Market navigator: week of 15 December 2025

Summary

• What happened last week: The Fed cut rates by 0.25% with dissent, while China battles deflation despite consumer price gains. Australia's central bank held rates citing inflation risks.
• Markets in focus: AI sector valuations face scrutiny after Oracle and Broadcom disappoint, while silver surges to record highs above $64 per ounce.
• The week ahead: Chinese economic data, US employment figures ahead. Europe, UK and Japan interest rate decisions will shape policy trajectories.

What happened last week

• Third consecutive cut from Fed: The Federal Open Market Committee (FOMC) voted to reduce policy rates by 25 basis points (bps) with three dissenting voices. One member advocated for a 50bps reduction, while two voted to maintain rates unchanged. The dot plot median projection indicates only one cut next year as the committee anticipates improved growth prospects (from 1.8% to 2.4%) and inflation moderating more rapidly than expected. Risk assets rallied on enhanced policy clarity and resilient economy.
• China's deflation challenge persists: November's consumer price index (CPI) year-on-year (YoY) growth accelerated to 0.7% from October's 0.2%, driven by elevated food prices. However, producer price index (PPI) contracted for the 38th consecutive month, deepening to 2.2% YoY from 2.1% in October, indicating persistent deflation amid intense price competition and subdued domestic demand.
• Chinese policy priorities emerge: The Politburo designated domestic demand as the paramount priority for 2026, reducing dependence on exports. Monetary and fiscal policies will remain 'moderately loose' and 'proactive', though policy wordings suggest stimulus will not exceed this year's levels. Addressing involution represents another priority.
• RBA stays put: Australia's easing cycle may be coming to an end as the Reserve Bank of Australia (RBA) holds for the third consecutive meeting amid elevated inflation. While the new monthly CPI data series might have exaggerated the situation, the RBA believes there is an upside risk to inflation. The board did not consider rate cuts, instead focusing on factors that would warrant increases next year.

Markets in focus

AI bubble concerns drive US equity volatility

The S&P 500 and Dow Jones indices established fresh all-time highs last Thursday following the Federal Reserve's (Fed) rate decision, before retreating on Friday amid renewed concerns over artificial intelligence (AI) sector valuations. The Nasdaq 100 bore the brunt of the selloff, declining 1.9% for the week, while the S&P 500 retreated 1.1%. The Dow Jones demonstrated relative resilience, advancing 1.0%.

Oracle's fiscal second quarter results catalysed the latest wave of AI stock selling pressure. The AI cloud infrastructure provider missed revenue expectations and failed to alleviate investor concerns regarding its mounting debt burden. Capital expenditure projections for fiscal year 2026 surged 40% to $50 billion, triggering a 13% weekly decline in Oracle's share price. Broadcom encountered similar headwinds despite exceeding top and bottom-line expectations. Insufficient clarity regarding order backlog combined with warnings of gross margin compression prompted investors to liquidate positions, driving an 11% decline following a 75% year-to-date rally preceding quarterly results.

Conversely, Warner Bros Discovery shares surged 15% after Paramount Sykdance submitted a $108.4 billion acquisition proposal, following Netflix's $83 billion merger agreement.

Despite record highs across other major US indices, the US Tech 100 index continues to exhibit subdued momentum, evidenced by a descending relative strength index (RSI) trajectory. The benchmark currently trades at support established by prior resistance near 25,200. A rebound from this level would signal near-term bullish momentum towards 26,253, while failure to hold support could prompt testing of the next level near 24,250.

Figure 1: US Tech 100 index (daily) price chart

Hang Seng Index trades sideways

The Hang Seng Index (HSI) maintained a sideways trajectory, delivering a modest decline of 0.4% last week. Trading volume on the Hong Kong Exchange main board continued to remain subdued despite enhanced clarity on 2026 global economic prospects from the FOMC. Investors continued to realise profits as the year draws to a close. Southbound net flows turned negative last week, a development not observed for at least six months.

The FOMC's hawkish cut is generally supportive of global banking stocks performance. HSBC Holdings was the best performing Hang Seng Index constituent, surging 6% to a 17-year high last week. Meanwhile, Chinese insurers are benefiting from a steepening Chinese government bond yield curve and a structural transformation in society, as Chinese households diversify their deposit and investment allocation beyond traditional banking channels. Ping An Insurance was a notable outperforming stock last week, delivering 5% in returns.

The 20-day moving average (MA) on the HSI daily chart continued to trend downward after failing to form a golden cross with the 50-day MA in mid-November, revealing sluggish momentum. The index appears positioned to trade within the 25,150 to 27,400 range in the near term. The short-term moving averages will likely present resistance around 26,100 while November's low establishes support near 25,180.

Figure 2: Hang Seng Index (daily) price chart

Silver price breaks record high

Silver surged to a historic record above $64 per ounce last week, marking an extraordinary breakout that has captured renewed attention from both institutional and retail investors. Year-to-date, the white metal has delivered 115% in returns, significantly outpacing gold's performance, demonstrating its higher volatility characteristic and amplifying the precious metals rally.

