United States
Wall Street drifted through a quiet session on Tuesday as traders refused to commit ahead of the Federal Reserve’s final interest rate decision of 2025, due early Thursday morning Australian time.
The S&P 500 finished little changed, edging closer to its all-time high set in October. The Nasdaq 100 managed a modest 0.2 per cent gain, while the blue-chip Dow Jones Industrial Average slipped 0.4 per cent. The 10-year Treasury yield hovered around 4.19 per cent following a government bond auction.
While a quarter-point rate cut on Thursday (Australian time) appears all but certain, market watchers are increasingly nervous about what comes next. Money markets are now pricing in just two additional cuts through 2026 – a significant retreat from more optimistic forecasts in recent weeks. The concern centres on the prospect of a “hawkish cut”, where the Fed lowers rates but signals it is done easing for now.
JPMorgan Chase weighed on sentiment after warning about higher-than-expected costs and describing consumers as “fragile”. The bank’s shares tumbled more than 4 per cent after indicating it expects to spend $US105 billion next year.
In late trading, GE Vernova surged more than 6 per cent after doubling its dividend, increasing its share buyback scope, and raising earnings projections amid soaring electricity demand.
Kevin Hassett, the frontrunner to replace Fed Chair Jerome Powell, said at the Wall Street Journal CEO Council Summit that he sees plenty of room for rates to fall further, even by more than a quarter-point. His comments added to speculation about the central bank’s future direction.
In other corporate news, Microsoft pledged to invest $US17.5 billion on artificial intelligence and cloud computing in India. Home Depot offered cautious preliminary guidance for next year, signalling it doesn’t expect the housing market to rebound soon. PepsiCo reached an agreement with activist investor Elliott Investment Management that includes a 20 per cent reduction in its US product lineup alongside planned layoffs.
Europe
European stocks dipped slightly as investors adopted a wait-and-see stance ahead of the Fed decision while digesting Tuesday’s data.
The Stoxx 600 edged 0.1 per cent lower, though defence stocks enjoyed their best session in weeks. German lawmakers are preparing to approve a record €52 billion in military procurement contracts, lifting Rheinmetall 3.6 per cent, BAE Systems 2.1 per cent and Leonardo 3.1 per cent.
Insurers outperformed after Allianz jumped 3 per cent and Generali gained 2.9 per cent on upgrades. Banks also fared well, with BNP Paribas rising 1.6 per cent and Deutsche Bank climbing 1.8 per cent as it prepares to implement regular annual buybacks.
On the downside, Portuguese energy company Galp slumped 14.7 per cent after a disappointing deal concerning its Mopane project with TotalEnergies. Thyssenkrupp tumbled 6.5 per cent after warning it would swing to a loss, while EssilorLuxottica dropped 5.7 per cent on competition concerns in the smart glasses space.
Unilever bucked the trend in the consumer space, rising 3.5 per cent as markets welcomed comments from its CEO following the Magnum ice cream spinoff. Ad agency WPP surged 6.9 per cent after winning a contract from the UK government.
UK retailers weakened after Black Friday discounts failed to prevent a sales slowdown, with data suggesting the government’s budget has damaged consumer confidence.
Australia
The local market is set for a positive open, with S&P/ASX 200 futures pointing to a 0.2 per cent gain. The session follows a whipsaw day on Tuesday that saw futures down 31 points before the RBA decision, only to swing higher and close up 23 points.
Governor Michele Bullock delivered a hawkish message, effectively ruling out further rate cuts and sending bond yields soaring. Australian swap markets are now pricing in almost two quarter-point increases by the end of next year – a dramatic shift from expectations of easing just weeks ago. The three-year bond yield jumped 10 basis points to 4.14 per cent, while the 10-year yield rose 5.5 basis points to 4.76 per cent.
The RBA’s stance puts Australia increasingly out of step with the Fed, which is expected to cut rates this week, though the global trend is tilting hawkish. Money markets are now pricing in almost no prospect of further ECB cuts, while the Bank of Japan is expected to hike next week.
Among stocks to watch, BHP sold its Pilbara power stake to a BlackRock unit for $2 billion. Gold miner Ramelius Resources announced up to $250 million in share buybacks and increased its minimum dividend to 2 cents per share per year. GQG Partners reported funds under management rose to $US166.1 billion but posted net outflows of $US2.4 billion for November.
Flight Centre was upgraded to buy at Canaccord, while TPG Telecom completed the retail component of its reinvestment plan, raising approximately $73.4 million.
Commodities and currencies
Crude oil extended its decline as weakening demand signals dragged sentiment lower across the energy complex. The gasoline crack spread fell to its lowest level since February, while the diesel spread slid in tandem. President Donald Trump’s comments suggesting Russia holds the stronger position in the Ukraine conflict added further pressure, raising concerns that restrictions on Russian oil flows could ease. Brent crude fell 0.7 per cent to US$62.06 per barrel, while West Texas Intermediate dropped 0.9 per cent to US$58.33.
Copper retreated from record highs as traders turned cautious ahead of the Fed meeting. Signs of weak Chinese demand are building, with processing fees for copper rods used in electrical wiring slumping to a record low.
Gold edged up 0.5 per cent to US$4,212.67 an ounce as traders positioned for lower rates, while silver topped US$60. Iron ore dipped 0.2 per cent to US$101.85 per tonne.
The Australian dollar firmed 0.2 per cent to US66.39 cents, supported by the RBA’s hawkish stance. The euro was steady at US$1.1627, while the yen weakened 0.7 per cent to 156.94 per dollar. Bitcoin jumped 4.1 per cent to around US$93,880.
Economic Calendar
AU:
- Unemployment Change Nov 11:30
- Participation Rate Nov 11:30
US:
- FOMC Rate Decision 06:00
This article was written by Calvin Curdie, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
