Week commencing 22 December 2025

ASX 200 stalls while US indices struggle for momentum

The S&P 500 and Dow Jones are poised to finish a second consecutive week lower, as renewed concerns over artificial intelligence (AI) valuations – reignited last week by earnings from Broadcom and Oracle – continue to weigh on sentiment. The worries centre on soaring capital expenditure (capex), heavy debt, construction delays, massive cash burn, and mixed second-quarter (Q2) earnings, all of which have eroded confidence.

Locally, the ASX 200 is set to snap its three-week winning streak, with no evidence yet of the traditional Santa Claus rally. The energy and health care sectors have been the main drags, while the financial and real estate sectors have outperformed the broader market.

The week that was: highlights

• In the United States (US), November non-farm payrolls rose by 64,000, above the 50,000 expected, while the unemployment rate increased to 4.6%
• Headline retail sales for October came in flat. However, the Retail Sales Control Group – a key input for gross domestic product (GDP) calculations – surged 0.8% month-on-month (MoM), well above the 0.4% consensus
• Annual headline inflation fell to 2.7% in November, the lowest level since July and below market expectations of 3.1%. The core measure fell to 2.6%, its lowest since March 2021
• In China (CN), the house price index fell 2.4% year-on-year (YoY) in November, marking the 29th consecutive month of falls
• Retail sales in China rose 1.3% YoY in November, the slowest yearly rise since December 2022. Meanwhile, fixed asset investment declined by 2.6% YoY in November for a third straight month of falls
• In Japan (JP), annual headline inflation rose 2.9% in November, easing from 3.0% prior. Core inflation rose 3.0% YoY, the same as in October
• In Australia (AU), the Westpac Consumer Sentiment survey plunged 9% in December to 94.5
• In New Zealand (NZ), GDP rose by 1.1% in third quarter (Q3) 2025, rebounding from a 1.0% fall in second quarter (Q2)
• Crude oil fell 2.51% to $56.00
• Gold gained 0.77% to $4,332
• Bitcoin fell 2.94% to $85,570
• Wall Street's gauge of fear, the volatility index (VIX), rose to 16.86 from 15.73 the previous week.

Key dates for the week ahead

Australia & New Zealand

• AU – Reserve Bank of Australia (RBA) meeting minutes: Tuesday, 23 December at 11.30am AEDT

China & Japan

• JP – Bank of Japan (BoJ) meeting minutes: Wednesday, 24 December at ~10.50am AEDT

United States

• US – Durable goods orders: Wednesday, 24 December at 12.30am AEDT
• US – Q3 GDP second estimate: Wednesday, 24 December at 12.30am AEDT
• US – Industrial production: Wednesday, 24 December at 1.15am AEDT
• US – Conference Board (CB) consumer confidence: Wednesday, 24 December at 2.00am AEDT

Europe & United Kingdom

• UK – Current account: Monday, 22 December at 6.00pm AEDT

Key events for the week ahead

AU: RBA meeting minutes

Date: Tuesday, 23 December at 11.30am AEDT

At its December Board meeting, the Reserve Bank of Australia (RBA) held the cash rate unchanged at 3.60%, as widely anticipated, marking the third consecutive hold.

The decision came with a hawkish tone in the accompanying statement. Key observations included inflation appearing more broad-based, strengthening private sector growth, a recovering housing market, a still-tight labour market, capacity utilisation above long-run averages, elevated unit labour costs, and potential for further capacity pressures if private demand continues to accelerate.

RBA Governor Michele Bullock's subsequent press conference reinforced this hawkishness, noting that a rate cut was not considered, while the Board did discuss scenarios that could warrant a hike. Bullock emphasised the RBA’s tightened bias: ‘If it looks like inflation is not coming back to the band then the Board will have to take action and it will.’

The upcoming minutes will be closely scrutinised for deeper insights into potential triggers and timing around a first rate hike or a shift back toward a neutral policy stance.

The Australian interest rate market is pricing in 9 basis points (bp) of RBA rate hikes for February. There are 25 bp of rate hikes priced for August and a cumulative 39 bp of rate hikes priced between now and the end of 2026.

RBA cash rate chart

US: Q3 GDP second estimate

Date: Wednesday, 24 December at 12.30am AEDT

The US economy rebounded strongly in Q2 2025, with real GDP growing at an annualised 3.8% according to the final (third) estimate from the Bureau of Economic Analysis (BEA). This marked a sharp turnaround from the -0.6% contraction in first quarter (Q1), driven primarily by surging consumer spending, robust business investment (particularly AI-related), and a significant drop in imports, which boosted net exports.

Due to the federal government shutdown, the BEA cancelled the advance estimate for Q3 and will combine it with the second estimate due next week – effectively serving as the first official print.

Market expectations for this ‘second’ estimate centre on a moderation from Q2's pace. Consensus forecasts cluster around 2.0 – 3.0% annualised growth, though it is worth noting the Atlanta Federal Reserve (Fed) GDPNow model is tracking at 3.5% as of 16 December. All of this is expected to confirm that the US economy was on solid footing before the government shutdown began on 1 October.

US real GDP chart

US: CB consumer confidence

Date: Wednesday, 24 December at 2.00am AEDT

The Conference Board (CB) consumer confidence for November came in at 88.7. This represented a sharp drop of 6.8 points from the prior month's revised 95.5, marking the lowest reading since April.

The Present Situation Index dropped 4.3 points to 126.9, while the Expectations Index plunged 8.6 points to 63.2 – remaining below the 80-recession signal threshold for the tenth straight month.

Key drivers included:

• Weakening labour market views (fewer ‘plentiful’ jobs)
• Pessimism on incomes and finances
• Rising inflation expectations (median 4.8%)
• Concerns over tariffs, politics, and a potential government shutdown
• Declining plans for big-ticket purchases and services spending

These drivers appear likely to weigh again this month, with preliminary expectations looking for a number around 89. The US interest rate market currently prices in roughly 16.5 bp of cuts for the March Federal Open Market Committee (FOMC) meeting, with about 60 bp of rate cuts embedded between now and the end of 2026.

CB consumer confidence chart