Financial Markets
The first week of December saw stock markets behave largely as investors had expected, with analysts focusing on published macroeconomic data to interpret the Federal Reserve’s next moves. The decision on interest rates, along with commentary on the state of the U.S. economy and labor market, will be the main short-term catalysts.
But the truth is, there was no need to wait for the official announcement to see major asset managers reposition themselves in bond markets. Weekly employment data and the PCE released at the end of the week once again highlighted the solid health of the U.S. economy—something that has driven a significant rise in bond yields, especially in the long end of the curve. The surge in both public and private issuance (funding for AI investments and public deficits) is concentrating in the middle and long segments of the curve, prompting investors to demand a higher premium for lending at longer maturities. On top of that, the idea seems to be returning that interest rates may stay elevated for longer (neither inflation nor economic growth are cooling), a factor that supports higher yields.
It seems quite likely that the Fed will cut rates by 25 bps at its upcoming meeting on Wednesday the 10th, but what has changed is the outlook for how much and how often it might act in the future. We had already mentioned that markets were pricing in as much as 50 bps more in cuts throughout 2026 than the Fed was signaling, and that any positive macroeconomic news could trigger an adjustment in expectations—a movement that has indeed been taking shape over the past few sessions. In any case, data could easily reverse the trend at any time, especially if the labor market deteriorates or if a sharp drop in consumption is anticipated.
Equity markets posted broad-based gains once again, although this time they were less exuberant—with the exception of the Ibex 35, which climbed +1.93% to a new all-time high at 16,844.50 points after Inditex’s strong results and updated guidance. In the United States, the S&P 500 rose 0.31%, finishing the week at 6,870.40 points, while the Nasdaq 100 closed at 25,692.05, up 1.01%. In Europe, the Euro Stoxx 50 gained 0.97% to end at 5,723.93 points.
Government bonds saw yields rise significantly throughout the week due to the shift in expectations, a move that continued during Monday’s session. The 10-year Treasury rose 12 bps to end at a yield of 4.14%. European debt, dragged by the U.S., also saw double-digit increases: the Bund closed at 2.80% and the Bono at 3.27% (3.35% as of Monday’s close).
In real-asset markets, gold slipped slightly (-0.28%) to close at USD 4,243/oz, reflecting expectations that rates won’t fall as much or as quickly as once anticipated. Silver, meanwhile, posted a sharp rise and reached new all-time highs at USD 59.05/oz (+2.69%). The metal has recently seen a notable upward revision in price targets, given its critical role in photovoltaic energy and battery development. Brent crude rose 0.87% to USD 63.75/bbl in a week when the U.S. dollar weakened again against major currencies.
Europe’s macroeconomic data didn’t impress, but they weren’t gloomy either. i) The manufacturing PMI dipped to 49.6, while the services PMI rose to 53.6; ii) CPI increased one-tenth to 2.2%; iii) the unemployment rate rose to 6.4%; iv) retail sales were flat in November; and v) GDP growth of 1.4% for Q3 2025 was confirmed. In the U.S., i) PMIs showed the same pattern, but manufacturing remained in expansion territory at 52.2; ii) September PCE came in at 2.8%, matching the core reading and perfectly aligned with expectations; iii) the Atlanta Fed’s GDPNow forecast for Q4 2025 was revised down to 3.5%; and v) the University of Michigan’s survey improved both in consumption and inflation expectations.
This week, markets will be watching the Fed’s decision (a 25-bp cut is expected) and will pay close attention to its economic projections and the language used to justify the move—a message that could signal the path of future actions. Another key release this week came yesterday, Monday: China’s November trade data. Exports beat expectations (+5.9%), while imports lagged (+1.9%), pushing the trade surplus above USD 111 billion, clearly higher than the roughly USD 90 billion of the previous two months. China is not taking off, but these figures do not suggest that its economy is worsening.
The quote:
We wrap up with a line from British professional boxing trainer Michael Watson, awarded the MBE:
“Strong people don’t knock others down—they help them get back up.”
Summary of the performance of main financial assets (12/09/2025)
