Market Quick Take - 15 December 2025

SAXO

Summary:

Confidence among Japan's large manufacturers hit a four-year high, with the BOJ's quarterly Tankan business survey index rising to 15 from 14 in September, while large non-manufacturers held at 34, near early-1990s highs.

Market drivers and catalysts

· Equities: Wall Street slides on artificial intelligence margin worries, Europe slips with tech drag, while Asia firms on China fiscal support hopes

· Volatility: VIX mid-teens, event-heavy week, macro and central banks in focus

· Digital assets: BTC/ETH stable, ETHA weaker, UK crypto regulation, MSTR pressure

· Fixed Income: US yield curve steepens to new 2025 extreme as long dated US treasuries under pressure.

· Currencies: Yen firms Monday ahead of Friday's key Bank of Japan meeting. The US dollar quiet.

· Commodities: Metals rebound after equity-led correction; oil steadies above key support

· Macro events: US Dec Empire Manufacturing & NAHB Housing Market Index

Macro headlines

· Confidence among Japan's large manufacturers hit a four-year high, with the BOJ's quarterly Tankan business survey index rising to 15 from 14 in September, while large non-manufacturers held at 34, near early-1990s highs. A result that strengnthens the case for the BOJ to raise interest rates this week.

· The four-year downturn in China's home prices, which has weighed on consumer sentiment and become a hurdle for economic growth, continued in November, with new-home sales and resale home values both falling. Officials are considering measures including mortgage subsidies and tax rebates to address the crisis. Retail sales and industrial production, also for November, both rose by less than expected, up 1.3% and 4.8% YoY versus expectations of 2.9% and 5%.

· Trump stated he is leaning towards Kevin Warsh or Kevin Hassett to lead the Fed and believes the next Fed Chair should consult him on interest rates.

· Fed comments on recent rate change: Goolsbee dissented from last week's cut, preferring to await more inflation data despite expecting 2026 cuts, while Paulson was more dovish, prioritising labour market risks and seeing inflation easing next year. Cleveland Fed's Hammack meanwhile said policy is around neutral, but she would prefer a slightly more restrictive stance to keep pressure on inflation, which remains above target and has been stuck near 3%. San Francisco Fed's Daly ultimately backed this week's rate cut despite calling it a difficult decision.

Equities

· USA: The S&P 500 fell 1.1% to 6,827.41, the Dow slipped 0.5% to 48,458.05, and the Nasdaq dropped 1.7% to 23,195.17. Tech led losses as investors worried that the artificial intelligence (AI) build-out is starting to squeeze margins, rather than lift them. Broadcom sank 11.4% after warning that more AI system sales mean thinner margins, while Oracle slid 4.6% on fresh concerns about data center timing and heavy spending. Nvidia fell 3.3% in the chip selloff, while Lululemon jumped 9.6% on upbeat guidance and a CEO transition; next up is the delayed run of U.S. data, including retail sales on 16 December.

· Europe: The STOXX 600 fell 0.5% to 578.24 and the Euro STOXX 50 eased 0.6% to 5,720.71, while the FTSE 100 slipped 0.6% to 9,649.03. Morning gains faded as U.S. tech weakness revived artificial intelligence valuation worries. ASML dropped 1.7% and Schneider Electric fell 1.6%, while UBS rose 2.5% on hopes Swiss capital rules may be softened and Lufthansa climbed 4.8% after a broker upgrade. Attention now turns to this week's European Central Bank and Bank of England decisions later this week.

· Asia: Asia finished mostly higher on Friday: Japan's Nikkei 225 rose 1.4% to 50,836.55, Hong Kong's Hang Seng gained 1.8% to 25,976.79, and China's CSI 300 added 0.6% to 4,580.95. Sentiment improved after Beijing signalled a more proactive fiscal stance for 2026 and markets digested last week's Fed rate cut. Alibaba climbed 2.3% and Xiaomi rose 1.9% as internet and consumer tech rebounded, while China Life Insurance jumped 5.5% as financials outperformed. This week's key watchpoints are fresh China data and the Bank of Japan meeting on 18–19 December.

Volatility

· Volatility picked up slightly as investors prepare for a packed macro week. The VIX rose 5.99% to 15.74, while short-term fear gauges like VIX1D (+16.07%) and VIX9D (+8.19%) jumped more noticeably, hinting at near-term nerves. Despite the SPX dropping -1.07% to 6,827, options positioning suggests no panic, just preparation.

