December Market Highlights: US GDP exceeds expectations, surpassing 4%; Federal Reserve policy shift triggers global resonance, while Indian stock market faces heavy setbacks

U.S. Economy Shines, but Consumer Confidence Takes a Hit

The U.S. third-quarter GDP grew at an annualized rate of 4.3%, far exceeding market expectations of 3.3%, marking the fastest pace in two years. This economic momentum is primarily driven by strong household consumption spending, while data center investments surged to record highs, boosting business investment by 2.8%. However, the market has overlooked an important warning sign—the U.S. Consumer Confidence Index has declined for the fifth consecutive month, falling to 89.1, well below economists’ forecast of 91.

Public sentiment towards business conditions remains pessimistic, with the current conditions index plunging 9.5 to 116.8, the lowest since February 2021. Concerns about employment and income continue to intensify. Despite robust GDP performance, consumer pessimism about the future persists. Spending is shifting toward affordable entertainment and essential services, with cautious plans for bulk commodity purchases and continued decline in new car buying expectations.

Diverging Central Bank Policies, Volatile Global Forex Markets

The Federal Reserve’s independence is increasingly under scrutiny. Trump explicitly stated that anyone who disagrees with him on monetary policy cannot serve as Fed Chair. He believes rates should be cut when markets are good, rather than destroying upward momentum without reason, as economic growth could potentially add 10-20 percentage points annually to U.S. GDP. These remarks have raised concerns about the Fed’s policy independence.

U.S. Treasury Secretary Yellen proposed a different approach, suggesting the Fed change its 2% inflation target to a range, such as 1.5% to 2.5% or 1% to 3%, calling the current precise target “simply absurd.” White House National Economic Council Chair Kasparov warned that the Fed is not cutting rates fast enough and is lagging behind globally. He pointed out that 1.5% of Q3 economic growth was due to tariffs reducing the trade deficit, while booming AI development is also driving growth and exerting downward pressure on inflation.

Influenced by policy expectations, the dollar index fell below 98.0 to 97.88, hitting a two-and-a-half-month low. EUR/USD rose 0.27%, USD/JPY declined 0.51%.

Stock Markets Surge, Cryptocurrencies Slightly Retreat

The three major U.S. stock indices all rose, with the Dow gaining 0.16%, the S&P 500 up 0.46% to a new closing high, and the Nasdaq climbing 0.57%. Leading tech stocks led the rally, with NVIDIA up 3.01% to its highest since November 17, regaining over $4.6 trillion in market cap; Amazon rose 1.6%, and Alphabet rebounded 1.5%. Copper-related stocks strengthened, with Freeport-McMoRan up 2.49%, Ero Copper up 2.01%, and LME copper futures breaking through $12,000 per ton for the first time in history.

European markets showed mixed results, with the UK FTSE 100 up 0.24%, Germany DAX 30 up 0.23%, and France CAC 40 down 0.21%. Notably, Indian stocks suffered a sharp decline, contrasting with the generally rising global markets, reflecting unique challenges faced by emerging markets.

Cryptocurrency markets experienced a slight pullback. Bitcoin is currently at $91.22K, up 1.34% in 24 hours; Ethereum is at $3.14K, up 1.09% in 24 hours.

Commodities Continue Three-Day Rally, Precious Metals Hit New Highs

Oil markets remain strong, with WTI crude rising for the third consecutive day, reclaiming $58.0 per barrel, up 0.9%, at $57.47 per barrel. Gold outperformed, rising 0.9% to $4,483.9 per ounce, setting a new record high. The U.S. 10-year Treasury yield remains steady at 4.16%, unchanged from the previous trading day.

Global Central Bank Policy Outlook

The Bank of Canada released its December policy meeting minutes, indicating uncertainty about whether the next rate decision will be a cut or a hike, reflecting the complexity of the global economic outlook. Recent GDP fluctuations highlight the difficulty in assessing underlying economic trends. Meanwhile, the U.S., Mexico, and Canada will review the USMCA trade agreement next year, posing significant risks. Officials believe that trade disruptions and rising costs caused by tariff negotiations have so far had limited impact, and the economy remains in a state of oversupply.

Japan’s former Deputy Governor Amamiya Seiji stated that concerns over expansionary fiscal policies may lead to further yen depreciation and rising bond yields. Despite the Bank of Japan raising interest rates last week to 0.75%, the highest in 30 years, the yen continued to weaken, reflecting a disconnect between policy and currency markets. It is expected that the BOJ will eventually raise rates to 1.5%, with the next hike possibly in July next year.

Trade Policy Adjustments, Tariff Timeline Confirmed

The U.S. Office of the U.S. Trade Representative announced findings on China’s semiconductor industry, identifying unfair trade practices in the sector. However, to honor the U.S.-China trade truce, initial tariffs will be set at 0%, with rates to be increased to a later announced level on June 23, 2027, after 18 months. Tariff rates will be publicly announced at least 30 days in advance, reflecting transparency but also indicating ongoing uncertainties in U.S.-China trade negotiations.