A week that seemed destined to unfold smoothly toward the holiday season has transformed into a whirlwind of events capable of redefining global financial equilibrium. Central banks taking center stage, surprising inflation data, historic tech deals, and geopolitical tensions: it all came together in five sessions that investors will long remember.
🇪🇺 Europe: Central banks hold sway
European stock markets moved ahead at a steady pace through the week, demonstrating a resilience many analysts hadn't expected. The STOXX 600 gained 1.60% overall, driven primarily by the European banking sector, which is experiencing what could be its best year since 2010. Consider, for example, that giants like Deutsche Bank, Santander, and Société Générale have more than doubled in value over the course of 2025.
But the real star of the show was undoubtedly Piazza Affari. Milan confirmed its dominance of Europe with a weekly jump of 2.86%, driven by Italian banks. Montepaschi, Banca Mediolanum, Unicredit, and Intesa all posted consecutive sessions in positive territory, riding the wave of increasingly constructive sentiment about the European financial sector. The FTSE MIB decisively surpassed the psychological threshold of 44,000 points, a level that only a few months ago seemed a mirage.
The ECB kept rates at 2% for the fourth consecutive meeting, an expected but not a foregone conclusion. Christine Lagarde reiterated that inflation is moving in a "narrow range" around the 2% target, and revised upwards her eurozone GDP growth estimates: 1.4% for 2025, 1.2% in 2026, and then again 1.4% in 2027-2028. This signal of cautious optimism was interpreted positively by the markets.
Across the Channel, the Bank of England opted for a 25 basis point cut, bringing its rate to 3.75%. The decision came in a tight 5-4 vote, with Governor Andrew Bailey shifting toward a more dovish stance. Inflationary pressures in the United Kingdom are finally easing, although British household spending remains anemic compared to pre-pandemic levels.
A theme that ran under the radar in European trading was the peace talks in Ukraine. Defense stocks, which had soared in 2024, suffered a week of profit-taking. Rheinmetall, Renk, and Hensoldt fell as investors began to price in a de-escalation scenario, with US special envoy Steve Witkoff in Moscow for direct talks with the Kremlin.
🇺🇸 United States: Inflation Surprises, TikTok Solves It
Wall Street has had a rollercoaster week that would have tested even the most seasoned investor. Things got off to a rocky start on Monday, with artificial intelligence stocks under pressure after the Financial Times revealed the breakdown of negotiations between Oracle and Blue Owl Capital for a $10 billion data center. Broadcom and Oracle dragged the tech sector down, fueling fears of a potential AI bubble.
The heaviest blow came on Wednesday: the S&P 500 fell 1.16% in a single session, with the Nasdaq down 1.81%. Oracle fell 5.4% as investors questioned the sustainability of its monstrous investments in artificial intelligence infrastructure. Even Nvidia, the undisputed titan of the sector, showed signs of weakness.
Inflation may be above target, but today's data has opened the door just a little further for further rate cuts.
Then came Thursday, and with it the November CPI data that turned the tables. US inflation stood at 2.7% year-over-year, significantly below the 3.1% analysts had expected. But be careful: these numbers should be taken with a pinch of salt. The BLS had to contend with the 43-day government shutdown, which prevented data collection for October and mid-November. Some economists suspect that the survey sample unintentionally captured more Black Friday discounts than it should have.
But the real bombshell exploded after hours on Thursday: TikTok signed an agreement to sell its American operations to a joint venture led by Oracle, Silver Lake, and MGX (Abu Dhabi's sovereign wealth fund). A years-long saga has finally come to an end, with ByteDance retaining a 19.9% stake while the remaining 50% will be transferred to predominantly American investors. The closing is scheduled for January 22, 2026. Oracle shares soared 7% on Friday, dragging the entire tech sector along with them in a buyout session.
Friday was also a day of "triple witching," the simultaneous quarterly expiration of stock options, index options, and futures. Over $7 trillion in derivatives expired, generating exceptional volumes and wide intraday swings. This was all compounded by Carvana's inclusion in the S&P 500, resulting in a rebalancing of index funds.
A sour note came from Nike, which released quarterly results with revenues above expectations but a 17% drop in sales in China and margins squeezed by tariffs. The stock fell 11%, dragging the Dow Jones into negative territory for the week. China remains the Achilles heel of the Beaverton giant, and the additional €1.5 billion in annual costs due to tariffs aren't helping.
🇨🇳 China: Between monetary stimulus and geopolitical tensions
Chinese markets experienced a volatile week, caught between hopes of further stimulus and concerns over rising tensions with Washington. The Shanghai Composite closed essentially unchanged, up a mere 0.03% for the week, while the Shenzhen Component fell nearly 1%. In Hong Kong, the situation was more severe, with the Hang Seng taking a heavy hit on Tuesday, losing 1.54% in a single session.
The People's Bank of China is maintaining a "moderately accommodative" monetary policy, but the market expects more decisive moves. The PBOC conducted reverse repo operations worth 600 billion yuan on December 15, injecting liquidity into the banking system. Analysts expect cuts to rates and the reserve requirement ratio in the coming months, when conditions allow. The problem is that the Chinese economy is showing mixed signals: industrial production is holding up, but domestic consumption remains weak, and the real estate sector continues to weigh on growth.
The U.S. State Department's approval of an $11 billion arms package for Taiwan—the largest in history—has sparked a harsh reaction from Beijing. China's Ministry of Defense threatened "strong measures," accusing Washington of turning Taiwan into a "powder keg" and pushing the region toward "military confrontation and war." Chinese defense and aerospace stocks soared in response to the news.
The World Bank has revised its growth forecast for China: 4.9% for the current year 2025, but with a slowdown to 4.4% expected in 2026. The Beijing government aims to close the year with GDP growth at 5%, but achieving this will require further fiscal interventions. Public spending is expected to be the main driver of growth, with the deficit/GDP ratio reduced to 4% and massive investments in infrastructure and urban renewal.
A positive sign for Asian markets came from the Bank of Japan, which raised rates by 25 basis points on Friday to 0.75%, the highest level since 1995. This widely anticipated move marks the end of the era of ultra-low Japanese rates. The yield on the Japanese 10-year bond surpassed 2% for the first time in over 20 years, potentially impacting global capital flows. The yen carry trade, which for years has funded speculative investments around the world, could experience further contraction.
| Central Bank | Decision | Current Rate | Next Move |
|---|---|---|---|
| Federal Reserve | 25bp cut (10 Dec) | 3.50% - 3.75% | Probable break |
| ECB | Unchanged | 2.00% | Data-dependent |
| Bank of England | 25bp cut | 3.75% | Gradual easing |
| Bank of Japan | 25bp rise | 0.75% | Further increases in 2026 |
| PBOC | Unchanged | LPR 3.10% | Expected cuts |
Looking ahead, investors are preparing for the traditional Christmas week with reduced volumes but still high expectations for the so-called "Santa Claus Rally." Historically, the last five trading days of the year plus the first two of January have seen the S&P 500 rise an average of 1.3%. This year, however, December got off to a slow start, and a final sprint is far from guaranteed. As always, the key will be monitoring upcoming macroeconomic data, sentiment on tech stocks, and the evolution of geopolitical tensions between Washington and Beijing. 2025 is drawing to a close, but the markets show no signs of letting up.
