• The latest US statistics still indicate a resilient economy despite a slowing labour market, but the lack of visibility on the impact of the shutdown is likely to prompt Jerome Powell to maintain a cautious stance.
• There are increasing signs that the Bank of Japan is preparing to raise rates when it meets on December 19.
• In Europe, budgetary uncertainties in France and tensions within the German coalition are fuelling political risk, yet European indices gained further ground on hopes for a peace deal in Ukraine.
Fed chair Jerome Powell knows that end-of-year risks will largely depend on the tone he adopts when he speaks after next week’s FOMC. Another rate cut is practically certain insofar as markets are betting 92% it will happen and the Fed very rarely wrong foots investors. The real issue at the press conference is the possibility of a hawkish cut with a significant number of committee members voting against the decision. 5 voting members have in recent weeks queried the necessity to press on with monetary easing. Differences of opinion might also be reflected in projections for next year, possibly undermining the market’s expectations of three rate cuts in 2026. The latest US statistics still indicate a resilient economy even if the labour market is slowing. But lack of visibility on the shutdown’s impact could lead Jerome Powell to stay cautious and retain a good degree of flexibility over the trajectory of monetary policy.
Ahead of the Fed’s decision, another central bank hit the headlines this week. There are increasing signs that the Bank of Japan is preparing to raise rates when it meets on December 19. The governor said the bank was ready to adjust monetary policy and press reports suggest prime minister Sanae Takaichi would not be opposed even if she has in the past sounded reluctant. However, with investors still worried about fiscal risk, these signals failed to reverse the yen's decline against both the US dollar and the euro. The risk was reflected in yields on 10-year Japanese government bonds which flirted with 2% for the first time since 1998.
In Europe, political and geopolitical issues continued to dominate proceedings. The ability of France’s government to get its Social Security budget approved by parliament next Tuesday is still uncertain, even if the “revenue” part of it was adopted. And in Germany, doubts on the coalition's viability started to surface after a group of 18 MPs from Friedrich Merz’s party refused to vote for a pension proposal, thereby jeopardising the government’s slender 12-MP majority. Any increase in these divisions could undermine the government's stimulus plan, a project which already has a particularly prolonged roll-out schedule. The situation weighed on Mdax returns over the week. The index slightly underperformed other European indices which gained further ground on hopes for a peace deal in Ukraine, even if talks with Russia have practically stalled.
We remain moderately cautious on equity markets and particularly in the US where valuations are steep. We are more positive on duration, and notably emerging country debt, and on higher-rated corporate bonds.
EUROPEAN EQUITIES
European equities pushed higher as hopes rose for a Fed rate cut next week, following an ADP report which confirmed that the US labour market was worsening. In the eurozone, composite PMI came in at 52.8 in November, the sixth month in a row of growth. Strong services performance offset manufacturing weakness. Elsewhere, the meeting between Washington's envoy and Vladimir Putin failed to reach a compromise. The European Union reached an agreement to ban Russian gas imports by 2027. In France, the budget marathon continued. The Senate approved the receipts part of the budget but talks in the Assembly on the Social Security budget showcased divisions only days before the vote takes place.
In company news, Airbus ran into market turbulence after around 6,000 planes were grounded due to a software programme’s sensitivity to solar radiation. Three days later, in another incident, the group was forced to recall 628 planes because of a structural “quality” problem. Management reduced delivery targets for this year but reaffirmed all its financial objectives. AstraZeneca sounded a confident note for 2026 on pricing. The group has limited exposure to Medicaid and is currently enjoying a number of R&D successes. Management confirmed that emerging countries will drive growth. Following GTT’s excellent third-quarter results, the group received a new order for two tankers. In autos, Stellantis had a good November marked by improving sales in the US. Consultancy Wavestone’s increase in net profits, despite a difficult trading environment, allowed the group to maintain annual guidance.
