The market sentiment remains slightly positive early Monday as Ukraine’s readiness to drop NATO bid joins China’s bond issuance and mixed data. However, anxiety ahead of this week’s top-tier employment, inflation, and activity data joins mixed Fed talks and Trump comments to challenge the risk-on mood. Meanwhile, Crude Oil stalls its two-day losing streak while posting mild gains on comments from Kuwait and fresh concerns about oil demand and supply.
Ukraine signalled a major shift in its war stance as President Volodymyr Zelenskiy offered to drop Kyiv’s bid to join the North Atlantic Treaty Organization (NATO) while U.S.-led peace talks showed progress in Berlin. Zelenskiy held over five hours of talks with U.S. envoys, including Steve Witkoff and Jared Kushner, with discussions centred on a proposed 20-point peace framework covering security and economic issues. Talks are set to resume, with uncertainty over security guarantees and territorial outcomes still limiting the reduction in geopolitical risk premia, even as improving prospects support European risk sentiment.
Federal Reserve (Fed) officials spoke after the blackout period, underscoring uncertainty over the policy outlook. Cleveland Fed President Beth Hammack highlighted the difficulty of balancing inflation control and growth, Chicago Fed President Austin Goolsbee signalled patience and a need for more data before calling inflation transitory, and Kansas City Fed President Jeffrey Schmid warned inflation remains “too hot,” challenging expectations for early rate cuts.
Treasury yields rose on Friday, reversing earlier declines, with the long end leading as heavy supply and policy repricing weighed on bonds. The 30-year yield reached its highest level since early September after more than $602 billion in Treasury issuance during the week and continued reassessment of the Fed’s outlook following the latest rate cut.
China Vanke, a major state-backed property developer, failed to secure approval to delay a $284 million bond payment, receiving only a five-day grace period. The failed vote highlighted rising credit stress in China’s property sector, showing funding pressure spreading beyond weaker developers as the prolonged downturn continues to strain cash flows and refinancing.
China announced plans to issue ultra-long-term bonds to fund strategic priorities, signalling ongoing fiscal support. The onshore yuan rose to a 14-month high despite weak activity data, with November retail sales rising 1.3% year-on-year versus expectations of 2.9% and industrial production increasing 4.8% year-on-year versus 5.0% expected. Property investment fell 15.9% year-on-year over the first 11 months. Policymakers remain committed to a roughly 5% growth target next year, though the World Bank and the International Monetary Fund (IMF) continue to warn of subdued medium-term growth.
U.S. equity markets saw a sharp rotation out of technology and artificial intelligence stocks, driven by earnings disappointments and analyst downgrades. The NASDAQ fell 1.76%, the S&P 500 declined 1.17%, and the Dow Jones Industrial Average slipped 0.50%, outperforming relatively due to strength in industrial stocks.
In Japan, the Tertiary Industry Index rose 0.9% month-on-month in October, beating expectations of 0.2% and the prior 0.3%. USD/JPY fell to around 151.21. A Bank of Japan (BOJ) official said the December Tankan survey showed easing trade uncertainty, improved cost pass-through, and resilient demand linked to artificial intelligence and semiconductor investment, supporting expectations of a Bank of Japan rate hike at the December 18–19 meeting.
In the UK, Rightmove reported that average asking prices for newly listed homes fell 1.8% month-on-month in the four weeks to December 6, compared with a 10-year average decline of 1.4%, and were down 0.6% year-on-year, pointing to continued caution in the housing market.
New Zealand’s near-term growth outlook was downgraded by the New Zealand Institute of Economic Research (NZIER), reinforcing downside pressure on the New Zealand dollar. The BNZ–BusinessNZ Performance of Services Index (PSI) fell to 46.9 in November from October, marking the weakest reading since May 2025 and signalling deeper contraction. Reserve Bank of New Zealand (RBNZ) Governor Ann Breman said the 2.5% policy rate is likely to remain if the economy evolves as expected, while noting a low probability of a further cut.
