Global marketshead into a pivotal week as political negotiations, long-delayed U.S. data releases and a packed central-bank calendar converge to shape the outlook for the year ahead.
In Europe, leaders of the European Union are set to meet on Thursday for a final attempt to reach consensus on using frozen Russian assets to support Ukraine. The proposal centres on tapping around €210 billion of Russian funds immobilised in Europe, most of it held as cash in Belgium. These assets represent Europe’s most significant leverage in discussions surrounding a potential settlement to the Ukraine war, which has largely been dominated by Washington and Moscow.
The issue has exposed deep divisions within the bloc, with concerns about legal precedent and investor fallout weighing heavily. Western investors still have tens of billions of euros trapped in Russia, spanning cash holdings and physical assets. However, with Ukraine facing severe funding constraints and European security considerations mounting, policymakers are running out of viable alternatives.
Across the Atlantic, investors will finally receive a clearer picture of the U.S. economy as a series of shutdown-delayed data points are released. Tuesday’s November non-farm payrolls report is expected to show subdued job creation, reflecting signs of a cooling labour market. The data comes shortly after the Federal Reserve delivered its third consecutive quarter-point rate cut, leaving markets divided over the likelihood of further easing.
Additional delayed indicators, including October retail sales and November consumer price inflation, will also be released during the week, helping shape expectations around the Fed’s next move amid lingering uncertainty over growth and inflation trends.
In Asia, attention is firmly on Japan, where markets are bracing for what is widely seen as a near-certain rate hike from the Bank of Japan on December 19. Short-term Japanese government bond yields have surged to multi-year highs, reinforcing expectations of tighter policy. The debate now centres on how far rates will ultimately rise next year, with estimates ranging from a modest increase to 1% to a more aggressive tightening path if inflation pressures persist.
The direction and tone of the BoJ’s messaging will be closely watched, particularly for its impact on the yen, which has remained weak despite higher yields. With other major economies adopting a more hawkish stance, conditions appear favourable for a continuation of yen-funded carry trades into 2026.
Europe’s central banks also take centre stage. The European Central Bank meets on Thursday in what was initially expected to be a quiet, year-end gathering. However, stronger economic data and recent comments from policymakers have unsettled assumptions that rate cuts are imminent. While rates are expected to remain unchanged at 2%, markets will scrutinise President Christine Lagarde’s guidance for clues on the ECB’s next move. Central banks in Sweden and Norway are also expected to hold rates steady.
In the United Kingdom, the Bank of England is widely expected to cut interest rates in December, with markets assigning a high probability to a reduction to 3.75%. Still, uncertainty surrounds the outlook beyond this decision, particularly after last month’s narrowly split vote to keep rates unchanged. Inflation data due earlier in the week could yet influence expectations, while ongoing divisions within the Monetary Policy Committee suggest policy debates will continue well into 2026.
Together, these developments underscore a decisive week for global markets, as policymakers balance slowing growth, stubborn inflation risks and geopolitical pressures heading into the new year.
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