US EQUITIES
Wall Street edged higher over the period. The S&P 500 and Nasdaq 100 traded close to recent highs, rising 0.12% and 0.58%, respectively. The trend is still largely dependent on expectations that the Fed will almost certainly cut by 25bp when it meets on December 9-10. But data remained contrasted with the ADP report indicating a loss of 32,000 jobs, essentially among small companies, and weekly jobless claims hitting a low not seen since 2022. In the background, the government toughened its migrant policy and pressure on the Fed increased. Donald Trump said a new Fed chair would soon be announced. Economist Kevin Hassett, one of the president’s advisors, is currently the favourite.
AI remained the market’s main driver over the period. Nvidia (+3.8%) reinforced its ecosystem by investing $2bn in Synopsys (+11%), a company which makes semiconductor design software. Apple (+0.7%) continued to make up lost ground thanks to strong iPhone 17 sales and despite a major overhaul of its AI teams. Microsoft (-2.3%) saw Azure increase its hold with the integration of Mistral Large 3 and announced price increases for Office. Meta (+2.2%) gained ground on better cost management with reduced spending on the Metaverse, but also faces a host of regulatory procedures, and notably in Russia. Amazon (-1.8%) announced major developments at AWS (new AI agents, the Trainium3 chip) and the rollout of faster Amazon Now logistics in the US. Festive season shopping got off to a very strong start and American Eagle Outfitters jumped 18.7%. Elsewhere, Boeing (+6.8%), Delta Air Lines (+4.7%) and Uber (+3.9%) confirmed that demand for transport was strong. In commodities, copper hit a new record above $11,400/ton and gold continued to trade around $4,200/oz.
EMERGING MARKETS
The MSCI EM index was up by 0.79% in USD this week as of Thursday. Brazil, Korea, Taiwan, Mexico and China gained 3.75%, 2.46%, 0.89%, 0.63% and 0.50% respectively. India declined by 1.16%.
In China, Manufacturing PMI remained in contraction territory at 49.2 in November, slightly below expectations of 49.4. Non-manufacturing PMI for November was 49.5 vs. October’s reading of 50.1, dragged down by property and services weakness. RatingDog China manufacturing PMI slumped to 49.9 vs. estimates of 50.5. Policymakers think the 5% GDP growth target is within reach, suggesting no rush for major new stimulus. President Xi Jinping met French President Emmanuel Macron and they pledged deeper cooperation on global issues including the Ukraine war and trade. China issued its first batch of new rare earth export licenses. The regulator announced a reduction in risk factors of some equity holdings for insurance companies to better leverage their role as “patient capitals”. Macau November GGR grew 14% YoY, beating estimates of +10%. Meituan reported an adjusted net loss of RMB 16bn, or wider than the estimated RMB13.96bn loss.
In Taiwan, Hon Hai reported strong growth of 25.5% YoY for November.
In Korea, November exports surged 8.4% YoY, beating expectations of 5.4% growth, driven by robust semiconductor and auto demand. Parliament approved a record 495.8 billion budget for 2026, representing an 8.1% increase to power AI-led growth initiatives.
In India, the RBI delivered a 25 basis point rate cut to 5.25%, as expected. October industrial production increased 0.4% YoY, or less than the 2.5% expected. Manufacturing PMI for November was 56.6 vs. the previous reading of 57.4 while Services PMI was 59.8 vs. the previous reading of 59.5, taking the composite PMI to 59.7. Russian President Vladimir Putin arrived in New Delhi for the 23rd India-Russia Annual Summit. The summit will focus on defence cooperation, energy ties, and trade expansion. November auto sales showed strong momentum with major auto companies delivering high double-digit growth.
In Brazil, third-quarter GDP growth slowed to 1.8% YoY from 2.4% in the previous quarter. TikTok announced a $37.7bn investment to build its first Latin American data centre. Vale updated its guidance and now sees 2025 capex at $5.5bn and copper production at 370,000 tonnes.
In Mexico, capital investment had a smaller-than-expected decline of 6.7% YoY in September versus estimates of -7.7%. Sheinbaum announced an historic 13% minimum wage increase for 2026. Foreign direct investment in Mexico's automotive sector fell 20.1% to $7.87bn in the third quarter.
