Key Takeaways

• The Federal Reserve indicated a potential December rate cut, increasing global market volatility and shifting risk sentiment.
• ECB data shows that eurozone inflation remains persistent despite a slowdown in growth.
• Italian equities advanced, supported by strong Q3 earnings in the energy and tech sectors.
• The dollar weakened against both the euro and the yen following the Fed’s dovish outlook.
• Market participants are reassessing risk in response to contrasting monetary signals across the Atlantic.

Below, the full context and reactions.

Introduction

On 23 November 2025, the Federal Reserve’s announcement of a possible December rate cut heightened global market volatility, prompting traders to reassess risk as the dollar weakened against the euro and yen. This market press review highlights these pivotal policy signals and the persistent nature of eurozone inflation, despite broader signs of slowing growth.

Notizia principale

Rate cut signals emerge

The Federal Reserve signaled a potential rate cut at its December meeting, according to minutes from the November Federal Open Market Committee (FOMC) meeting. Several committee members voiced concerns about overtightening policy, citing decelerating inflation and moderating labor market conditions. The minutes showed a growing consensus that economic risks are becoming more balanced.

Markets reacted quickly. The S&P 500 rose 1.2 percent and the Nasdaq Composite gained 1.8 percent in afternoon trading. Treasury yields declined sharply, with the benchmark 10-year yield dropping 15 basis points to 3.85 percent, the lowest level since September.

Fed Chair Jerome Powell maintained a cautious tone following the minutes’ release. He stated that the committee remains data dependent and will closely monitor economic indicators. Powell emphasized the need to see sustained evidence of inflation moving back toward the two percent target before making policy changes.

Market implications

Traders quickly revised expectations. The probability of a 25-basis-point rate cut in December, as priced by fed funds futures, rose to 78 percent from 45 percent a week earlier. Banking analysts said this shift marks a significant change, as most market participants had assumed rate cuts would begin no sooner than March 2026.

David Mericle, Chief Economist at Goldman Sachs, stated that the Fed is increasingly confident that inflation is on a sustainable downward path, which may allow monetary easing before significant economic damage occurs. Other Wall Street analysts echoed this outlook, with many updating forecasts to include at least two rate cuts by mid-2026.

The prospect of lower rates provided an immediate boost to rate-sensitive sectors. Real estate and technology stocks outperformed the broader market, with the Philadelphia Housing Index up 2.3 percent and the semiconductor index rising 2.7 percent.

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ECB’s changing inflation outlook

European Central Bank officials have adjusted their inflation outlook, with several Governing Council members suggesting that price pressures are subsiding more quickly than anticipated. Chief Economist Philip Lane stated that recent data point to a clearer disinflation path during a conference in Frankfurt.

Eurozone inflation figures for October reached 2.4 percent, moving closer to the ECB’s two percent target more rapidly than predicted in September forecasts. Core inflation fell to 2.7 percent from 2.9 percent the previous month.

Markets are now pricing in potential ECB rate cuts as early as April 2026. The euro weakened against the dollar following these developments, while European bond yields declined. Germany’s 10-year Bund yield fell 8 basis points to 2.18 percent.

UK inflation surprises to the downside

Inflation in the United Kingdom declined more than expected in October, dropping to 2.3 percent from 2.7 percent in September, according to the Office for National Statistics. This is the closest inflation has come to the Bank of England’s two percent target since July 2024.

Core inflation decreased to 2.5 percent, and services sector inflation eased to 3.8 percent from 4.1 percent. Bank of England Governor Andrew Bailey called these results encouraging, but emphasized that continued progress is necessary before considering rate cuts.

The pound sterling weakened by 0.7 percent against the dollar following the release, and UK gilt yields also fell. The probability of a rate cut at the February 2026 meeting rose to 65 percent from 40 percent prior to the data release.

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Italian budget receives cautious market approval

Italy’s 2026 budget proposal received tentative approval from market participants, with Italian government bond spreads narrowing against German Bunds. The budget aims to reduce the deficit to 3.1 percent of GDP by 2027 through moderate spending cuts while maintaining key social programs.

Prime Minister Giorgia Meloni described the approach as responsible, stating that the government remains committed to fiscal sustainability while protecting essential services. European Commission officials expressed preliminary support but said a formal assessment will follow after a full review in December.

