Global Market Trifecta: Inflation Eases Boosting Stocks, Commodities Rise Together, FOMC Decision Next Week

Investors preparing breakfast the night before need to pay attention. Over the past week, global markets have shown a diversified upward trend. The three major US stock indices all rose, commodity futures repeatedly hit new highs, and cryptocurrencies also rebounded. This reflects market expectations of easing inflation and anticipation of the Federal Reserve’s policy shift next week.

Inflation data warms the market, Fed rate cut expectations rise to 87%

Last Friday, the US released the September core PCE Price Index, which increased by 0.3% month-over-month, and the annual rate fell from 2.9% in August to 2.8%. This inflation data, favored by the Federal Reserve, shows that price increases are moderating. The market interprets this as a “one-time” impact of tariffs on prices rather than a long-term structural pressure.

Based on this data, traders estimate an 87% probability that the Federal Reserve will cut interest rates at next week’s policy meeting. The decision for the departing Fed Chair Powell has become clearer—against the backdrop of significantly falling inflation and signs of cooling in the labor market, the case for rate cuts is strong.

Meanwhile, the US December University of Michigan Consumer Sentiment Index rose from 51 in November to 53.3, reaching a five-month high. Although still low in absolute terms, signs of an upward breakout have emerged, reflecting improving consumer expectations for the economic outlook.

Stock markets surge, commodities rally collectively

Expectations of rate cuts have improved, directly boosting risk assets. The three major US stock indices all closed higher, with the Dow Jones Industrial Average up 0.22%, the S&P 500 up 0.19% and rising for four consecutive days, and the Nasdaq Composite up 0.31%. Tech giants like Meta rose 1.8%, Alphabet gained 1.2%, while Nvidia declined 0.5%. The China Golden Dragon Index also rose 1.29%, indicating easing sentiment towards Chinese assets.

European stocks also advanced, with Germany’s DAX 30 up 0.61%, the UK FTSE 100 up 0.45%, and France’s CAC 40 up 0.09%.

Commodity markets are lively. Gold, though slightly down, traded around $4,197.4 per ounce, down 0.25%, but still oscillating near high levels. Notably, LME copper hit a new high, with a maximum increase of 2.2%, at $11,705 per ton; silver briefly surged to a daily high of $59.33, setting a new record. In energy, WTI crude oil rose 0.74% to $60.14 per barrel.

Crypto rebound, Bitcoin breaks above $90,000

The crypto market has seen a rebound. Bitcoin rose 0.98% in 24 hours, currently around $87.83K, testing the $90,000 level. Ethereum increased 1.14% in 24 hours, now at $2.96K. This rebound injects new vitality into the recently corrected crypto market.

JPMorgan research indicates that if Bitcoin’s trading pattern resembles gold, its theoretical price could approach $170,000, implying a significant upside potential of 84% over the next 6 to 12 months compared to current levels. JPMorgan believes Bitcoin’s future price will be influenced by factors such as whether Strategy continues to hold Bitcoin and whether MSCI excludes it from indices.

Bank of Japan faces decision, global central bank policy divergence intensifies

Bloomberg quoted sources saying that Bank of Japan officials are preparing to raise interest rates later this month, provided the economy or financial markets are not significantly impacted during this period. Officials expect a 25 basis point hike to 0.75% at the December 18-19 meeting, reaching the highest level since 1995. BOJ Governor Ueda hinted in a speech on Monday that the Policy Board will make appropriate decisions on rate hikes, similar to signals given before the January rate increase this year, significantly boosting market expectations for tightening.

In contrast, ECB Governing Council member Villeroy expressed a more dovish stance. He stated that the ECB faces greater risks of inflation slowing rather than accelerating, and if inflation remains below 2%, the bank will act. Villeroy warned that a strong euro and falling Chinese import prices could reduce inflation by 0.2 percentage points by 2027, and further slowing wage growth could add downward pressure.

The divergence in policies among major global central banks is intensifying, which will have complex interactions on exchange rates, bond markets, and equities.

Bond markets under pressure, government bond yields rise to high levels

As global central bank policies become more complex, government bond yields are generally rising. The US 10-year benchmark Treasury yield rose to around 4.14%, up 4 basis points from the previous trading day. Japan’s 10-year government bond yield briefly hit 1.97%, and Germany’s 10-year yield increased to 2.81%.

Behind this bond market adjustment, there are concerns—if yields continue to climb without stabilizing, it could trigger systemic market risks. Rising financing costs may pressure corporate profits and valuations, representing a key risk to monitor.

Corporate developments: new patterns in the tech industry emerge

SpaceX’s valuation surpasses $800 billion, overtaking OpenAI to become the most valuable private US company. According to the Wall Street Journal, Musk’s rocket manufacturer is negotiating to sell shares at this valuation, doubling from its previous secondary market valuation of $400 billion. SpaceX plans an IPO in late 2026 or 2027.

In AI, JPMorgan assesses that the release of DeepSeek V3.2 marks a second wave of “impact” in China’s AI market. The new model, with API price cuts of 30% to 70% and longer context reasoning that could save 6 to 10 times the workload, benefits most stakeholders in China’s AI ecosystem, including Alibaba, Tencent, Baidu, and cloud operators and AI chip manufacturers. Notably, V3.2 shifts towards domestic hardware independence, supporting domestic chips like Huawei Ascend, Cambrian, and Hygon from Day-0.

In finance, Citigroup’s stock price ratio reached 1 for the first time since September 2018, reflecting significant progress in CEO Jane Fraser’s transformation plan. Through a series of upgrades, backend improvements, layoffs, and exit from international retail, Citi has gradually shed its lagging position relative to Wall Street peers. Citi’s stock has risen 55% this year, outperforming all other Wall Street firms.

Mixed signals from consumer confidence data

The US December Consumer Confidence Index rose 2.3 points to 53.3 compared to November, though within the margin of error, structural improvement is noteworthy. The increase was mainly driven by younger consumers, with personal financial expectations rising 13%, and improvements across all age, income, education, and political groups.

However, labor market expectations have slightly improved but remain relatively subdued. High price burdens remain a major pressure cited by consumers, with the personal financial expectations index still nearly 12% below early January levels. One-year inflation expectations fell from 4.5% in November to 4.1% in December, the lowest since January 2025, but short-term inflation expectations remain above the 3.3% level of January.

Forex and yen fluctuations warrant attention

The US dollar index declined 0.08%, to 98.9. USD/JPY rose 0.14%, EUR/USD fell 0.01%. The Japanese government expressed concern over rapid and unilateral forex market fluctuations and is prepared to take appropriate measures if necessary, hinting at possible intervention to curb excessive yen appreciation.

Outlook: next week’s Federal Reserve decision is a key turning point

Next week will be a focal point for global financial markets. The Fed’s policy decision, the BOJ’s rate hike trajectory, and the release of economic data from various countries will shape future market directions. Currently, markets have priced in an 87% chance of rate cuts by the Fed. If the Fed cuts rates as expected, it will provide new support for global risk assets. However, rising government bond yields also warn of potential bond market adjustments. Investors preparing breakfast the night before need to find a balance between optimism and caution.