CORPORATE DEBT
It is tempting to talk of an end-of-year rally on credit markets but the situation is more nuanced. Markets are practically certain the Fed will cut rates next week. At the same time, complicated discussions over peace in Ukraine are sending contradictory headlines every day.
Over the week, investment grade fell 0.07% and high yield gained 0.15%. In fact, spreads narrowed over the period, with the Xover down 7bp to 253bp. The risk-free rate actually widened and yields on the 5-year Bund rose 10bp to 2.38%.
As is usual in December, new issuance was calm with the exception of the high yield segment. The biggest deal came from Spanish steel producer Celsa which raised €1.2bn at 8.25% due 2030.
GLOSSARY
• Investment Grade: bonds rated as high quality by rating agencies.
• High Yield: corporate bonds with a higher default risk than investment grade bonds but which pay out higher coupons.
• Senior debt benefits from specific guarantees. Its repayment takes priority over other debts, known as subordinated debt.
• Debt is considered to be subordinated when its redemption depends on the earlier payment of other creditors. To offset the higher risk, subordinated Senior debt has priority over other debt instruments.
• Tier 2 / Tier 3 : subordinated debt segment.
• Duration: the average life of a bond discounted for all interest and capital flows.
• The spread is the difference between the actuarial rate of return on a bond and the rate of return on a risk-free loan with the same maturity.
• The so-called "Value" stocks are considered to be undervalued.
• EBITDA: Earnings before Interest, Taxes, Depreciation, and Amortization.
• CTA: quantitative strategy which uses futures to invest in a wide range of financial assets, including equity indices, short-term and long-term interest rates, currencies, and commodities.
• The PMI, for "Purchasing Manager's Index", is an indicator of the economic state of a sector.
• AT1s belong to a family of bank capital securities known as contingent convertibles or “Cocos”. Convertible because they can be converted from bonds to shares (or depreciated entirely) and contingent because this conversion only occurs if certain conditions are met, such as the issuing bank's capital strength falling below a predetermined trigger level.
• RT1s: perpetual bond issues with early redemption possible after 10 years. Coupon payments are discretionary and non-cumulative.
DISCLAIMER
This is a marketing communication.
28/11/2025
This document is issued by the Edmond de Rothschild Group. It is not legally binding and is intended solely for information purposes. This document may not be communicated to persons located in jurisdictions in which it would be considered as a recommendation, an offer of products or services or a solicitation, and in which case its communication could be in breach of applicable laws and regulations. This document has not been reviewed or approved by a regulator of any jurisdiction. The figures, comments, opinions and/or analyses contained herein reflect the sentiment of the Edmond de Rothschild Group with respect to market trends based on its expertise, economic analyses and the information in its possession at the date on which this document was drawn up and may change at any time without notice. They may no longer be accurate or relevant at the time of reading, owing notably to the publication date of the document or to changes on the market. This document is intended solely to provide general and introductory information to the readers, and notably should not be used as a basis for any decision to buy, sell or hold an investment. Under no circumstances may the Edmond de Rothschild Group be held liable for any decision to invest, divest or hold an investment taken on the basis of these comments and analyses. The Edmond de Rothschild Group therefore recommends that investors obtain the various regulatory descriptions of each financial product before investing, to analyse the risks involved and form their own opinion independently of the Edmond de Rothschild Group. Investors are advised to seek independent advice from specialist advisors before concluding any transactions based on the information contained in this document, notably in order to ensure the suitability of the investment with their financial and tax situation.
Past performance and volatility are not a reliable indicator of future performance and volatility and may vary over time, and may be independently affected by exchange rate fluctuations.
Source of the information: unless otherwise stated, the sources used in the present document are those of the Edmond de Rothschild Group. This document and its content may not be reproduced or used in whole or in part without the permission of the Edmond de Rothschild Group.
Copyright © Edmond de Rothschild Group – All rights reserved
EDMOND DE ROTHSCHILD ASSET MANAGEMENT (FRANCE)
47, rue du Faubourg Saint-Honoré 75401 Paris Cedex 08
Société anonyme governed by an executive board and a supervisory board with capital of 11.033.769 euros
AMF Registration number GP 04000015
332.652.536 R.C.S. Paris