The Indian rupee fell to a record low, with downside pressure persisting despite likely Reserve Bank of India (RBI) intervention, as authorities focus on smoothing volatility rather than defending a fixed level amid strong U.S. dollar dynamics.
Against this backdrop, the U.S. Dollar Index (DXY) remains sidelined after a three-week downtrend, despite Friday’s corrective bounce, while EURUSD hovers around an 11-week high and GBPUSD retreats from the second straight day. That said, USDJPY remains pressured after a positive week, lacking momentum amid mixed concerns about the BoJ and risk premium. Further, AUDUSD and NZDUSD both remain pressured for the third consecutive day, mildly offered after a three-week uptrend, on China concerns and mixed data at home. That said, USDCAD hovers at a three-month low as the Crude Oil’s corrective bounce joins a cautious mood ahead of today’s Canada inflation amid hawkish Bank of Canada (BoC) concerns. Elsewhere, the Gold price posts a five-day uptrend, poking an eight-week high of late, while Bitcoin (BTC) and Ethereum (ETH) both post a corrective bounce after a dicey week. That said, Wall Street ended the week on a negative note, while the Asia-Pacific shares drifted lower.
EURUSD remains range-bound after a three-week uptrend as traders stay cautious ahead of this week’s key data releases and the European Central Bank (ECB) policy decision, while the pair is also capped by the sideways movement in the U.S. Dollar at the start of a heavy data week.
Elsewhere, weaker UK housing data are weighing on GBPUSD as markets await top-tier United Kingdom and United States data, along with the Bank of England (BoE) monetary policy decision.
Meanwhile, USDJPY extends its decline as stronger data reinforce expectations of a Bank of Japan (BoJ) rate hike and softer risk sentiment boosts demand for the traditional safe-haven Japanese yen.
AUDUSD and NZDUSD extend their losses for a third straight session, shrugging off the U.S. Dollar’s lacklustre performance as weak China-related catalysts and a cautious risk mood pressure the risk-sensitive currency pairs. Meanwhile, USDCAD stays under pressure ahead of Canada inflation data, supported by a corrective rebound in crude oil, Canada’s key export, and a hawkish bias around the Bank of Canada (BoC) as markets also brace for top-tier United States data.
Early Monday, WTI crude oil staged a corrective rebound, snapping a two-day losing streak after suffering its biggest weekly drop since late September, as traders weighed fears of capped supply and a potential recovery in energy demand supported by China's bond issue.
Kuwait’s oil minister said the recent fall in crude prices was unexpected and put a fair price range at $60 to $68 per barrel. Crude declined 4.5% last week after the International Energy Agency (IEA) forecast a large supply surplus in 2026 driven by non-OPEC output growth, as easing geopolitical risk premia linked to Ukraine and Iraq’s restoration of output at a key oilfield outweighed isolated supply disruptions.
Gold rises for a fifth straight session and holds near its highest level since October 21 as persistent market uncertainty and a weaker USD drive demand for the traditional safe-haven asset. Meanwhile, Bitcoin (BTC) and Ethereum (ETH) remain under pressure despite little change on a weekly basis, reflecting market unease over the outlook for crypto growth in 2025, even as the USD weakens and Federal Reserve rate cuts are priced in.
Elsewhere, Asia-Pacific equities drift lower following a weak close on Wall Street on Friday, with the broad decline largely driven by a contagion effect from disappointing earnings at Broadcom and Oracle alongside targeted analyst downgrades.
Canada inflation and the Empire State Manufacturing Index are due first on Monday, ahead of speeches by Federal Reserve (Fed) policymakers that may set the tone for momentum trading. A packed week follows with top-tier releases including U.S. Nonfarm Payrolls (NFP), Consumer Price Index (CPI), Retail Sales, and global Purchasing Managers’ Indexes (PMIs). With markets increasingly anxious about Federal Open Market Committee (FOMC) rate policy in 2026, traditional havens such as Gold, the Swiss franc (CHF), and the Japanese yen (JPY) may extend recent gains, while cryptocurrencies could stay under pressure, and equities are likely to trade mixed.
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