United States
The U.S. Federal Reserve reduced its benchmark interest rate by 0.25% as widely anticipated, but comments signalling a slowdown in the pace of future rate cuts caused U.S. markets to reverse earlier gains and move lower. The Dow Jones Index fell 664 points, or 1.39%, to be at 42,785.32, marking its 10th consecutive decline—its longest losing streak since 1974. The Nasdaq Composite dropped 540 points, or 2.68%, trading at 19,571.89, while the S&P 500 declined by 120 points, or 2.01%, to 5,929.78, with all sectors in the index posting losses.
The Federal Reserve adjusted its overnight borrowing rate to a target range of 4.25–4.50%. Alongside the decision, the Fed released its updated “dot plot,” which reflects the anticipated rate trajectory among Federal Open Market Committee (FOMC) members. This chart showed a significant shift, with members now expecting two rate cuts in 2025, compared to four cuts projected in the previous meeting. This revision removed any expectation of a January rate cut, signalling a more cautious monetary approach. The Fed’s stance is potentially being influenced by possible economic impacts from major policy changes expected under the incoming Trump administration, which could affect inflation and employment.
Fed Chair Jerome Powell sought to reassure markets, emphasizing that the Fed would “react to data as it comes.” He described the updated dot plot as a “general sense of what the committee thinks is likely to be appropriate,” but his comments did little to ease market concerns.
The uncertainty prompted broad-based selling across equities. Tesla fell 8.35% to $439.50 (-$41.47), while Rivian, a competing EV manufacturer, plummeted 11.39% following broker downgrades. Alphabet (Google) declined 3.02% to $191.61. Nvidia, however, bucked the trend, lower by only 0.15% to $130.39 after a rocky few sessions, though it closed off intraday highs when it had gained more than 4%.
Banks also faced significant pressure, with major financial institutions posting declines. Citigroup dropped 3.44%, Goldman Sachs fell 3.93%, and JP Morgan lost 2.58%,
The U.S. dollar surged on the news, with the dollar index climbing over 1% to 108.14—its highest level since late 2022. The greenback strengthened to 1.0354 against the euro and 154.65 against the yen. Bond yields spiked as well, with the 10-year Treasury note rising 11 basis points to 4.50%, while the 2-year note increased 11 basis points to 4.35%, marking six-month highs.
The macroeconomic concerns overshadowed individual company developments, leading to a risk-off sentiment across markets.
Note: U.S. market prices are as of 7:30 a.m. Sydney time (3:30 p.m. NY).
Europe
The Euro Stoxx 600 edged higher on Wednesday in cautious trading as investors awaited the U.S. Federal Reserve’s rate decision. The index rose by 0.77 points, a 0.15% increase, closing at 514.43. Six sectors advanced while five declined, with the technology sector leading the gains, up 1.33%.
On individual exchanges, the French CAC 40 added 18.92 points (+0.26%) to close at 7,384.62. The German DAX remained largely flat, losing 3.80 points to finish at 20,242.57. Similarly, the UK’s FTSE 100 saw minor movement, rising by 3.91 points (+0.05%) to end the day at 8,199.11.
The technology sector was buoyed by semiconductor stocks, with BE Semiconductor up 2.37% and ASML gaining 1.98%, as the sector mirrored positive sentiment from the U.S.
In the automotive sector, Renault surged 5.21% on reports suggesting a potential closer alliance between Nissan and Honda in Japan. Nissan is Renault’s largest shareholder. Shares of competitor, Volkswagen also performed well, climbing 1.7%.
In other corporate developments, Italy’s UniCredit announced it had increased its stake in Commerzbank to 28% obtained via the use of derivative contracts. Commerzbank shares gained 1.37%, while UniCredit also rose 1.31%.
On the economic front, UK inflation climbed to an eight-month high of 2.6%, ahead of the Bank of England’s policy meeting where interest rates are expected to remain unchanged. Meanwhile, eurozone inflation data for November was revised downward to an annual rate of 2.2%.
Bond yields were mixed across the region. In Germany, the two-year yield fell by 2 basis points to 2.02%, while the 10-year yield edged up by 1 basis point to 2.24%. In the UK, the 10-year yield increased by 3 basis points to 4.55%, while the two-year yield remained steady at 4.45%.
