Major indices worldwide entered a holding pattern this week, trading more or less flat following a volatile November. The Nasdaq (+0.6% at the time of writing), S&P 500 (+0.12%), and the Dow Jones Industrial Index (+0.28%) are largely unchanged for the month-to-date, despite a sell-off followed by a sharp snapback in November.
After the AI-related jitters of November, investors appear to be waiting to see whether or not the US Federal Reserve cuts interest rates next week. Markets are currently pricing in a high probability of Fed easing. The CME FedWatch tool shows roughly an 89% chance of a 25 basis-point cut at next week’s meeting.
Sentiment is guided by the belief that the Fed will be more concerned about the labour market than about inflation. Recent job data is mixed, with lower-than-expected jobless claims counterbalanced by payroll surveys indicating relatively high layoff numbers for the month.
Later today, the release of Personal Consumption Expenditures (PCEs), one of the Fed’s preferred inflation gauges, may give markets further direction. If the PCEs confirms that inflation is cooling, that will clear the way for a rate cut and boost the appetite for risk. However, a reading that indicates stickier inflation may cause renewed volatility.
Markets are also digesting speculation that Kevin Hassett will replace Jerome Powell as Fed Chairman. Hassett is the White House’s top economic advisor. He would be expected to take a more dovish stance than his predecessor, in line with President Donald Trump’s preference for lower interest rates.
December is a historically strong month for US stocks. But it is also a month when stock market volatility edges higher because many traders are on holiday and thinner trading volumes exaggerate market movements.
As 2025 comes to an end, many of the risks in play at the start of the year are still with us. These include geopolitical uncertainty, high levels of concentration risk due to the dominance of a few mega-cap stocks, worries about US government debt, and concerns about whether AI will deliver the returns that justify tech stocks’ rich valuations.
Some market participants are also expressing concerns that rising government bond yields in Japan could trigger an unwinding of the Yen carry trade, removing substantial liquidity from the financial system. On the upside, Trump’s tariffs have had a more muted effect on inflation, economic growth and equities than was expected back in April.
If the Fed cuts rates, we would anticipate a flat-to-mildly positive finish to December to crown a year that has delivered positive returns amid volatile trading.
“The markets have done well year-to-date, with strength in the back half of November, and I think it wouldn’t be surprising to me to see markets just kind of move sideways from here.”
– Tim Holland, Chief Investment Officer at Orion
“Right now, the data argues for additional Fed funds rate cuts. US labour demand is weak, consumer spending is showing early signs of cracking, and upside risks to inflation are fading.”
– Elias Haddad at Brown Brothers Harriman & Co
Global News
- Ahead of next week’s interest rate decision, the Fed appears deeply split over its next interest-rate move, according to a report by Bloomberg. After cutting rates by more than one percentage point over the past year, officials are now openly debating whether to pause or cut again as early as next week. The disagreement, the widest since at least 2012, stems from differing views on the economy: some policymakers believe conditions warrant another rate cut, while others worry that further easing could reignite inflation. Fed Chairman Powell has said there are “strongly differing views” on whether to prioritise inflation or employment. As a result, the upcoming 9 to 10 December meeting could further expose those divides, leaving markets uncertain about the Fed’s long-term direction.
- Trump on Sunday said he has decided who he will appoint to succeed Powell, telling reporters, “I know who I’m going to pick,” but declining to name the candidate. National Economic Council head Kevin Hassett, widely seen as a contender, said markets appear “ready” for a Trump nominee, pointing to falling bond yields and strong demand at a recent US Treasury auction. He dismissed speculation about his own role and surrounding rumours, adding that recent market moves suggest investors would be comfortable with a change in Fed leadership when Powell’s term ends.
- US private-sector payrolls fell by 32,000 in November, the largest drop since early 2023, according to data released on Wednesday by ADP Research. Payrolls have declined in four of the past six months, compared with economists’ expectations of a 10,000 gain in a Bloomberg survey. The weak report may increase concerns about a faster deterioration in the labour market ahead of the Fed’s policy meeting next week, especially as the shutdown delayed the government’s November jobs report.
- US Black Friday sales rose from a year earlier, signalling that consumers are still spending despite economic concerns. Mastercard SpendingPulse data showed retail sales, excluding autos, increased 4.1% on the day after Thanksgiving, up from last year’s 3.4%, with in-store sales up 1.7% and online sales rising 10.4%. Spending was particularly strong in electronics, apparel, and dining, suggesting households remain willing to spend even under pressure, supporting signs that consumer demand continues to underpin the US economy heading into the holiday season.
