Inflation cools down, fueling rate hike expectations; US stocks rise, and cryptocurrencies experience a slight correction.

Consumer Price Index Hits Three-Year Low, Federal Reserve Rate Cut Window Widens

The U.S. Bureau of Labor Statistics released November CPI data on Thursday, delighting the market—the year-over-year increase was only 2.7%, the slowest since early 2021, well below the expected 3.1%. Core CPI, excluding food and energy, rose 2.6% annually, also below the anticipated 3% increase. Meanwhile, the number of initial unemployment claims for the week ending December 13 dropped to 224,000, slightly better than the expected 225,000.

This unexpected slowdown in inflation immediately triggered market reactions. The VIX fear index fell 4.37%, the 2-year U.S. Treasury yield briefly dropped to 3.43%, hitting a two-month low, and the 10-year Treasury yield subsequently fell to 4.12%, significantly increasing the likelihood of further Fed rate cuts.

However, economists questioned the authenticity of the data. Capital Economics economist Ashworth pointed out that housing prices have been essentially flat over the past two months, which seems unusual, especially as the rise in rent and other service items has suddenly halted—an uncommon phenomenon outside recession periods. Morgan Stanley economist Gapan suggested that some data fluctuations might stem from methodological issues, as the Bureau of Labor Statistics has continued using past price data in certain categories. Experts generally agree that December data needs to be released to verify whether this is a statistical anomaly or a genuine slowdown in inflation.

U.S. Stock Market’s Three Major Indices Rise Together, Tech Stocks Shine

The shift in inflation expectations drove a rally across the U.S. stock market, with the three major indices closing up: Dow +0.47%, S&P 500 +1.16%, Nasdaq +1.81% to 23,006 points, with the Nasdaq ending a four-day losing streak. European markets also gained, with UK stocks up 0.65%, France up 0.8%, and Germany leading with a 1% increase. The China Golden Dragon Index rebounded 0.97%.

In popular stocks, memory chip maker Micron Technology surged over 10% on strong earnings outlooks, becoming a market focus. Amazon shares rose 2.5%, the best performer among Dow components. Tesla gained 3.5%, Nvidia and Oracle rebounded 1.9% and 0.8%, respectively, while Apple stabilized after fluctuations.

Cryptocurrency Under Pressure, Bitcoin and Ethereum Both Retreat

Despite strong traditional stock market performance, the cryptocurrency market showed signs of correction. Bitcoin fell 0.94% in 24 hours, currently at $85,406; Ethereum declined 0.25%, now at $2,825. This trend contrasts with the robust performance of traditional assets and may reflect a shift in investor risk appetite.

In Hong Kong stocks, the Hang Seng night futures closed at 25,675 points, up 161 points, 177 points above yesterday’s close; the China Enterprises Index night futures closed at 8,903 points, 61 points higher than yesterday’s close.

Diverging Global Central Bank Policies, Rate Cut Pace Faces Adjustment

The European Central Bank held its fourth consecutive meeting, keeping interest rates unchanged, with deposit rates at 2%. According to sources, based on the latest economic outlook, ECB officials believe the rate cut cycle is likely over. After eight rate cuts, officials stated that unless significant shocks occur again, deposit rates should remain at 2%. Regarding market expectations of rate hikes next year, policymakers said any discussions about raising rates are premature.

The Bank of England announced a 25 bps rate cut to 3.75% on Thursday, in line with expectations, the lowest since February 2023. Governor Bailey voted in favor of the cut, noting that interest rates are on a gradual downward trajectory and that inflation decline has been further confirmed. However, the BOE also acknowledged that further easing of monetary policy will become more difficult, and the pace of rate cuts may slow at some point, though the timing remains uncertain.

The Bank of Japan will announce its rate decision today, with market attention on whether it will follow the global trend of policy adjustments.

Commodity Markets Diverge, Gold Retreats While Copper Remains Supported

Commodity markets show divergence. Gold fell 0.15%, at $4,332.5 per ounce, after a rally. WTI crude oil declined 1.48%, at $55.9 per barrel. The U.S. dollar index rose 0.02% to 98.4, USD/JPY fell 0.08%, and EUR/USD declined 0.14%.

Copper demonstrated resilience. NY copper futures have gained 34% this year, and London copper hit a new high of $11,952 per ton last Friday. BHP CEO Henry stated that copper is similar to rare earths, with widespread applications in semiconductors, electronics, construction, and military sectors, with a market value of $300-400 billion annually. Demand is expected to grow 70% from now until 2050, but supply is becoming increasingly difficult due to fewer new discoveries, smaller and lower-quality deposits. BHP is confident that supply tightness will continue into next year and even until 2030. UBS forecasts copper prices could reach $13,000 per ton by the end of next year.

Company News Steals the Spotlight, AI Models and Infrastructure Focus

Nike plunged nearly 10% after hours to $59.20. The company’s Q2 revenue was $12.43 billion, up 0.6% YoY; net profit was $792 million, down 32% YoY; EPS was $0.53, down 32%. Gross margin declined from 43.6% to 40.6%.

Meta is secretly developing a new image and video AI model codenamed Mango, alongside next-generation large language models. According to the Wall Street Journal, these models are expected to be released in the first half of 2026. Deutsche Bank’s latest global market survey shows that AI-related valuation risks have become the biggest single threat to market stability in 2026, with 57% of respondents citing a sharp decline in tech stock valuations as the top risk next year.

Progress has been made in Oracle and OpenAI’s collaboration. Michigan regulators approved DTE Energy’s request to support the power supply for a large data center project. The facility, located in Saline Township, will cost billions of dollars and have a capacity of 1.4 GW. According to OpenAI and Oracle, their nationwide partnership plans will exceed 8 GW of capacity, bringing over $450 billion in investments over the next three years.

Market Volatility Continues, Many Highlights in the Coming Week

Key economic data due this week include Japan’s November core CPI YoY, Germany’s January GfK consumer confidence index, Germany’s November PPI MoM, Eurozone December consumer confidence preliminary, US December University of Michigan consumer sentiment final, and US November existing home sales annualized. The Trump administration announced federal government closures on December 24 and 26, but the NYSE stated trading hours before Christmas will remain unchanged. On December 24, the market will close early at 1 p.m. New York time; December 26 will be a full trading day.

Inflation data shifts provide new reference points for future policies. While U.S. stocks are performing strongly in the short term, factors such as AI valuation risks, Fed policy shifts, and private capital market crises remain important. Investors should closely monitor upcoming developments.