More of the Same: Gentle Dollar Down-Drift and Resilient Equities
December 5, 2025
Friday has seen several data releases but without meaningful impact on world financial markets as 2025 draws closer to its end. Prior to the release of U.S. personal income & consumption, consumer confidence, and the all-important PCE price deflator, the dollar was trading 0.1% lower against the euro, Swiss franc and on a weighted basis. Sterling had risen 0.2%, and somewhat larger drops of the greenback had occurred against the Canadian, Australian and New Zealand dollars. Major U.S. stock indices opened higher. Asian equity markets closed up 1.8% in South Korea, 0.7% in China and Taiwan and 0.6% in Hong Kong but down 1.1% in Japan. There’s been little change in most European stock markets, but the German DAX (down 0.9%) has been an exception. Bitcoin’s price sagged 1.6% overnight, but gold firmed by 0.5%. Ten-year sovereign debt yields climbed two basis points in the U.K. and U.S. and by a basis point in Germany and Japan.
The Reserve Bank of India’s policy interest rate was cut by another 25 basis points after the final scheduled monetary policy review in 2025. The action was decided unanimously, had been widely anticipated and brings the rate to 5.25% versus a peak of 6.5% maintained for two years until an initial cut last February. A downward modification of projected inflation in spite of an upward shift in expected growth helped justify the interest rate reduction. According to a released statement,
The growth-inflation balance, especially the benign inflation outlook on both headline and core, continues to provide the policy space to support the growth momentum. Accordingly, the MPC unanimously voted to reduce the policy repo rate by 25 bps to 5.25 per cent. The MPC also decided to continue with the neutral stance. However, Prof. Ram Singh was of the view that the stance be changed from neutral to accommodative.
The second estimate of Euroland GDP growth last quarter revises an initially reported 0.2% increase to +0.3%. Year-on-year growth held at 1.4%. Business investment, which had recorded a 1.7% quarterly drop in 2Q swung to a 0.9% increase in the summer quarter. Personal consumption (+0.2%), government expenditures (+0.7%) and inventories (which enhanced GDP growth by 0.1 percentage point) made positive contributions to the economy, while the drag of net foreign demand (-0.3 ppts) was limited by a 0.7% rise in exports. The revised third-quarter GDP growth rates of Euroland’s big-four economies ranged from zero percent and 0.1% in Germany and Italy to 0.5% and 0.6% in France and Spain.
Employment in the euro area increased 0.2% in the third quarter, but the year-on-year rise slowed to 0.6% from 0.7% in 2Q and 1.0% in the summer quarter of 2024.
Swedish GDP in the third quarter climbed 0.6% from 2Q and by 2.6% versus the summer quarter of 2024.
In October, industrial production rose 0.7% in Spain but by a 6-month low 1.2% from a year earlier. Industrial production in France increased 0.2% on month and 1.7% versus the October 2024 level. German industrial orders experienced their second strong advance in October, climbing by 1.5% after September’s 2.0% increase, but the latest three-month over three-month change was still negative (-0.5%) due to a string of four declines in May through August.
Released Japanese data today revealed 1) a $12 billion rise of reserves to a 44-month high of $1.36 trillion, 2) October declines in household spending of 3.5% on month and 3.0% on year, and 3) a 17-month high in the index of leading economic indicators and 4) a 4-month high in the index of coincident economic indicators.
Brazilian producer prices dropped by 0.5% in October, the most since May and resulting in the largest year-on-year decline (-1.8%) in a year and a half.
Austrian wholesale prices increased 0.9% in November compared to both October and November 2024.
The British Halifax house price index held steady in November, which sliced its 12-month rate of rise to a 20-month low of 0.7% from 1.9% in October and 4.7% in November 2024.
The non-oil purchasing managers index for the United Arab Emirates improved a full point to a 9-month high of 54.8 in November.
The Canadian dollar responded favorably to much better-than-forecast Canadian labor statistics released today. (The U.S. monthly employment situation report, which often gets released on the same day as Canada’s, will arrive later this month). Meanwhile, Canada’s jobless rate plunged almost a half percentage point to 6.5% (a 16-month low) from 6.9% in October. Also Canadian employment (+53.6K in November) recorded its third straight increase of at least 50K.
Just In from the U.S.: The preliminary measure of consumer sentiment compiled by U. Michigan/Reuters remained quite low in December, bouncing 2.3 points above November’s all-time trough of 51.0 but not quite to October’s 53.6 level. By contrast, the 3-month sequence right after President Trump’s election victory showed a spike to 71.8 in November 2024 followed by 74.0 in December and 71.1 in November. Handling the economy had been cited by a majority of his supporters in exit polls as the main reason behind their vote, but many now feel let down.
U.S. personal income in September rose 0.4%, slightly more than predicted and associated with an as-forecast 0.3% rise in personal expenditures. Inflation measured by the FOMC-favored PCE price deflator edged up 0.1 percentage point to a 17-month high of 2.8% in September. Excluding food and energy, the core price deflator edged 0.1 percentage point lower but stayed well above the 2% target at 2.8%. Investors nonetheless anticipate a cut in the Fed’s policy interest rate to be announced next Wednesday.
Copyright 2025, Larry Greenberg. All rights reserved.
Tags: Canadian jobless rate and employment growth, Euroland GDP and employment growth, German industrial orders, Reserve Bank of India, U.S. consumer confidence, U.S. personal income and consumption
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