Weekly Market Outlook | 15–19 December

Last week, European equity markets outperformed their U.S. peers, where only the Dow Jones Industrial Average avoided losses among the major indices. In contrast, European equities closed the week broadly higher, with both the German DAX and peripheral markets — led by a strong performance from Spain’s IBEX — finishing the five sessions in positive territory despite a challenging Friday.

The week was dominated by cyclical sectors, particularly financials and industrials, which outperformed technology stocks. More broadly, markets were shaped by meetings of four major central banks — the Federal Reserve, Swiss National Bank, Bank of Canada, and Reserve Bank of Australia — none of which delivered meaningful surprises. For the Federal Reserve, only three meetings remain before the upcoming leadership change, making any significant shift in guidance unlikely at this stage.

Meanwhile, the U.S. dollar weakened against most major peers, with the notable exception of the Japanese yen. WTI crude oil ended at its lowest weekly level since February 2021, pressured by persistent oversupply dynamics despite ongoing macroeconomic tensions. Natural gas prices also fell sharply, declining by around $1, or nearly 20%, over the week.

Key Points to Watch

• The ECB’s rate decision and President Lagarde’s press conference, preceded by the Bank of England’s policy decision on Thursday, will be key events for European markets. The Bank of Japan will announce its decision the following day.
• This will be the final full-liquidity trading week of the year. Month-end and quarter-end positioning, combined with portfolio rebalancing, may amplify market moves around major data releases.
• Continued pressure on technology valuations and a potential extension of equity sector rotation toward cyclicals.
• U.S. nonfarm payrolls and flash PMIs for major economies (U.S., Eurozone, UK) will provide further insight into global economic momentum.

Europe and the United Kingdom

In the euro area, final CPI inflation data and the German ZEW sentiment survey will shape expectations for the European rates outlook, with the ECB widely expected to remain on hold at this meeting. Attention will also focus on industrial production data, following recently better-than-expected — though still weak — export figures.

EU heads of state and government will convene in Brussels on Thursday 18 and Friday 19 December for the European Council meeting, with preparatory sessions beginning on Wednesday. The summit will address key geopolitical and budgetary issues, including support for Ukraine and the EU’s multi-annual financial framework.

In the UK, upcoming labour-market data and sentiment indicators will influence expectations for future Bank of England policy decisions. Sterling remains sensitive to domestic data surprises and shifts in global risk appetite, particularly as fiscal considerations re-enter the market narrative.

United States and Canada

Flash PMIs will be released in the United States alongside retail sales data. Most notably, nonfarm payroll figures for both October and November will be published simultaneously on Tuesday, following delays caused by the recent government shutdown.

CPI inflation data will be released in both the United States and Canada and remains firmly in focus, especially given the recent steepening at the long end of yield curves. On Friday, markets will also watch the University of Michigan consumer sentiment survey.

Several Federal Reserve officials, including Williams and Bostic, are scheduled to speak during the week, with markets closely parsing their comments for clues on the 2026 policy outlook and rate expectations

Asia-Pacific

On Friday morning, the Bank of Japan will deliver a policy decision widely viewed as finely balanced. Some economists expect a rate hike to 0.75%, which would further narrow interest-rate differentials with other advanced economies. The decision will follow the release of trade data and the Tankan large enterprise survey.

In China, attention will focus on early-week macro releases, including industrial production, retail sales, and fixed-asset investment, which will provide key signals on regional demand and implications for emerging-market assets.

In New Zealand, markets will also digest GDP figures, the trade balance, and the business outlook survey.

Conclusion

The week ahead will again be rich in macroeconomic data and central-bank decisions, with the Bank of Japan posing the greatest risk of triggering sharp moves in the Japanese yen.

This also marks the final week of full trading activity for the year. From next week onward, reduced institutional participation and thinner liquidity could lead to unusual price action. Historically, this period often coincides with lower volatility and the so-called Santa Claus rally, as the final week of the year is statistically the fourth-best week for the S&P 500.

However, this pattern is not guaranteed, particularly given the renewed volatility seen late last week. Investors should therefore remain attentive to year-end rebalancing dynamics to ensure a smooth transition into the holiday period.