Week commencing 15 December 2025

US indices climb as Fed cuts rates while Nasdaq slips on tech weakness

The S&P 500 and Dow Jones are on track to finish the week higher, with the Dow leading the gains after hitting a fresh record high. This comes as investors shifted from technology stocks toward cyclicals and value sectors, encouraged by the Federal Reserve (Fed) 25 basis point (bp) rate cut on Wednesday and guidance that proved less hawkish than many had anticipated.

By contrast, the tech-heavy Nasdaq 100 is heading for a modest weekly loss, weighed down by a sharp decline in Oracle shares on Thursday. The stock fell as much as 13% after the company disclosed that fiscal year (FY) 2026 capital expenditures are now expected to be around $15 billion higher than earlier projections, raising concerns about the cash intensity of its accelerated investments in artificial intelligence (AI) and cloud infrastructure.

In contrast, the Australia 200 (ASX 200)  is set to finish the week modestly higher, held back by the Reserve Bank of Australia (RBA) keeping rates on hold at 3.60% and sounding hawkish. The materials and financial sectors have been the best performing sectors this week, while the information technology and health care sectors have been the main drag.

The week that was: highlights

• In the United States (US), the Fed cut rates by 25 bp, bringing the Fed Funds rate to a range of 3.50% - 3.75%
• Job Openings and Labor Turnover Survey (JOLTS) data for September and October were released together due to the recent US government shutdown. September showed a substantial increase of 431,000 from August’s 7.227 million, while in October, job openings increased by 12,000 to reach 7.670 million
• Initial jobless claims climbed 44,000 to 236,000, breaking a four-week streak of falls
• In China (CN), the annual inflation rate picked up to 0.7% year-on-year (YoY) in November from 0.2% the prior month. Core inflation rose 1.2% YoY in November, the same as in October
• In Japan (JP), third-quarter (Q3) annualised gross domestic product (GDP) was revised lower to -2.3% from -1.8%
• In Australia (AU), the RBA kept rates on hold at 3.60% and sounded hawkish. Employment in Australia fell by 21,000 jobs in November, well below the 20,000 gain expected. The unemployment rate held steady at 4.3%, below the 4.4% expected, as the participation rate fell to 66.7% from 67% prior
• Crude oil fell 4.13% to $57.60
• Gold gained 1.92% to $4,279
• Bitcoin gained 2.50% to $92,658
• Wall Street’s gauge of fear, the volatility index (VIX), fell to 14.85 from 15.40 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU – Westpac consumer confidence: Tuesday, 16 December at 10.30am AEDT
• NZ – Q3 GDP: Thursday, 18 December at 8.45am AEDT

China & Japan

• CN – House price index: Monday, 15 December at 1.00pm AEDT
• CN – Industrial production (IP), retail sales, fixed asset investment (FIA): Monday, 15 December at 1.00pm AEDT
• JP – Bank of Japan (BoJ) interest rate meeting: Friday, 19 December at ~2.00pm AEDT

United States

• US – Non-farm payrolls (NFP): Wednesday, 17 December at 12.30am AEDT
• US – Retail sales: Wednesday, 17 December at 12.30am AEDT
• US – Consumer price index (CPI): Friday, 19 December at 12.30am AEDT
• US – Existing home sales: Saturday, 20 December at 2.00am AEDT

Europe & United Kingdom

• UK – CPI: Wednesday, 17 December at 6.00pm AEDT
• UK – Bank of England (BoE) interest rate meeting: Thursday, 18 December at 11.00pm AEDT
• EA – European Central Bank (ECB) interest rate meeting: Friday, 19 December at 12.15am AEDT

Key events for the week ahead

AU: Westpac consumer confidence

Date: Tuesday, 16 December at 10.30am AEDT

For November, Australian consumer confidence soared by 12.8% to 103.8. Excluding Covid-19 pandemic disruptions, this was the most positive reading in seven years, supported by signs of economic recovery and easing external risks. Notably, the surge occurred despite a sharp rise in RBA rate hike expectations following the red-hot Q3 CPI report released in late November.

Across the sub-indexes, there was a broad-based boost in sentiment with the notable exception of labour market views as unemployment expectations increased 9.3% to 139.5, remaining above the long-term average.

