2025 Weekly Update

Market update

The S&P 500 closed the week at 6,849.09, +3.73% higher. The Dow Jones closed at 47,716.42, +3.18%, with the Nasdaq higher by +4.91%. The volatility index VIX closed the week at 16.35, down from 23.43. The Euro Stoxx 600 rose +2.55%. 

The 10-year UST closed at 4.01%, down from 4.06% a week before. The yield curve is upward sloping with the yield spread between the 3-month and 10-year UST at 20bps. US Corporate Bond spreads: Investment Grade spreads narrowed -2bps at 83bps and High Yield spreads narrowed -16bps at 347bps. German 10-year Bunds yield closed at 2.69% down from 2.70% a week before. In Europe, Corporate Investment Grade spreads remained steady at 93bps and High Yield narrowed -5bps at 312bps.

The US Dollar Index (DXY) depreciated -0.72% last week and closed at 99.46. The Euro closed at 1.1598 (+0.74%); the Yen appreciated +0.15%, closing at 156.18 and the Swiss Franc appreciated +0.53%, closing at 0.804. Gold closed at $4,239.43, appreciating +4.29%. Oil was higher, Brent closed at $63.2 (+1.02%) and WTI at $58.55 (+0.84%).

Macroeconomy

Black Friday

The Black Friday spending numbers published over the weekend were respectable (but not spectacular), with Mastercard SpendingPulse (which is the most comprehensive gauge, not adjusted for inflation though) putting the aggregate number at +4.1% y-o-y, with online +10.4% and in-store +1.7% (while Adobe said online spending jumped 9.1% and RetailNext estimates in-store traffic fell 3.6%).

Fed Beige Book

The report largely confirmed economic activity was little changed since the previous report, according to most of the twelve Federal Reserve Districts, though two Districts noted a modest decline and one reported modest growth. So the existing consensus narrative around the economy is that: employment is at stall-speed (no major layoffs, however coupled with minimal hiring, as few firms noted that artificial intelligence replaced entry-level positions or made existing workers productive enough to curb new hiring), inflation is still elevated (although companies are eating some of the tariff impact by sacrificing margin rather than passing along the full tax to consumers), and aggregate growth is muted (consumer spending declined further, while higher-end retail spending remained resilient; auto dealers saw declines in EV sales following the expiration of the federal tax credit; and, community organizations saw increased demand for food assistance, due in part to disruptions in SNAP benefits).

US data

We saw mixed US data, most notably with November consumer confidence (88.7 vs 93.3 expected) slumping to a 7-month low (lowest level since the Liberation Day turmoil in April). The ADP’s weekly estimate of private payrolls remained in contractionary territory, with an average weekly decline of -13.5k in the four weeks ending November 8. The delayed data from September showed retail sales only up +0.2% that month (vs. +0.4% expected), whilst monthly PPI inflation was at +0.3% as expected. On the other hand, latest jobless claims suggest a still resilient labor market as initial jobless claims fell back to 216k in the week ending November 22 (vs. 225k expected).

The Fed

Governor Waller said on Fox Business that he was “advocating for a rate cut at the next meeting”. San Francisco Fed President Daly (non-voter) also supported a December cut in a Wall Street Journal interview, seeing the labor market as “vulnerable enough now that the risk is it'll have a nonlinear change”. Also, Kevin Hasset is seen by Trump’s advisers and allies as the frontrunner to become the next Fed Chair. Hassett is currently Director of the White House National Economic Council and has endorsed further rate cuts. For instance, he said on Fox News the previous week that he’d “be cutting rates right now” and “the data suggests that we should”. While we don’t have an exact date for the decision yet, Treasury Secretary Bessent said on CNBC there was a “very good chance” that President Trump would make the announcement before Christmas.

ECB Meeting

The ECB published the account from their last meeting in October, where they kept their deposit rate at 2%. It said that keeping rates “at their current levels would allow for more information to become available to assess the risk factors that the Governing Council had discussed.” There was an interesting discussion on “possible strategies for future monetary policy”. It was also said that one view expressed “that the rate-cutting cycle had come to an end”, but another view argued “that it was important to remain entirely open-minded on the possible need for a further rate cut”.

UK Budget

UK budget, the market reaction was generally quite positive, as Chancellor Reeves announced an increase in the fiscal headroom that was bigger than expected. So, on the current OBR (Office for Budget Responsibility) forecasts, the government now has £22bn of space against its fiscal rule that the current budget should be in balance by 2029-30. That’s more than double the £10bn of headroom in March, and above consensus expectations for around £15bn of headroom in this budget. And in turn, that reassured investors that a further round of fiscal tightening would be less likely, as the government now had a bigger margin for error against any kind of negative shock. Similarly on the gilt remit, the Debt Management Office announced they would sell £303.7bn of gilts in this fiscal year, beneath expectations for £308.1bn. The policy measures included a £26bn worth of tax rises by 2029-30, which were concentrated towards the latter part of the forecast. In economic terms, the biggest included an extension to the freeze on income tax thresholds for three years from 2028-29. In addition, they’re going to charge National Insurance (a payroll tax) on salary-sacrificed pension contributions, and there’s a 2-point tax increase on income from dividends, property and savings. As well as a mansion tax on properties above £2 million. Then there were a few spending increases as well, including the removal of the two-child limit on universal credit payments (a benefit for those on low incomes or out of work).

