Next week, the Federal Reserve will release its final interest rate decision of the year, putting the US stock market to the test after reaching a new high. In addition, central banks such as Japan, the United Kingdom, Russia, Thailand, the Philippines, Norway, and Sweden will also make interest rate decisions.
The significant rise in technology stocks has pushed the Nasdaq Composite Index to break through the 20000 point mark for the first time this week, marking another milestone for the US stock market. In the past year, the Nasdaq has risen by 32%, while the S&P 500 index has risen by about 27%.
The expectation of the Federal Reserve cutting interest rates has supported these gains. However, despite the expectation that the Federal Reserve will cut interest rates by another 25 basis points next week, investors have reduced their bets on policymakers' rate cuts next year due to strong economic growth and high inflation.
The market is currently more concerned about the prospect of future interest rate cuts, especially considering the variables that President elect Trump's series of policies may bring. According to LSEG data, the probability of a rate cut in December is expected to be 94% in the US money market. However, throughout 2025, they expect to only cut interest rates twice more.
Jeffrey analyst Brad Bechtel said in a report, "The December rate cut is already a certainty, but since then, the pace of rate cuts will definitely slow down
Generali Asset Management expects that the Federal Reserve will emphasize that it will decide whether to further relax monetary policy based on future economic data, and this action will be cautious and slow.
Analysts from BNP Paribas in France have stated that they anticipate a "hawkish interest rate cut," and the Federal Reserve may open the door for a pause in further rate cuts, with the duration of the pause yet to be determined.
Recent economic data shows that the US economy remains strong. And next week's data focus will be on the November Personal Consumption Expenditures Price Index (PCE), which is the Federal Reserve's most favored inflation indicator.
As the end of the year approaches, other data will provide further information on the economic performance. Including manufacturing index, retail sales data, initial jobless claims, and consumer confidence index.
The Bank of England will announce its interest rate decision next Thursday, and the market generally expects the Bank of England to maintain its policy rate of 4.75% unchanged and adhere to a gradual policy of interest rate cuts. According to the money market, the likelihood of the Bank of England keeping interest rates unchanged this month is 85%, and the likelihood of a rate cut at next year's February meeting is much higher.
Prior to Thursday's decision, UK CPI inflation is expected to rise again in November, which will increase the reason for the Bank of England to keep interest rates unchanged this month.
As for the Bank of Japan, people's expectations for its interest rate hike are constantly rising. Economists from Nomura Securities predict that the Bank of Japan will raise interest rates by 25 basis points next week to 0.50%, but it is also possible to postpone until January next year or later.
Nomura stated that if the Bank of Japan decides to abandon interest rate hikes in December due to uncertainty or fiscal policy considerations, the likelihood of taking action in January next year is very high.
In terms of financial reports, only a few companies such as Micron Technology, FedEx, and Accenture are worth paying attention to, and the new round of financial reporting season will begin next month.
In terms of geopolitics, with the collapse of the Assad regime, Israel may intensify its attacks on Hezbollah and Hamas, and due to Iran's weakened position in the region, the Israeli military is preparing to attack Iran's nuclear facilities.
US President elect Trump recently stated that he does not rule out the possibility of a war between the US and Iran. Anything can happen. Anything can happen. This is a very unstable situation
Insiders say that Trump's transition team is developing a so-called "maximum pressure 2.0" strategy against the Iranian regime, which is a continuation of his policy towards Iran centered around severe economic sanctions during his first term.
Overview of important events next week:
Monday (December 16th): China's total retail sales of consumer goods in November compared to the same period last year, China's industrial value added above designated size in November compared to the same period last year, Eurozone's initial manufacturing PMI for December, UK's initial manufacturing PMI for December, US New York Fed's manufacturing index for December, US S&P's global manufacturing PMI for December, and European Central Bank President Lagarde's speech
Tuesday, December 17th: UK November unemployment rate, Germany December IFO business climate index, Germany December ZEW economic climate index, Eurozone December ZEW economic climate index, Canada November CPI monthly rate, US November retail sales monthly rate, US November industrial output monthly rate
Wednesday (December 18th): US API crude oil inventory for the week ending December 13th, UK November CPI monthly rate, Eurozone November CPI annual final value, US November new home construction total annualized, US Q3 current account, US EIA crude oil inventory for the week ending December 13th
Thursday (December 19th): US Federal Reserve interest rate decision until December 18th, China's Swift RMB share in global payments in November, Germany's January Gfk consumer confidence index, UK central bank interest rate decision until December 19th, US initial jobless claims for the week ending December 14th, US third quarter real GDP annualized quarterly rate final value, US November total home sales annualized, US November leading indicator monthly rate, US EIA natural gas inventory for the week ending December 13th, Federal Reserve Chairman Powell's monetary policy press conference, Japan's central bank target interest rate for the week ending December 19th
Friday (December 20th): China's one-year loan market quoted interest rate until December 20th, UK November seasonally adjusted retail sales monthly rate, US November core PCE price index annual rate, US November personal expenditure monthly rate, US December University of Michigan consumer confidence index final value, Russian central bank announces interest rate decision