Little to shift broader market narrative as 2025 comes to a close

EU Mid-Market Update: Little to shift broader market narrative as 2025 comes to a close; US dollar on track for worst year since 2017, while gold is on track for a record annual gain.

Notes/observations

- European equities are lower, with several major markets closed (UK and Ireland close early at 12:30 GMT and parts of continental Europe at 13:00 GMT). All markets will be closed tomorrow.

- Ukraine is seeking to limit diplomatic fallout from Russian claims of a drone attack on Putin’s residence, US look to uncover all details before coming to conclusion. Impact on the peace talks is unclear. EU leaders will meet again next week on Jan 3rd and Jan 6th to continue efforts to end war.

- Precious metals volatility returned as year-end positioning ramps up. Silver futures down nearly 10%, Gold spiked lower and bounced, Platinum was down >9.0% at one point. Gold is still on track for record annual gain.

- FOMC Dec minutes showed a divided Fed with a general expectation that further rate cuts could come in 2026 if disinflation continues.

- Chinese tech firms have reportedly placed orders for 2M H200 AI chips for 2026 delivery, significantly exceeding Nvidia's current inventory of approximately 700K units. To meet this demand, Nvidia has priced the specific H200 variants for the Chinese market at around $27,000 per unit and reportedly asked TSMC to ramp up production of these previous-generation chips starting in Q2 2026. This significant order expansion coincides with ByteDance's reported plan to invest $14B in Nvidia hardware next year, despite earlier uncertainty regarding Chinese import limits and rising competition from domestic chipmakers like Cambricon.

- The Truflation US Aggregated Inflation Index has dropped to 2.05% (v 2.5% m/m), driven primarily by cooling rental agreements and recent price declines in food, alcohol, and gasoline.

- TTN Early 2026 risk radar includes: US jobs report on Friday; Pending Supreme Court decision window on IEEPA legality, Trump’s Fed Chair pick, and the Fed’s Miran term ending Jan 31 could reprice policy uncertainty, while earnings season from mid-Jan will test AI and macro narratives against real margins and demand. Other near-term catalysts: OpenAI’s Jan model drop and a potential Oracle jumbo ~$38B debt offering, plus the Jan 30 US government funding deadline, create a tight cluster of headline and liquidity risk into month-end.

- Asia closed mixed with Nifty50 outperforming +0.7%. EU indices -0.5% to +0.1%. US futures -0.1% to -0.4%. Gold -0.2%, DXY +0.1%; Commodity: Brent +0.1%, WTI +0.1%; Crypto: BTC +0.9%, ETH 0.0%.

- Lastly, Happy New Year to you all from EU team, we wish you the best for 2026.

Asia

- South Korea Dec CPI M/M: 0.3% v 0.2%e; Y/Y: 2.3% v 2.3%e; CPI (ex-food/energy) Y/Y: 2.0% v 2.0%e; BOK unlikely to be moved from current steady rate path.

- China Dec Manufacturing PMI (Govt Official): 50.1 v 49.2e; Non-manufacturing PMI: 50.2 v 49.6e.

- China Dec RatingDog PMI Manufacturing: 50.1 v 49.8e.

Global conflict/tensions

- Ukraine said to have tried to attack Putin's residence in Novgorod region; Russia planned to change its position, but would continue to negotiate

- Iran reportedly fired test ballistic missile amid threat of Israel taking further action against Iranian missile capabilities

- Iran govt forces said to have begin shooting protesters as countrywide uprising threatened Islamic regime.

Americas

- FOMC Dec Minutes noted that would be appropriate to keep policy steady for some time after the Dec cut. Most participants judged further easing would be appropriate if inflation declined over time. A few who supported a rate cut in Dec could have supported no change.

Energy

- Weekly API Crude Oil Inventories: +1.7M v +2.4M prior.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [FTSE -0.10% at 9,931.25, CAC-40 -0.54% at 8,123.66, IBEX-35 -0.19% at 17,321.88, S&P 500 Futures -0.27%].

Market Focal Points/Key Themes: European markets limped to the 2025 finish line with a mixed performance, as defense stocks rallied while the FTSE and CAC drifted lower in thin, shortened trading. Global liquidity is now drying up for the New Year's break, with exchanges closing early today and remaining dark until Friday's open.

Equities

- Energy: Maurel Et Prom [MAU.FR] +6.0% (divestment).

- Technology: ASML [ASML.NL] -0.5% (Chinese tech firms have reportedly placed orders for 2 million H200 AI chips for 2026 delivery, significantly exceeding Nvidia's current inventory of approximately 700,000 units).

Speakers

- South Korea Fin Min Koo stated that the global environment was likely 'challenging' in 2026; Sold net $1.75B to curb FX volatility. To ensure stable price management.

