The global equity markets got off to a weak start in December. Negative industrial data from the US, rising yields on the bond market and significant declines in the crypto sector initially led to a reduction in risk and caution. However, the weakness was short-lived and was followed by a recovery, which was particularly noticeable in Europe. In the US, the broad equity market and the technology index closed the month slightly negative, while the Asian equity markets presented a mixed picture. Global equities still closed the month on a positive note.
The US Federal Reserve (Fed) continued its monetary policy course at its December meeting and decided to cut interest rates by 25 basis points for the third time this year, setting the target range at 3.50-3.75 %. However, the minutes revealed an unusually strong internal political split within the Federal Open Market Committee, particularly over the future pace of easing. Fed Chairman Jerome Powell went on record as saying that the bar for further rate cuts was now higher. Inflation in the US stood at 2.7% in December, below the 3.0% last reported in September and below consensus expectations of 3.1%.
In the eurozone, inflation fell from 2.2% in November to 2.0% in December, thus reaching the European Central Bank's target value. Core inflation (excluding energy and food) also fell from 2.4% to 2.3%. Unlike the Fed, the ECB left key interest rates unchanged in December. The market is not pricing in any change for 2026 as a whole. The combined European Purchasing Managers' Index (PMI) for industry and services fell from 52.8 to 51.9 points in December, but still signals moderate growth in the European economy. This growth is likely to occur without German industry, whose PMI fell to 47.7 points in December and is therefore now below the 50-point threshold above which growth is assumed.
On the bond markets for government bonds in the USA and the eurozone, yields developed uniformly in a monthly comparison. Yields on 10-year US government bonds rose by 15 basis points at the end of the month, closing at 4.16%. Yields on 10-year German government bonds rose by 16 basis points from 2.69% to 2.85%. The yield on 10-year Italian government bonds rose from 3.47% to 3.55%.
There were similar trends in corporate bonds. The yield on high-quality euro corporate bonds rose by 9 basis points to 3.23%. Yields on investment-grade corporate bonds denominated in US dollars closed 5 basis points higher at 4.81%. By contrast, yield movements in the high-yield segment were mixed. They fell by 4 basis points to 6.53% for US dollar-denominated corporate bonds and rose by 4 basis points to 5.51% for euro-denominated bonds.
The precious metals sector experienced a pronounced price correction in December after previously reaching new all-time highs. The CME Group increased its margin requirements for precious metal futures twice within a week. Nevertheless, the price of gold continued to rise over the course of the month, reaching USD 4,314 per ounce at the end of the month. The US dollar fell against the euro and closed at 1.174.
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