Market Quick Take – 19 December 2025

Market drivers and catalysts

• Equities: U.S. and Europe rise on softer inflation and central bank steadiness, while Hong Kong edges higher on tentative China data
• Volatility: VIX steady, SKEW high, PCE + triple witching risk
• Digital assets: BTC firm, ETH weak on flows, ETF outflows in ETHA
• Fixed Income: 10-year Japanese Government Bonds jump to multi-decade highs after Bank of Japan hike.
• Currencies: JPY weakens after hawkish hike from Bank of Japan, Sterling firms after less dovish than feared BoE guidance
• Commodities: Metals and energy divergence continue; Coffee and sugar slump on ample supply
• Macro events: US Dec Final University of Michigan Sentiment

Macro headlines

• The Bank of Japan- as expected- raised its benchmark interest rate to 0.75%, the highest in 30 years, and said more increases are in the pipeline if conditions allow, citing a rising likelihood its economic outlook being realised. Japanese Government Yields rose sharply on the decision, with the 10-year JGB benchmark pulling several basis points higher and clearing 2.02%, the highest level since 1999.
• US inflation was 2.7% in December 2025, the lowest since July and below forecasts. Economists however agreed that the data was affected by the record-long government shutdown, which limited the Bureau of Labor Statistics' ability to collect prices and resulted in some categories showing unusually low inflation.
• Japan's annual inflation rate decreased to 2.9% in November 2025 from October's 3.0%. Core inflation remained at 3.0%, matching estimates. Monthly CPI rose 0.4%, consistent with October and the highest in eight months.
• ECB kept rates unchanged for the fourth meeting. President Lagarde stated no rate changes were discussed, focusing on a flexible approach amid uncertainty. Growth is forecast at 1.4% for 2025 and 2027, with inflation at 2.1% in 2025 and slightly decreasing thereafter, adjusting upward for 2026 due to services.
• The Bank of England cut the Bank Rate by 25 basis points to 3.75%, responding to easing inflation and economic strain. The vote was close, with future cuts depending on inflation trends. UK inflation dropped to 3.2% in November, below forecasts, amid GDP contraction and cooling wage growth.
• The US Fed's Goolsbee sees favorable inflation data but is wary of rapid rate cuts, seeking more sustained cooling of inflation. He notes the job market's steady cooling and suggests rates can drop significantly if inflation approaches 2%.

Macro calendar highlights (times in GMT)

0700 – UK Nov Retail Sales
1500 – Eurozone Dec Consumer Confidence
1500 – US Nov Existing Home Sales
1500 – US Dec University of Michigan Sentiment

Earnings events

• Today: Paychex, Carnival Corporation

For all macro, earnings, and dividend events check Saxo’s calendar.

Equities

• USA: The S&P 500 rises 0.8% to 6,774.76, the Nasdaq Composite gains 1.4% to 23,006.36, and the Dow Jones Industrial Average adds 0.1% to 47,951.85. Micron jumps 10.2% after a blowout forecast points to tight supply in high-bandwidth memory used in artificial intelligence servers, while Nvidia gains 1.9% as the chip group steadies. Trump Media surges 42% on a $6 billion fusion merger with TAE Technologies, and after the close Oracle pops 5.4% as TikTok signs a U.S. joint-venture deal. Nike fell 10.7% after reporting earnings that showed weak sales in China persisting.
• Europe: The STOXX Europe 600 climbs 1.0% to 585.35 and the Euro STOXX 50 rises 1.1% to 5,741.71, while the FTSE 100 gains 0.7% to 9,837.77 as the European Central Bank holds rates steady and the Bank of England cuts rates by 0.25 percentage point. ASML rebounds 2.1% as the semiconductor group recovers, Inditex rises 2.6% and H&M adds 3.6% as lower yields lift consumer names, while Novo Nordisk slips 1.3% as investors stay cautious on the obesity-drug race. Next up, markets look to incoming activity and inflation data to see if central banks keep easing in 2026.
• Asia: Hong Kong’s Hang Seng Index edges up 0.1% to 25,498.13 as financials lead and traders weigh fresh China data. November youth unemployment for 16 to 24 year-olds, excluding students, eases to 16.9%, while January to November fiscal revenue grows 0.8% and spending rises 1.4%, a reminder that the policy support is steady but not a sugar rush. ZTO Express gains 2.5%, Prada adds 2.3%, Techtronic rises 1.5%, and Henderson Land advances 1.3% as sentiment firms, with attention turning to the next set of China prints and any fiscal headlines.