- Indonesia Fin Min: Still discussing coal export tax (previously proposed at 1-5% tax).

- China State Planner: Vowed to stabilize price and ensure supply of grains.

- China MOFCOM announced ruling on probe of imported beef; To take measures from 2026 and impose 55% of additional tariffs on certain beef imports for three years.

- China's military concluded drills around Taiwan.

Currencies/fixed Income

- USD was a tad firmer in quiet year-end trading. Greenback ending 2025 with its worst performance since 2017. Dealers cited the recent FOMC Dec minutes that suggested caution over additional rate cuts helped to end the year on a positive note. Most officials saw more rate cuts in 2026 if inflation decline continued. Fed members said to seek caution on path as divisions remained.

- EUR/USD at 1.1730 by mid-session. The key levels going into 2026 are 1.1500 for the floor and 1.2000 as key resistance.

- USD/JPY at 156.60 by mid-session. Markets will gauge the 160 area as ley resistance as 2026 begins. Yen facing weakness over fiscal concerns as the new govt embarked on stimulus in recent months.
- 10-year German Bund yield last at 2.85%, France 10-year Oat at 3.56% and 10-year Gilt yield at 4.48% 10-year Treasury yield: 4.11%; 10-year JGB: 2.05%.

Economic data

- (FI) Finland Nov Retail Sales Volume Y/Y: 2.8% v 2.0% prior.

- (ZA) South Africa Nov M3 Money Supply Y/Y: 8.3% v 7.5% prior; Private Sector Credit Y/Y: 7.8% v 7.3% prior.

- (FI) Finland Oct Final Trade Balance: €0.2B v €0.2B prelim.

- (TR) Turkey Nov Final Trade Balance: -$8.0-B v -$7.8B prelim.

- (CH) Swiss Q3 Foreign Exchange Transactions (CHF): 0.1B v 5.1B prior.

- (HK) Hong Kong Nov M3 Money Supply Y/Y: 4.5% v 3.5% prior; M2 Money Supply Y/Y: 4.5% v 3.5% prior; M1 Money Supply Y/Y: 14.9% v 12.3% prior.

- (CN) China Q3 Final Current Account Balance: $198.7B v $195.6B prelim.

- (PL) Poland Dec Preliminary CPI M/M: 0.0% v 0.1%e; Y/Y: 2.4% v 2.5%e.

- (CZ) Czech Nov M2 Money Supply Y/Y: 3.3% v 2.8% prior.

- (GR) Greece Oct Retail Sales Value Y/Y: +4.2% v -1.7% prior; Retail Sales Volume Y/Y: +5.3% v -0.7% prior.

Fixed income issuance

- None seen.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (IN) India Nov YTD Fiscal Deficit (INR): No est v 8.251T prior.

- 06:00 (PT) Portugal Dec Preliminary CPI M/M: No est v -0.3% prior; Y/Y: No est v 2.2% prior.

- 06:00 (PT) Portugal Dec Preliminary CPI EU Harmonized M/M: No est v -0.8% prior; Y/Y: No est v 2.1% prior.

- 06:01 (NZ) New Zealand Dec Cotality Home Value M/M: No est v 0.0% prior.

- 07:00 (US) MBA Mortgage Applications w/e Dec 26th: No est v -5.0% prior.

- 07:00 (CL) Chile Nov Retail Sales Y/Y: 6.2%e v 8.4% prior; Commercial Activity Y/Y: No est v 7.1% prior.

- 07:00 (CL) Chile Nov Industrial Production Y/Y: No est v -0.4% prior; Manufacturing Production Y/Y: 0.0%e v -0.4% prior; Total Copper Production: No est v 458.4K prior.

- 07:00 (ZA) South Africa Nov Trade Balance (ZAR): No est v 15.6B prior.

- 08:00 (UK) No Daily Baltic Dry Bulk Index.

- 08:30 (US) Initial Jobless Claims: 220Ke v 214K prior; Continuing Claims: 1.91Me v 1.923M prior.

- 10:00 (CO) Colombia Nov National Unemployment Rate: No est v 8.2% prior; Urban Unemployment Rate: 7.7%e v 8.0% prior.

- 10:00 (MX) Mexico Nov Net Outstanding Loans (MXN): No est v 7.16T prior.

- 10:30 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 17-Week Bills.

- 11:30 (US) Treasury to sell 4-week and 8-week Bills.

- 19:00 (KR) South Korea Dec Trade Balance: $10.0Be v $9.7B prior; Exports Y/Y: 8.0%e v 8.4% prior; Imports Y/Y: 1.9% v 1.1% prior (revised from 1.2%).