Global News Summary : 6-12 Dec 2025 and Market Outlook end 2025 and towards 2026
Global markets shifted from rate-cut optimism to cautious reassessment. Early in the week, expectations of easier monetary policy supported bonds and equities, particularly AI-linked stocks, but by Friday 13 December profit-taking in AI leaders, rising long-dated yields and renewed Fed pushback on inflation cooled sentiment. Growth signals diverged: the UK flirted with recession, China showed weak credit demand and low inflation, while Japan’s inflation–wage cycle stayed firm and the US economy slowed but did not break. Inflation globally moderated but remained sticky enough to constrain central banks. The net result was rotation, not capitulation—AI enthusiasm cooled, diversification returned, and markets ended the period more cautious, yet still broadly constructive heading into 2026.
United States
Economic growth / recession: Growth momentum softened but recession fears did not dominate; policy uncertainty rose after mixed Fed signals.
Jobs: Labour market described by Fed officials as “cooling but resilient”, not yet weak enough to justify aggressive easing.
Debt securities: Despite the Fed’s third rate cut, yields backed up late week: 10Y Treasury 4.19% (+4 bp on 13 Dec); 30Y at a 3-month high. Bond funds earlier saw inflows as investors positioned for easing.
Inflation: Fed dissent emerged; officials (Hammack, Schmid) argued inflation remained too high for comfort, explaining policy pushback.
AI: Profit-taking hit AI leaders on 13 Dec (Nasdaq −1.9%). Broadcom −11% on weaker AI sales outlook; Oracle’s rising capex and delayed data centres raised concerns about AI monetisation timing.
ESG: No major ESG policy shift this week; focus remained on rates and AI policy.
United Kingdom
Economic growth / recession: GDP −0.1% m/m in Oct (after −0.1% in Sep); 3-month GDP −0.1%, weakest run since late 2023, keeping the UK near technical recession.
Jobs: Hiring remained weak; labour market slackening added to growth concerns.
Debt securities: Markets priced a Bank of England cut to ~3.75% at the December meeting.
Inflation: Cooling inflation supported easing expectations, but growth weakness was the dominant theme.
AI / ESG: No major UK-specific AI or ESG headline this week; macro fragility dominated.
European Union (Eurozone)
Economic growth / recession: Growth sluggish but stable; no acute recession signal.
Debt securities: ECB officials signalled no urgency to cut rates, maintaining a higher-for-longer bias.
Inflation: Risks remained on the upside due to wage growth and tight labour markets.
AI: Ongoing implementation of EU AI rules; no major new enforcement step this week.
ESG: EU discussions continued around the use of ~€210bn of frozen Russian assets, highlighting ESG-geopolitical intersections.
China
Economic growth: Weak demand persisted. New yuan loans (Nov): 390bn yuan, below expectations and prior year.
Jobs: Employment data was not the focal point; confidence and demand were the concern.
Debt / credit: Household loans −206bn yuan, while corporate loans +610bn yuan, underscoring fragile consumer sentiment.
Inflation: CPI +0.7% y/y, still very low, reinforcing deflation concerns.
AI: China continued positioning itself in global AI governance; no major numeric release.
Recession risk: Not in recession, but growth risks remained tilted down.
Japan
Economic growth: Stable but overshadowed by inflation dynamics.
Jobs / wages: Strong wage momentum continued; major unions targeting ≥¥12,000/month base pay rise for 2026.
Inflation: Core CPI ~3.0% y/y, well above the BOJ’s 2% target.
Debt securities: Markets anticipated further BOJ normalisation (possible move towards 0.75%).
AI / ESG: Not a dominant headline during this period.
Australia
Economic growth: Growth around 2.1%; economy slowing but resilient.
Jobs: Mixed labour data: full-time −56,500, part-time +35,200 (Nov); unemployment ~4.3%.
Debt securities: RBA cash rate 3.60%; policy remained restrictive but stable.
Inflation: ~3.8%, still above target but trending lower.
AI / ESG: AI framed as a productivity lever; ESG investment themes steady.
Recession: Not imminent.
New Zealand
Economic growth: Early signs of recovery following prior RBNZ easing.
Jobs: Unemployment around 5.3%.
Inflation: Food prices +4.7% y/y, still pressuring households.
Debt securities: No major bond headline this week.
AI / ESG: No major developments in this period.
Singapore
Economic growth: No major GDP release this week.
Inflation: CPI ~1.2% y/y, among the lowest in developed Asia.
Debt securities: 15-year SGS yield ~2.35%, edging higher with global rates.
AI: Continued emphasis on trusted AI governance frameworks.
ESG: Sustainable finance positioning ongoing, without a specific weekly trigger.
Recession: Not a near-term concern.
Switzerland
Economic growth: Forecast growth ~1.2%.
Inflation: Exceptionally low; ~0.2%–0.4% projected into 2026.
Debt securities: 10Y Swiss yield ~0.3%; SNB expected to keep rates at 0%.
FX / policy: SNB prepared to use FX intervention rather than negative rates.
AI / ESG: No major developments this week.
Recession: Low risk, supported by price stability.
Bottom Line
The period marked a transition from optimism to discipline. Rate cuts remained supportive, but inflation constraints, higher yields and AI valuation realism tempered enthusiasm. Growth outcomes diverged sharply by region, reinforcing rotation and diversification rather than wholesale risk-off behaviour.
Market Outlook: Year-End 2025 and 2026
As 2025 draws to a close, global markets are shifting from rate-cut enthusiasm to disciplined realism. Growth is slowing but not stalling, inflation is easing but still restrictive, and central banks are becoming more cautious. The dominant story is rotation rather than recession.
Into year-end 2025, most major economies are expected to decelerate without tipping into recession. The United States remains resilient, supported by consumption and AI-linked investment, while the UK and parts of Europe flirt with stagnation. China continues to stabilise through targeted stimulus, though property remains a structural drag. Japan stands out, with sustained wage growth keeping inflation above target and supporting domestic demand. Inflation globally is moderating, but not fast enough to give central banks full freedom, keeping long-term interest rates range-bound rather than collapsing.
Markets are responding accordingly. After a powerful AI-led rally, valuation discipline has returned, with investors increasingly demanding earnings delivery rather than narrative. Equity markets are unlikely to repeat the outsized gains of recent years, but the outlook remains constructive, with modest returns and growing sector rotation. Bonds are regaining relevance as yields stabilise, while volatility is set to remain higher than in the immediate post-pandemic period.
Looking into 2026, the picture improves modestly. The effects of earlier rate cuts should feed through to activity, while AI-driven productivity gains begin to show more clearly in corporate earnings and economic data. Growth broadens beyond the US, leadership diversifies across regions and sectors, and equities are expected to deliver another year of positive returns, albeit with greater dispersion.
The bottom line is clear: the AI bubble is deflating, not bursting, inflation is no longer the shock but remains the constraint, and the global economy is transitioning from stimulus-led support to productivity-led growth. For investors, the coming period favours selectivity, diversification and patience — not panic.