This week’s hawkish RBA ‘on hold’ decision and increased chatter regarding rate hikes in the first half (H1) of 2026 are expected to see consumer sentiment ease back towards the 100 mark in December.

Australian consumer confidence chart

US: Non-farm payrolls

Date: Wednesday, 17 December at 12.30am AEDT

The September NFP report, which was finally released nearly seven weeks late due to the US government shutdown and well past the customary early-October release date, offered a sliver of relief after a dismal August print. NFP rose by 119,000 - a figure that handily beat economists’ consensus expectation of just 50,000 additions. The unemployment rate ticked up to 4.4% from 4.3% in August.

The Bureau of Labor Statistics (BLS) announced on 19 November that it would not publish a full employment situation report for October due to the government shutdown that began in late October and dragged into early November. The BLS will salvage what it can, folding October’s partial NFP data into the upcoming November release.

Without the October report, secondary labour market data - such as the ADP private payrolls estimate, initial jobless claims, JOLTS job openings, and employment sub-indexes within the purchasing managers’ indexes (PMIs) - hint at softening demand but lack clarity.

At this week’s Federal Open Market Committee (FOMC) meeting, where the Fed cut rates by 25 bp to a range of 3.50% - 3.75%, Fed Chair Powell made a surprisingly direct case that job growth may actually be negative due to measurement challenges. He noted that ‘gradual cooling in the labour market has continued just a touch more gradually than we thought’, adding that due to overcounting, the actual number could be closer to a loss of 20,000 jobs per month.

Looking ahead, the market is pencilling in +50,000 for November, with the unemployment rate remaining at 4.4%. The rates market is pricing in two full 25 bp Fed rate cuts in 2026.

US unemployment rate chart

UK: BoE interest rate meeting

Date: Thursday, 18 December at 11.00pm AEDT

At its last meeting in November, the UK BoE Monetary Policy Committee (MPC) voted by a majority of 5 - 4 to maintain the Bank Rate at 4.00%. Four members voted to reduce the rate by 0.25 percentage points to 3.75%.

The BoE’s forward guidance was dovish, noting that inflation has peaked and demand appears to be softening. The statement read: ‘The risk from greater inflation persistence has become less pronounced recently, and the risk to medium-term inflation from weaker demand more apparent, such that overall, the risks are now more balanced.’

Since then, the unemployment rate edged up to 5.0% in Q3 2025, the highest since May 2021. Headline inflation eased to 3.6% in October, the lowest level in four months, while annual core inflation dropped to a six-month low of 3.4%. Finally, growth has been weaker than expected; the UK economy expanded by just 0.1% in Q3, easing from 0.3% in Q2 and falling short of market expectations of 0.2%.

These developments have resulted in money markets pricing in a 90% probability that the BoE will cut rates by 25 bp to 3.75% when it next meets next week. Markets are then pricing in another full 25 bp rate cut by June 2026.

BoE official bank rate chart

JP: BoJ interest rate meeting

Date: Friday, 19 December at ~2.00pm AEDT

At the BoJ's most recent monetary policy meeting on 29 - 30 October, the central bank left its policy rate unchanged at 0.50%, extending the pause in place since the last hike in January 2025.

The decision, widely anticipated by markets, was approved by a 7 - 2 vote, with board members Naoki Tamura and Hajime Takata once again dissenting in favour of an immediate rate hike to 0.75%. The BoJ reiterated that it will continue raising borrowing costs if the economy and prices evolve broadly in line with its forecasts.

Since then, Governor Kazuo Ueda has struck a hawkish tone in speeches - most notably on 1 December - while multiple reports last week confirmed that Prime Minister Sanae Takaichi’s new administration has signalled it will not oppose a December rate hike, respecting the central bank’s independence.

Markets have responded accordingly. As of today, the rates market is pricing an approximately 85% probability of a 25 bp hike at next week’s meeting, which would lift the policy rate to 0.75%. The case for tightening has been reinforced by resilient wage growth, core inflation remaining stubbornly above 2.0%, and a noticeable easing of US tariff risks following bilateral talks.

BoJ policy rate chart