🌟 Central Banks & Santa Rallies

It was a week where the “soft landing” narrative got a major confidence boost. Markets digested a crucial US inflation report without indigestion, the European Central Bank (ECB) delivered an early Christmas present in the form of a rate cut, and the tech-heavy Nasdaq finally smashed through the psychological 20,000 barrier. However, it wasn’t all plain sailing; here in the UK, a surprise economic stall reminded investors that the domestic road remains bumpy.

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📈 Weekly Scoreboard

Index	Weekly Change	Current Level
S&P 500	🟢 +0.8%	6,051
Nasdaq Composite	🟢 +1.6%	20,025
Dow Jones	🔴 -0.4%	44,150
FTSE 100	🔴 -0.5%	8,295

(Approximate closing values for the week ending 13 Dec)

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🌍 Global Drivers & Macro

• US Inflation Behaves: The much-anticipated US inflation data (CPI) came in exactly as expected. It wasn’t “low,” but it wasn’t “hot” either—a “Goldilocks” result that kept hopes alive for a US interest rate cut next week.
• ECB Cuts Rates: The European Central Bank cut interest rates again on Thursday (down to 3.0% for the deposit rate). This confirms that Europe is now more worried about a slowing economy than spiralling prices, shifting into “support mode.”
• Tech Breakout: Optimism around Artificial Intelligence (AI) and falling bond yields helped US tech stocks surge, pushing the Nasdaq index to a historic high above 20,000 for the first time.

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🇬🇧 UK Corner

• Economy Hits the Brakes: Friday delivered a nasty surprise—UK GDP (economic growth) actually shrank by 0.1% in October. This unexpected contraction was driven by falls in construction and services, dampening the mood significantly.
• BoE Pressure: With the economy stalling, pressure is mounting on the Bank of England to cut interest rates sooner rather than later to get things moving again, though inflation fears still linger.
• FTSE Stumbles: The UK’s main index struggled to keep up with the US rally. The weak GDP data weighed heavily on domestic stocks, particularly banks and retailers, leaving the FTSE 100 in the red for the week.

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🏦 Asset Movers

• 💷 GBP/USD (Weakness): The Pound took a hit, falling back below $1.27. The shrinking UK economy makes the UK look less attractive to global investors compared to the resilient US.
• 🛢️ Oil (Brent Crude): Oil prices ticked up slightly this week. Despite global economic worries, geopolitical tensions continue to put a “risk premium” on the price of a barrel.

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📰 Key Headlines

• BBC Business: UK economy contracts unexpectedly in October, raising fears of a winter slowdown.
• Reuters: European Central Bank cuts rates by 0.25%, signalling concern over weak growth in the Eurozone.
• Financial Times: Nasdaq closes above 20,000 for the first time as tech rally broadens.
• Bloomberg: US Inflation (CPI) meets expectations, cementing bets for a Federal Reserve rate cut next week.
• The Guardian: Retailers warn of a tough Christmas as high borrowing costs squeeze British shoppers.

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⚖️ Investor Sentiment

The “Fear and Greed” indicators are flashing Greed, but not extreme euphoria. The VIX (a measure of market fear) remains low, suggesting investors are calm. However, the divergence between the booming US market and the sluggish UK/Europe performance shows that investors are being selective—they are “Risk-On” for US Tech, but cautious elsewhere.

Verdict: Cautiously Optimistic (Risk-On)

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📅 Next Week’s Radar

• 🇺🇸 Fed Interest Rate Decision (Wed 18 Dec): The big one. Markets are pricing in a cut, but the comments from the Fed Chair will set the tone for 2025.
• 🇬🇧 UK Inflation CPI (Wed 18 Dec): Critical for UK investors. If inflation is sticky, the Bank of England might refuse to cut rates despite the weak economy.
• 🇯🇵 Bank of Japan Decision (Thu 19 Dec): Watch for any surprise shifts in Japanese rates, which can often rattle global markets.

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⚡ The Final Take

This week highlighted the stark difference between the US and the UK right now: the US is powering ahead on tech optimism, while the UK is grappling with stagnation.

For the DIY Investor: Don’t let the headlines panic you. A shrinking UK GDP is disappointing, but remember that the FTSE 100 makes ~75% of its money outside the UK. If you have a globally diversified portfolio, the UK’s domestic struggles are just one small part of a much bigger picture.

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© Clearly Investments Ltd. Educational information only. This is not investment advice.