Global DM 2025 W51 Recap
With US unemployment rising to 4.6% and business activity hitting a six-month low, can the market realistically deliver the forecasted 15% earnings surge and record margins projected for 2026?
Markets Narratives
Macro Overview
Global markets concluded the year's final full trading week with mixed signals, reflecting a nuanced economic landscape. In the US, cooling inflation provided a positive impulse, yet job market data delivered a mixed picture with slower job additions but rising unemployment. Business activity growth also showed signs of moderation. Europe demonstrated steady economic growth, while Japan experienced a market decline despite a central bank rate hike, partly due to concerns over AI stock valuations. China continued to grapple with lackluster domestic demand and persistent deflationary pressures, with key indicators underscoring the economy's reliance on exports.
Policy Insights
Monetary policy remained a focal point, with varied approaches across major economies. The US Federal Reserve's prior week's rate cut set a dovish tone, while the European Central Bank maintained its deposit rate but left flexibility for future adjustments based on data. The Bank of England, however, opted for a quarter-point rate cut, driven by slowing inflation and a weakening labor market. In contrast, the Bank of Japan made a widely anticipated 25 basis point rate hike, its first significant move in decades, signalling a shift towards normalization. China's leaders indicated a cautious stance on further aggressive stimulus, planning to use interest rate and reserve requirement cuts flexibly while focusing on manufacturing-led growth.