The yield spread between Italian 10-year bonds and German Bunds narrowed to 135 basis points, the smallest gap since August. Banking analysts see this as an indication of growing investor confidence in Italy’s fiscal approach but caution that implementation risks persist.

German manufacturing continues to struggle

Germany’s manufacturing sector weakened further in November, as preliminary PMI data dropped to 46.2, the lowest level in six months and below the threshold separating expansion from contraction. The services sector provided some offset, improving to 52.1 from 51.6 in October.

These results highlight the ongoing challenges for Europe’s largest economy, which faces high energy costs, weak export demand, and persistent structural issues. Clemens Fuest, President of the Ifo Institute, stated that the manufacturing downturn shows no signs of abating and may weigh on overall economic performance into 2026.

Germany’s DAX index closed down 0.4 percent, underperforming other major European markets. Automotive and industrial stocks saw particular weakness, with Volkswagen and Siemens declining 1.8 percent and 1.5 percent respectively.

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Dollar weakness accelerates

The U.S. dollar continued to decline against major currencies, with the Dollar Index (DXY) falling 0.9 percent to its lowest level since February. This trend reflects expectations for Federal Reserve rate easing and stronger relative growth in some international economies.

Currency strategists at Morgan Stanley noted that the dollar is responding to classic drivers: expectations of Fed easing and improving growth prospects elsewhere. The dollar’s recent decline has been broad, affecting both developed and emerging market currencies.

Trading volumes were higher than average, suggesting that institutional repositioning played a role, not just speculative activity. Several market participants emphasized the importance of disciplined trading as volatility may increase further in coming sessions.

Chinese yuan gains on stimulus hopes

The Chinese yuan strengthened against the dollar after reports indicated that Beijing is preparing additional economic stimulus measures. Sources familiar with the discussions said authorities are considering initiatives such as infrastructure spending, property market support, and incentives to boost consumption.

The offshore yuan rose 0.7 percent against the dollar, marking its biggest daily gain in three months. The currency’s movement occurred alongside a 2.3 percent rise in the Shanghai Composite Index, as investors welcomed the stimulus outlook.

Analysts cautioned that, while short-term trading opportunities may arise, disciplined approaches are essential. Helen Yang, currency analyst at DBS Bank, stated that traders need to distinguish between reactionary moves and longer-term trends, as initial enthusiasm about stimulus must be supported by real economic improvement.

Market Wrap

Index performance

Major U.S. indices closed higher, with the S&P 500 up 1.2 percent to 5,982, and the Dow Jones Industrial Average rising 0.8 percent to 41,235. The Nasdaq Composite outperformed, gaining 1.8 percent to 18,720 on expectations of lower interest rates.

European market performance was mixed. The STOXX 600 climbed 0.3 percent despite German weakness, the UK’s FTSE 100 added 0.5 percent, and France’s CAC 40 gained 0.2 percent. Italy’s FTSE MIB led gains, rising 0.9 percent on positive budget sentiment.

Asian markets showed strength overnight. Japan’s Nikkei 225 advanced 1.1 percent, Hong Kong’s Hang Seng jumped 2.7 percent, and China’s Shanghai Composite climbed 2.3 percent, marking its best session since July.

Sector and commodity movements

Technology and real estate performed best among U.S. sectors, rising 2.2 percent and 2.1 percent respectively as lower rate expectations boosted valuations. Energy was the only S&P 500 sector to fall, declining 0.6 percent as oil prices dropped.

Oil prices declined, with WTI crude down 1.5 percent to $76.40 per barrel and Brent crude falling 1.3 percent to $80.20. Gold continued its upward trend, gaining 0.7 percent to $2,680 per ounce, supported by dollar weakness and anticipated rate cuts.

Bond markets rallied broadly. The U.S. 10-year Treasury yield fell 15 basis points to 3.85 percent, and corporate bond spreads tightened, especially in high-yield categories.

Conclusion

This market press review highlights the Federal Reserve’s pivotal signal on the potential for a December rate cut, which drove notable volatility across equities, bonds, and currencies. Persistent eurozone inflation and divergent performances across major European markets point to continued uncertainty for traders in evolving monetary conditions.

For those seeking to adapt to rapidly changing markets, developing a resilient market volatility mindset is essential for maintaining consistency. In addition, incorporating robust risk management frameworks can help safeguard trading strategies during periods of elevated uncertainty.

What to watch: The December FOMC meeting and the European Commission’s assessment of Italy’s budget will be key for the next phase of policy and market direction.