Multiple forces have converged to drive silver's exponential surge. The prospect of the Fed's loosening monetary policy following softer US economic data has weakened the dollar and compressed real yields, creating favourable conditions for non-yielding assets. Traditional safe-haven demand amid geopolitical uncertainties was also a key supporting factor of precious metal demand this year. Additionally, industrial consumption remains robust. Silver's unmatched conductivity makes it indispensable for solar panel production, electric vehicle components and AI infrastructure build-out. These overlapping industrial trends have created sustained demand that supply has struggled to match.

The technical picture reveals strong bullish momentum, with spot silver prices surging above the upper boundary of the ascending channel since mid-August. However, RSI readings suggest overbought conditions, indicating potential near-term consolidation before the uptrend resumes. 4 December's low at $56.4 should provide immediate support for any pullback, while a 161.8% Fibonacci extension of the upward move from 20 August to 16 October provides a medium-term target of $73.6.

Figure 3: Spot silver (daily) price chart

The week ahead

China's economic momentum takes centre stage Monday with industrial production, housing prices, retail sales and fixed asset investment figures for November. Markets anticipate industrial production growth to accelerate to 5% YoY from 4.9%, while retail sales are expected to hold at 2.9%. These releases assume heightened significance following November's CPI report, with investors seeking confirmation that China's recovery from deflationary pressures represents a sustainable trend. Stronger-than-expected readings would validate recent equity market optimism, while disappointment could ignite concerns about Beijing's stance of refraining from ramping up stimulus measures.

November's US labour market data arrives Tuesday with the non-farm payrolls report subdued following September's modest 119,000 gain. Markets expect the unemployment rate to hold at 4.4%. Thursday's November year-on-year inflation data is anticipated to remain roughly at current levels. These releases will influence the Fed's trajectory for 2026 and determine whether there will be a prolonged pause in the cutting cycle.

Central bank meetings dominate the second half of the week, with the European Central Bank (ECB), Bank of England (BOE) and Bank of Japan (BOJ) all convening. The ECB is widely expected to keep its deposit facility rate at 2% on Thursday, while the BOE is likely to deliver a quarter-point cut to 3.75% unless Wednesday's inflation reading complicates matters. The BOJ's Friday decision commands particular attention. Markets are pricing in nearly 80% probability of a rate increase from 0.5% to 0.75%, marking the central bank's first move since January. The recent hawkish pivot partly reflects concerns over yen weakness, with USD/JPY almost reaching 158. Should Governor Ueda signal additional tightening ahead, the currency pair could retreat towards 154 levels, though this would likely pressure Japanese equities. The path forward remains highly uncertain, with BOJ communication critical for market positioning.

Figure 4: Yen volatility and inflation pressure strengthens case for BOJ hike

Key macro events this week

Monday 15 December 2025

• 7.50am (HK time) – Japan Tankan Large Manufacturers Index Q4: previous 14, consensus 15
• 10.00am (HK time) – China Industrial Production YoY (November): previous 4.9%, consensus 5%
• 10.00am (HK time) – China Retail Sales YoY (November): previous 2.9%, consensus 2.9%
• 10.00am (HK time) – China Fixed Asset Investment YTD YoY (November): previous -1.7%, consensus 2.3%

Tuesday 16 December 2025

• 7.30am (HK time) – Australia Westpac Consumer Confidence Change (December): previous 12.8%
• 3.00pm (HK time) – UK Unemployment Rate (October): previous 5%, consensus 5.1%
• 5.30pm (HK time) – UK S&P Global Manufacturing PMI Flash (December): previous 50.2, consensus 50.2
• 5.30pm (HK time) – UK S&P Global Services PMI Flash (December): previous 51.3, consensus 51.5
• 9.30pm (HK time) – US Non-Farm Payrolls (November): previous 119,000, consensus 35,000
• 9.30pm (HK time) – US Unemployment Rate (November): previous 4.4%, consensus 4.4%
• 9.30pm (HK time) – US Retail Sales MoM (October): previous 0.2%, consensus 0.2%

Wednesday 17 December 2025

• 7.50am (HK time) – Japan Balance of Trade (November): previous -¥231.8 billion, consensus ¥71.2 billion
• 3.00pm (HK time) – UK Inflation Rate YoY (November): previous 3.6%, consensus 3.5%

Thursday 18 December 2025

• 8.00pm (HK time) – UK BOE Interest Rate Decision: previous 4%, consensus 3.75%
• 9.15pm (HK time) – ECB Deposit Facility Rate Decision: previous 2%, consensus 2%
• 9.30pm (HK time) – US Core Inflation Rate YoY (November): previous 3.0%, consensus 3.2%
• 9.30pm (HK time) – US Inflation Rate YoY (November): previous 3.0%, consensus 3.2%

Friday 19 December 2025

• 7.30am (HK time) – Japan Core Inflation Rate YoY (November): previous 3%, consensus 3%
• 11.00am (HK time) – Japan BOJ Interest Rate Decision: previous 0.5%, consensus 0.75%
• 3.00pm (HK time) – UK Retail Sales MoM (November): previous -1.1%, consensus 1%
• 11.00pm (HK time) – US Existing Home Sales (November): previous 4.1 million

Key corporate earnings

(in local exchange time)

Wednesday 17 December 2025

• Micron

Thursday 18 December 2025

• Accenture
• Nike

Source: Trading Economics, Nasdaq, LSEG (as of 14 December 2025)