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The stock market faced significant losses following the Federal Reserve's rate outlook, with the Dow Jones plunging 2.6% and the S&P 500 down 2.95%. Major tech stocks like Nvidia and Tesla also fell, while Micron's weak guidance led to a sharp decline in its shares. Despite a slight bounce in futures, the market remains volatile, with rising Treasury yields and economic uncertainty ahead.
The Bank of England has maintained its interest rate at 4.75% as UK inflation reached an eight-month high of 2.6% in November, driven by rising transportation and housing costs. Despite some easing inflationary pressures, persistent inflation in the services sector remains a concern for the central bank.
European stocks fell 1.2% following a hawkish shift from the Federal Reserve, which reduced its forecast for interest rate cuts in 2025. The yen weakened past 156 against the dollar as the Bank of Japan maintained its borrowing costs, while US stock futures indicated a potential recovery amid a resilient economy. European government bonds also saw significant losses, with UK 10-year yields reaching their highest since October 2023 ahead of the Bank of England's policy decision.
US inflation has decreased this year, influenced by the owners' equivalent rent, which does not reflect actual consumer spending power. The Fed, having been slow to cut rates, is expected to proceed cautiously next year, especially amid uncertainties from potential sales taxes under President-elect Trump. Meanwhile, the UK may also lower rates gradually due to deflation in input producer prices, while the ECB's consumer price inflation figures remain stable and largely unreactive.
European markets are under pressure due to political instability, particularly following Chancellor Olaf Scholz's government collapse and early elections in Germany. Despite these challenges, the DAX 40 reached record highs, buoyed by France's political turmoil, while UK economic indicators show resilience amid inflationary pressures and steady wage growth. The Bank of England is expected to maintain interest rates, contributing to ongoing volatility in European indices.
IG
European stocks declined due to political instability in France and Germany, with Chancellor Olaf Scholz's government collapsing and an early election set for February 23. Meanwhile, France's credit rating was downgraded, although European PMI data showed less contraction than expected, easing some tariff concerns. The focus now shifts to the upcoming UK consumer price index data and the Bank of England's interest rate decision, with expectations of further rate cuts in the future.
IG
The Federal Reserve is expected to implement a 25 basis point rate cut in December, potentially lowering rates to 4.25% to 4.50%, contingent on inflation and employment data. In contrast, the Bank of England is likely to maintain its rate at 4.75%, balancing inflation control with economic growth.Market volatility is anticipated around both central bank meetings, particularly affecting currency pairs like GBP/USD and interest rate-sensitive sectors. Key economic indicators, including inflation and wage growth, will be crucial in shaping future monetary policy decisions into 2025.
IG
Bitcoin is trading above $103,000, buoyed by strong market sentiment, but faces potential volatility this week due to key economic events, including the Federal Reserve's expected interest rate cut and U.S. economic data releases. Central bank decisions in Japan and the U.K. will also play a crucial role, with any unexpected shifts likely to impact Bitcoin's price. Traders are closely monitoring macroeconomic developments, particularly the psychological $100,000 level, as they assess the market's risk appetite.
The Federal Reserve is expected to implement a 25-basis point rate cut in December, influenced by recent comments from Governor Christopher Waller and market expectations. In contrast, the Bank of England faces persistent inflation challenges, likely maintaining its rate at 4.75% amid a split among its Monetary Policy Committee members. Both central banks' decisions will significantly impact currency and stock markets, with traders advised to monitor economic indicators closely.
IG
The Bank of England's Prudential Regulation Authority (PRA) has mandated that businesses disclose their current and anticipated crypto asset exposures by March 2025. This initiative aims to gather essential data to inform regulatory policies and assess the financial stability implications of digital assets. The PRA's efforts will focus on tokenized assets, stablecoins, and unbacked cryptocurrencies, as the UK seeks to establish a comprehensive regulatory framework amidst growing global interest in cryptocurrencies.

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