· This week's SPX expected move into the 19 Dec expiry is ±96.5 points (~1.41%), based on straddle pricing around the 6,825 strike. Skew check: the options chain remains moderately inverted, with calls near the money trading richer than puts, a possible signal of interest in upside hedges, or call overwriting.

· Macro triggers include U.S. CPI (Thursday), core PCE (Friday), and four central bank rate decisions (BoE, ECB, BoJ, Fed follow-through). With liquidity drying into year-end, even modest surprises may spark disproportionate moves. Watch central bank tone and inflation surprises for volatility spikes.

Digital Assets

· Bitcoin held ground near $89.6k (+1.63%), while ether rebounded to $3,123 (+1.97%), showing resilience despite a broader pullback in crypto equities. Solana outperformed at +2.05%, while XRP was more muted at +0.93%. The move came as politics increasingly dominates the crypto narrative, with UK regulators setting a timeline to integrate crypto into mainstream finance by 2027.

· ETF sentiment diverged. IBIT fell 1.73%, while ETHA dropped 4.55%, despite recent net inflows (latest reported +$51m IBIT, +$23m ETHA on 12 Dec). This points to rotation, not capitulation. Crypto treasury names like MSTR (-3.74%) and CIFR (-9.69%) underperformed, echoing ETF weakness. Concerns persist over MSTR's continued inclusion in the Nasdaq 100 amid its high BTC beta.

· Politics, liquidity, and regulation, not just halving cycles, are setting the tone heading into 2026.

Fixed Income

· The focus in US treasuries is on the steepening yield curve as further Fed rate cuts are seen next year and the 2-year benchmark treasury yield remains anchored near 3.50% while the 10-year benchmark rose a few basis points again on Friday despite heavy selling in risky assets, suggesting that US treasuries are failing to serve as a safe haven. The 10-year dipped back to 4.17% in the Asian session on Monday after closing above 4.18% on Friday, near the three-month highs just above 4.20% The 2-10 yield spread closed north of 66 basis points for the first time in 2025 on Friday, the steepest the yield curve has been since early 2022.

· Japanese government bonds were rangebound to start the week, with the key focus of late on the 10-year benchmark yield, which traded slightly higher near 1.96% in Tokyo late Monday as the high since 1999 just above the 2.00% level has been eyed in its recent surge.

Commodities

· Oil trades higher with Brent holding above key support in the USD 60-61 area following Friday's broad risk-off session. Today's modest rebound is supported by signs of robust Chinese demand in November and ongoing geopolitical supply risks. However, expectations of a growing surplus as OPEC+ and other producers lift output amid sluggish consumption growth continue to weigh on sentiment and may, for now, cap the upside in the absence of a material disruption, notably from Russia or Venezuela.

· Silver suffered a sharp 6% peak-to-trough pullback on Friday from a fresh record high near USD 64.5 as a sell-off in overvalued AI-related equities dragged broader risk sentiment lower. Despite this setback, silver still ended the week up a solid 5% before bouncing during the Asian session to trade around USD 63.2. Just like platinum which trades at a fresh 14-year high above USD 1,800, silver is being underpinned by continued demand for hard assets and a tight, price-supportive supply outlook,

· Gold trades less than 1% below its October record high at USD 4,380 after Friday's dip once again attracted fresh buying interest. While Wednesday's rate cut sparked dissent and renewed debate over the rate trajectory into 2026, gold continues to find support from sustained buying by non-western central banks—not as a hedge against the dollar, but increasingly as a replacement for it.

Currencies

· The US dollar traded in a tight range to start the week as the focus on Monday was on the more volatile Japanese yen. Friday saw a muted session for the US dollar as well as there was no additional momentum lower for the greenback after what was seen as a dovish Fed last Wednesday.

· Looking ahead, the focus this week will be intense on sterling on Thursday as the market anticipates another rate cut from the Bank of England, but it unsure how committed the bank is to further easing. But the greatest anticipation is likely how the Bank of Japan guides for future policy moves after the profound recent yen weakness as it is seen finally hiking its policy rate this Friday for the first time since January.

· The JPY found support overnight on the strong Tankan business sentiment surveys and as unnamed sources cited by Bloomberg suggest that the Bank of Japan would begin selling its ETFs soon in what could prove a multi-decade unwinding process. USDJPY pushed just below the 155.00 at its lowest in the Asian session on Monday after closing Friday at 155.80, while EURJPY traded near 182.00 after closing Friday just below 183.00.

Source: SAXO

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