- EU government and European Parliament representatives agreed on Wednesday to phase out Russian natural gas imports by late 2027, ending the bloc’s long-standing reliance on Russian energy. Under the plan, liquefied natural gas imports will end by 2026 and pipeline gas by September 2027. As of October, Russia accounted for 12% of EU gas imports. The European Commission plans to propose a phase-out of remaining Russian oil imports by early 2026.
- The US is stepping up efforts to secure critical minerals and supply chains needed for Artificial Intelligence (AI), as competition with China intensifies. The plan involves working with a group of allied countries to reduce reliance on China for key materials used in chips, magnets, and other AI-related technology. Officials say the initiative aims to strengthen links among mining, processing, and manufacturing, with coordination set to begin at a White House meeting on 12 December, as part of a broader strategy to shore up supply security in strategically important technologies.
- A global surge in demand for AI is triggering a new supply-chain squeeze, as shortages of memory chips push prices sharply higher. Tech giants such as Microsoft, Google, and ByteDance are competing for limited supplies from major producers, including SK Hynix, Samsung Electronics, and Micron. At the same time, makers of smartphones and other consumer devices warn that costs are likely to rise. With inventories at record lows and little scope to expand traditional memory production before 2027 to 2028, the shortage risks slowing AI rollouts, delaying broader tech upgrades, and adding pressure on global inflation.
- Moore Threads Technology Company, a Chinese AI-chip and GPU maker, raised about US$1.13 billion yesterday in what became the second-largest onshore IPO of 2025, with its shares surging by as much as 502% in their Shanghai trading debut. The listing underlines China’s growing push for home-grown alternatives to foreign AI-chip suppliers, especially amid rising global demand for AI hardware and mounting geopolitical pressure on foreign suppliers. Analysts see Moore Threads as part of a wave of domestic chip companies stepping into the spotlight as Beijing supports technological self-reliance in semiconductors.
- Alphabet’s investors are increasingly optimistic that its custom AI chips, known as TPUs (tensor processing units), could become a significant new revenue source, potentially worth up to $900 billion. Once an internal advantage powering Alphabet’s cloud infrastructure, TPUs are now generating external interest after recent deals, including a multi-billion-dollar agreement to supply chips to Anthropic and reported interest from Meta Platforms. If Alphabet begins selling TPUs more broadly, analysts estimate they could capture about 20% of the global AI-chip market, turning what was once just a performance edge into a potentially transformative profit engine.
- Amazon’s cloud unit has launched its latest AI chip, Trainium3, with a limited rollout in data centres and for customers as of Tuesday, said AWS VP Dave Brown. The chip is central to Amazon’s push to compete with Nvidia and Google in AI hardware. AWS dominates cloud computing and storage, but has lagged among AI developers, many of whom prefer Microsoft or Google.
- Meta Platforms is expected to cut resources for its metaverse effort by as much as 30% next year, the company confirmed yesterday. The metaverse group, which includes Horizon Worlds and Quest virtual reality, could face layoffs as early as January, although no final decisions have been made. Meta confirmed resources are shifting from the metaverse toward AI glasses and wearables. The proposed cuts follow Zuckerberg’s request for 10% savings across divisions during 2026 budget planning, sources said. Shares of Meta gained 3.4% to $661.53.
- Salesforce on Wednesday raised its revenue forecast after reporting strong demand for its AI offerings, signalling growing enterprise adoption of its AI tools. The company said revenue for the quarter ending in January is expected to be $11.1 to $11.2 billion, above analysts’ expectations of around $10.9 billion. Salesforce highlighted its AI platforms Agentforce and Data 360 as key growth drivers, noting a surge in adoption that underpins its bullish forecast for the rest of the year.
- As at Thursday’s close the S&P 500 was 0.12% up for the week.
Local News
- The National Planning Commission (NPC) on Wednesday published proposed reforms to redirect pension-fund savings into domestic infrastructure by using Regulation 28 of the Pension Funds Act to lower the current 45% offshore investment limit. The NPC estimates that reallocating 20% of pension assets could unlock a R1 trillion infrastructure pipeline and generate at least R5 trillion in gross fixed capital formation. While critics warn that the changes could increase risks for retirees and affect capital allocation, the NPC argues that the reforms would mobilise significant private capital to meet the country’s infrastructure needs.
- ANC Deputy President Paul Mashatile yesterday said the party’s once strong donor support has “vanished” since the Political Party Funding Act came into effect, as many donors are reluctant to have their contributions publicly disclosed. The loss of private funding has placed the party under severe financial strain, contributing to the late payment of staff salaries at the end of November. In response, the ANC is pushing for increased public funding through the Represented Political Parties Fund and promoting greater self-sufficiency by asking members and party structures to contribute to meetings and operational costs.
