT
• US – Job openings and labour turnover survey (JOLTS): Wednesday, 10 December at 2.00am AEDT
• US – FOMC interest rate decision: Thursday, 11 December at 6.00am AEDT
• US – Producer price index (PPI): Friday, 12 December at 12.30am AEDT
• US – Initial jobless claims: Friday, 12 December at 12.30am AEDT

Europe & United Kingdom

• United Kingdom (UK) – GDP: Friday, 12 December at 6.00pm AEDT

Key events for the week ahead

AU: RBA interest rate decision

Date: Tuesday, 9 December at 2.30pm AEDT

At its last meeting in November, the RBA kept its official cash rate on hold at 3.60%, as widely expected. The board’s decision was unanimous, driven by a pickup in underlying inflation during the September quarter, which exceeded both the RBA’s and market forecasts.

In its quarterly Statement on Monetary Policy, the RBA revised higher its inflation forecasts, with trimmed mean inflation expected to remain at 3.2% until mid-2026, only returning to the 2.5% mid-point target in mid-2027 – over a year later than previously projected.

October inflation surprised to the upside, with trimmed mean inflation rising 3.3% YoY, up from 3.2% prior. This was accompanied by stronger employment data, firmer Q3 GDP components, and robust household spending.

This combination is expected to see the RBA keep rates on hold next week at 3.60%. Attention will focus on how the RBA’s communication evolves after this run of data. While a rate cut or hike is unlikely at this meeting, the Board will want to keep all options open for next year, with ‘data dependence’ expected to feature prominently.

The Australian interest rate market is pricing in no change for next week’s meeting, 3 bp of hikes for February, and a cumulative 31 bp of RBA rate hikes between now and December 2026.

RBA cash rate chart

US: FOMC interest rate decision

Date: Thursday, 11 December at 6.00am AEDT

At the last FOMC meeting in October, the Federal Reserve (Fed) cut rates by 25 bp to a target range of 3.75% – 4.00%.

It was the second consecutive rate reduction, approved by a 10 – 2 vote. Fed Governor Stephen Miran dissented in favour of a 50 bp cut, while Kansas City Fed President Jeff Schmid preferred holding rates steady.

Fed Chair Jerome Powell said a December cut was not a ‘foregone conclusion’. Minutes showed disagreement over whether a stalling labour market or stubborn inflation posed the bigger risk.

Initially, the odds of a December cut fell to 30%. However, dovish Fed commentary and softer labour data now see markets pricing in an 87% probability of another 25 bp cut to 3.50% – 3.75% next week.

Markets are also pricing in two additional 25 bp cuts in 2026, with a 50% chance of a third.

Fed funds rate chart

UK: GDP

Date: Friday, 12 December at 6.00pm AEDT

UK GDP fell by 0.1% in September, compared with expectations of zero growth, partly due to cyber-attack disruptions at Jaguar Land Rover.

Production output declined 2%, reversing a 0.3% gain in August, the largest drop since January 2021. Services rose 0.2%, rebounding from a 0.1% fall, supported by wholesale and retail trade.

November’s UK services PMI was revised higher to 51.3 from 50.5, suggesting sentiment was better than feared. Manufacturing returned to growth, with the S&P Global UK manufacturing PMI rising to 50.2, a 14-month high.

Markets expect a flat GDP reading for October, supporting expectations that the Bank of England will cut rates by 25 bp to 3.75% at its 18 December meeting.

UK monthly GDP chart