Swiss data

Switzerland's GDP contraction has been confirmed at -0.5% q-o-q in Q3, following a +0.2% growth in Q2. The contraction is largely attributed to the chemical and pharmaceutical industries, for which strong exports were followed by a compensatory decline. On a positive note, household consumption grew solidly again, although investment remained subdued. Looking ahead, surveys (Kof, PMI) suggest some improvement compared to Q3, though growth is expected to remain below trend. The next key data to watch will be the Swiss CPI (November print), which is set to be published this week.

Japan data

Core CPI in Tokyo increased by +2.8% y-o-y in Nov. (vs. 2.7% expected) and remained unchanged from Oct. The headline Tokyo CPI inflation held steady at 2.7% y-o-y. Industrial production rose by 1.4% m-o-m in Oct., contrasting with expectations of a -0.6% decline, and a slowdown from a +2.6% increase in September. Retail sales surged by +1.6% m-o-m in Oct. (vs. +0.8% expected), rebounding on the anticipation of tax cuts and more expansionary policies under the new administration.

China data

China’s official manufacturing PMI came in a couple of tenths below expectations at 49.2, marking the eighth successive month below 50. The non-manufacturing equivalent surprisingly fell from 50.1 to 49.5, the first reading below 50 for nearly three years. Consensus was at 50.0. Also, the RatingDog general manufacturing PMI, conducted by S&P Global, fell to 49.9 in November (compared to the expected 50.5).

Highlights

On rates

Last week, U.S. Treasuries rallied across maturities amid growing expectations of a December rate cut. The 2-year Treasury yield fell -1.9bps to 3.49%, the 10-year yield declined -5.0bps to 4.01%, and the 30-year yield dropped -4.9bps to 4.66%. These moves were driven by dovish commentary from Fed officials and reports suggesting Kevin Hassett as the frontrunner for Trump’s nomination to the Fed Chair position. Market pricing for a 25bps rate cut at the December 9-10 FOMC meeting surged from 63% to 83% last week, reflecting a sharp shift in sentiment. Meanwhile, the forward guidance on that day is foreseen to pivot in a hawkish direction, with the market expectations aligning for no further policy adjustments until the April or June meetings. Despite signs of a cooling labor market, the FOMC remains focused on inflation, which continues to exceed the 2% target—a concern that could intensify during the holiday season’s high consumer spending. In continental Europe, yields followed a similar trajectory to U.S. Treasuries as the 10-year Bund yield declined -1.4bps, OATs fell -6.3bps, and BTPs dropped -5.9bps. In the UK, 10-year gilt yields saw a sharper decline, falling -10.6bps over the week, following the Budget 2025 delivery coupled with a narrower issuance by the BoE. Central banks in South Korea and New Zealand signaled the end of their easing cycles. South Korea’s central bank held rates steady last Wednesday, as expected, and adopted a more hawkish tone by removing references to maintaining an easing bias. Regarding Japan, the latest economic data out of Japan, released Thursday night, coupled with BoJ Governor Ueda’s remarks, suggest that the central bank is seriously considering a policy rate hike. Ueda emphasized that the upcoming Monetary Policy Meeting (MPM) will assess domestic and global economic activity, price trends, and financial market developments before deciding on the appropriateness of raising rates, leading market expectations for a December hike to surge, with pricing now reflecting an 83% probability, up from just under 60% earlier. Notably, 2-year JGB yields have risen by +5bps, breaching the 1% mark for the first time since June 2008, and 10-year JGBs are up +6.7bps.

Earnings

With the earnings season nearing its end for this quarter, more than 95% of the companies in the S&P 500 have reported their actual results for Q3 2025. Little to no changes derive from last week’s low volume of earnings releases. A few takeaways from this season include on the positive side that 76% of companies have exceeded revenue estimates, surpassing the 1-year (67%), 5-year (70%), and 10-year (66%) averages, while 24% reported below estimates, and none met expectations. At the sector level, Information Technology (93%) and Health Care (84%) sectors led in revenue beats, while Materials (58%) and Communication Services (58%) lagged. On average, companies reported revenues 2.0% above expectations, exceeding the 1-year average (+1.2%) but slightly below the 5-year average (+2.1%). On the market reactions, these have been slightly harsher than precedents. Market reactions have been mixed, with positive earnings surprises leading to an average price increase of +0.4%, below the 5-year average of +0.9%, while negative surprises triggered a sharper average price decline of -5.0%, significantly worse than the 5-year average of -2.6%. In the week ahead, key reports include MongoDB (Monday), Salesforce, and Snowflake (Wednesday).

What to watch

• Monday: US Manufacturing PMI and ISM; UK Consumer Credit; Canada, Eurozone, Korea & China Manufacturing PMI
• Tuesday: Eurozone CPI and Unemployment Rate; UK House Prices; Japan Consumer Confidence Index; Korea CPI
• Wednesday: US Industrial Production, ISM Services, ADP Report, Import & Export Prices Index; Eurozone PMI and PPI; Switzerland CPI; China Services PMI; Korea GDP; Australia GDP
• Thursday: US Initial Jobless Claims; UK & Germany Construction PMI; Eurozone Retail Sales; Japan Household Spending
• Friday: US PCE, University of Michigan Survey; France Trade Balance and Industrial Production; Taiwan CPI and PPI

* Previous U.S. federal data releases are currently being rescheduled.