Volatility

• Market volatility continues to ease into year-end, with the VIX closing at 16.87 and short-term gauges (VIX1D 15.78, VIX9D 13.92) drifting lower. Despite this calm, today's "triple witching" expiration could inject intraday noise as large positions roll off. The SKEW index remains elevated at 155.4, a signal that investors still value tail protection, even with no immediate macro shocks on the radar. Sentiment data (University of Michigan survey) and the PCE inflation prints later today could serve as catalysts for a volatility reprice if they diverge meaningfully from expectations.
• Options markets are pricing a ±45.6pt move in SPX (~0.67%) into today’s close. For today’s expiration (0DTE), near-the-money puts are trading at 24.6% implied volatility vs 18.8% for calls, a sign of mild downside skew.

Digital Assets

• Bitcoin holds near $87k, up nearly 1.9% on the day, while ether trades just below $3,000. Solana and XRP posted modest gains, though ETF flows tell a more nuanced story. IBIT saw outflows of -0.75 on 18 Dec, while ETHA dropped -0.32, with broader spot ether ETFs losing nearly $100m — hinting at ongoing fragility in ETH sentiment. The broader crypto complex is steady, but investor appetite remains selective, particularly in the altcoin space.
• The defensive tone extended into crypto-adjacent equities and ETFs. Option flows were dominated by deep in-the-money puts across COIN, MSTR, and IBIT positioning more consistent with delta hedging or portfolio protection than bearish speculation. The only standout was CORZ, where deep ITM calls were bought, possibly as a stock-replacement strategy. Net: investor tone is cautious, preferring protection and exposure management over broad risk-on buying.

Fixed Income

• US Treasuries yields dipped on the very soft CPI data, although the data release brought widespread sceptical commentary due to the government shutdown in October. By later in the day, treasuries sold off again and erased all of the reaction to the CPI release, with the benchmark 2-year yield trading near 3.47% and the benchmark 10-year yield back to almost unchanged on the day at 4.14%, still within the range of the last two weeks.
• Japanese government bonds ripped to new multi-decade highs in the wake of the Bank of Japan rate hike, with the benchmark 10-year JGB yield clearing the 2006 of 2.015% and trading above 2.02% Friday for the first time since 1999, while the hawkish guidance also saw yield rising sharply at the front of the yield curve as the 2-year yield rose to 1.10% at its highest ahead of Bank of Japan Governor Ueda’s press conference, the highest since 2007.

Commodities

• The Bloomberg Commodity Index (BCOM) traded softer for a second consecutive week as broad-based losses across the energy complex—led by natural gas—and the agriculture sector, outweighed another weekly gain in industrial and precious metals. Energy prices declined across the board amid a continued focus on ample supply despite ongoing geopolitical disruptions, while wheat, sugar, and coffee also posted sharp losses.
• The BCOM index remains up around 14% year to date, with performance almost entirely driven by strong gains in copper and aluminium, and especially gold and silver, with the precious metals sub-index heading for an annual gain of more than 75%. Platinum and palladium, both excluded from the BCOM, recorded double-digit gains this week.
• Arabica coffee futures tumbled to a four-month low after the USDA raised its 2025–26 production forecast to a record 178.8 million bags, pushing expected output above global consumption, which is also expected to hit a record at 174 million.
• Sugar futures also declined after India signalled it may export more than previously planned this season, extending a sell-off that has left prices down around 25% year to date.

Currencies

• The Japanese yen fell in the wake of the Friday Bank of Japan rate hike, as Japanese Government Bond yields rose further all along the curve on the decision. The bank said that policy remains accommodative and it is “highly likely that the mechanism in which both wages and prices rise moderately will be maintained”, suggesting scope for further rate hikes. Bank of Japan Governor Ueda was out speaking in presser Friday as these words are being written, sending USDJPY to well above 156.00 and EURJPY to new all-time highs above 183.00.
• The US dollar chopped around yesterday, ending the day on the high side of the day’s price action as a EURUSD rally to 1.1760 after the odd US CPI data (see above) failed to sustain and the exchange rate dipped back to the 1.1720 area. Sterling firmed Thursday in the wake of the Bank of England rate cut, as the decision was made with only a one vote 5-4 majority from the MPC and guidance was less dovish than anticipated as Governor Bailey indicated limited further room for additional rate cuts. This saw short UK rates erased some of the reaction to Wednesday’s soft CPI numbers. EURGBP dropped back toward the 0.8760 area after threatening 0.8800 recently.

For a global look at markets – go to Inspiration.