- South Africa said yesterday it will “take a break” from G20 engagement while the US holds the rotating presidency. This was announced after Washington confirmed it will not invite South Africa to any G20 meetings next year. The refusal follows mounting diplomatic tension between Pretoria and Washington, including US criticism over South Africa’s domestic policies and a boycott of the recent Johannesburg G20 summit. According to the South African presidency, the decision is a temporary “commercial break,” with plans to re-engage when the G20 presidency rotates to the UK in 2026.
- South Africa’s currency is shedding its reputation as one of the world’s most volatile, as expectations of rand swings against the dollar have fallen to their lowest levels in more than two decades. One-month implied volatility dropped to 7.9% on Wednesday, the lowest since February 2000, while measures for three, six, and twelve months are also at multi-decade lows, signalling that traders expect relatively stable conditions as the year draws to a close. This marks a sharp contrast to recent years of pronounced swings. Bloomberg says the shift reflects calmer global markets, more settled US interest-rate expectations, and improved domestic political and policy certainty; all of which have helped steady the rand.
- The South African Reserve Bank said yesterday that new US tariffs, effective in August, hit car and transport-equipment exports hard. However, the overall blow was softened in the third quarter by a sharp increase in exports of platinum-group metals, driven by rising global commodity prices. Meanwhile, the current-account deficit narrowed significantly (from R72.2 billion to R57 billion), helped by lower payments to foreign investors and higher investment income received, improving the overall trade balance.
- The economy grew by 0.5% in the third quarter of 2025, the fourth consecutive quarter of expansion and the longest growth run since 2021. Most sectors except electricity recorded gains, led by mining, agriculture, trade, catering, and accommodation. Year-on-year growth reached 2.1%, with the nine-month rate at 1.2%, matching National Treasury’s forecast. Gross fixed capital formation rose 1.6% after three quarters of decline.
- Yet, the private sector economy remained under pressure in November, according to the S&P Global South Africa Purchasing Managers’ Index (PMI) released on Wednesday. The headline PMI indicated continued contraction, which may lead to a softer fourth quarter. Business activity and new orders fell again, with the fastest downturn in eight months, while companies faced their sharpest increases in input costs in over a year.
- South Africans shopped online in large numbers over Black Friday, with banks on Tuesday reporting faster growth in digital transactions than in-store purchases. Absa said the average online basket rose 25% year on year to R827, while Standard Bank said card-not-present transactions made up 22% of volumes, compared with 12% last year. The E-commerce Forum of South Africa noted online retail has grown from 1% to nearly 10% in five years, reaching a projected R130 billion in 2025.
- The South African Revenue Service (SARS) asked a court for permission to appeal a recent ruling in which the High Court rejected its attempt to hold Sasfin Bank liable for as much as R5 billion in illicit capital outflows. SARS argues that Sasfin, as an “authorised dealer,” approved forex transactions that it should have known were based on fraudulent or non-existent documentation, thereby enabling the unlawful expatriation of undeclared funds. The original court decision held that imposing a duty on banks to protect SARS from losses linked to customers’ unlawful offshore transfers would be unreasonable, but SARS insists a different court may reach a different conclusion.
- FirstRand said in a voluntary trading update on Tuesday that its operational and financial performance for the first half to end-December is in line with expectations, supported by a slowly improving macroeconomic environment. Net interest income is being driven by advances growth across all geographies. Retail advances are expected to exceed last year, commercial advances continue to grow, while broader African operations remain stable, and the UK shows slightly better-than-expected new business, anchored in property finance.
- Exxaro has built an R18 billion cash war chest to pivot away from declining coal markets toward renewables and manganese. The group has already acquired manganese assets in South Africa, signalling a strategic shift, while coal earnings have dipped due to weaker prices and logistics challenges. Although coal remains part of the business, Exxaro is betting on cleaner energy metals and renewable projects to drive long-term growth and sustain returns amid a transitioning energy landscape.
- Traxtion, Africa’s largest private rail operator, said on Wednesday that it will invest R3.4 billion in new trains as the first phase of a R5.8 billion programme. CEO James Holley said the 2022 National Rail Policy will spur more private investment, as companies, including miners, seek greater control over logistics amid Transnet’s recent bottlenecks. Traxtion’s programme includes R1.8 billion for locomotives and R1.6 billion for wagons. It will be the largest private freight rail investment in South Africa by fleet size and value.
- As at the time of writing, the rand was 0.7% stronger against the dollar, and the ALSI was flat for the week.
Sources: Dynasty, Bloomberg, Reuters, BusinessDay, ITWeb, CNN, WSJ, Daily Maverick, Moneyweb, BizNews.com, etc.