Australia
Changing expectations for future U.S. interest rate cuts triggered a sharp decline in ASX200 futures during overnight trading. The ASX200 futures fell by 108 points, representing a drop of 1.30%. Meanwhile, a surging U.S. dollar pushed the AUD/USD exchange rate down to 0.6225, its lowest level since late 2022.
The Australian share market fluctuated between gains and losses yesterday, ultimately closing with a slight 4.6-point decline (-0.06%) at 8,309.40. This range-bound trading was evident across sectors, with six sectors gaining and five losing ground. The industrial sector outperformed, adding 0.77%, while most other sectors remained within a 0.50% range of gains or losses.
The industrial sector was again led by Transurban, which rose 1.90% (25 cents) to close at $13.44. Computershare also gained 1.84%, ending at $33.78, with significant trading volume recorded over the past two days.
Healthcare performed positively, although individual stock movements were mixed. Pro Medicus continued its upward trend, surging 2.25% to trade at $263.02, as more brokers issued buy recommendations citing broader adoption of its medical imaging technology. Telix Pharmaceuticals jumped 3.21% to close at $25.74, while ResMed fell 1.02% (39 cents) to end the day at $37.88.
The financial sector displayed mixed results. Westpac gained 0.64% to close at $32.85, whereas NAB dropped 0.52% to trade at $37.95. During the bank’s AGM on Wednesday, CEO Andrew Irvine noted that Australia’s economy remains in reasonable shape, expressing optimism about its long-term outlook. He also predicted rate cuts in the first half of 2025. Meanwhile, Insignia Financial plunged 4.17% to $3.45 after rejecting a takeover bid from Bain Capital. The board deemed the $4.00 per share offer as lacking “fair value” and not in shareholders’ best interests.
Treasurer Jim Chalmers announced revised budget forecasts over the next four years, projecting deficits $22 billion higher than previously estimated. He attributed the increase to unavoidable spending on the Pharmaceutical Benefits Scheme (PBS) and medical bulk billing costs.
In the bond market, Australian yields edged slightly lower. The 10-year bond yield fell by 1 basis point to 4.28%, while the 2-year yield declined by 3 basis points to 3.86%.
Commodities
Oil prices rose on Thursday, absorbing the impact of the US rate cut and subsequent analysis suggesting only two rate cuts are expected in 2025. The West Texas Intermediate (WTI) contract increased by 0.88%, settling at US$70.70 with a gain of 62 cents. Meanwhile, the Brent contract rose by 0.44%, reaching US$73.51 with an additional 29 cents. The Energy Information Administration (EIA) reported a weekly decline in US crude and refined product inventories, alongside an increase in US crude exports, which averaged 1.8 million barrels per day. Earlier in the day, Kazakhstan announced its intent to comply with OPEC+ output restrictions for the coming year, despite previously stating plans to raise production contrary to the group’s agreements.
Gold saw accelerated losses following the Federal Reserve announcement, with the precious metal down 0.90% in the afternoon session, trading at US$2,624.05—a decrease of US$22.62. Silver also declined, dropping 1.37% to US$30.13. Bitcoin consolidated after hitting a record high earlier in the week, falling by US$2,413 to US$103,995, marking a 2.2% decline. The pullback occurred amid reports that President-elect Trump met with industry leaders to discuss establishing a strategic Bitcoin reserve.
Iron ore prices fell, trading at US$102.30 in New York, representing a 1.5% decline over the past 24 hours. The drop began during Asian trading hours, driven by concerns over Chinese steel demand and broader regional growth outlooks. In London, ahead of the US Federal Reserve’s rate decision, copper prices rose by US$39 (+0.43%) to reach US$9,028 per tonne.
Economic Calendar
AU:
- Consumer Inflation Expectations (Dec) – 11:00am
Japan:
- Bank of Japan Interest Rate decision – 11:00pm
UK:
- Bank of England Interest Rate Decision – 11:00pm
US:
- GDP Growth (Sep Qtr.) – 12:30am
- Philadelphia Fed Manufacturing Index (Dec) – 12:30am
- Conference Board Leading Indicators (Dec) – 2.00am
- Existing Home Sales (Nov) – 2.00am
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
