Markets Brace for Volatile End to 2025

As December begins, financial markets are anticipating a volatile close to 2025. A palpable risk-off mood has settled across global trading floors, evidenced by a sharp decline in Bitcoin and downturns in Asian and European stock markets, with U.S. futures also indicating a lower open. This sentiment appears to lack a single catalyst, though some point to heavy selling in Japanese government bonds on speculation of an impending Bank of Japan rate hike.

Asia's economic engines are showing signs of strain, with major manufacturing hubs reporting sluggish demand throughout November. Despite progress in U.S. trade negotiations, factory activity continues to decline as new orders fail to materialize significantly. In contrast, European nations are reportedly softening their long-held opposition to new oil and gas drilling. This shift represents a reversal of climate-focused policies, driven by governments' urgent need to mitigate their heavy dependence on expensive energy imports.

Adding to the complex market landscape, China's significant investment in Indonesia's nickel industry has created the world's largest producer. However, Indonesian nickel may soon face reduced demand as Chinese electric vehicle manufacturers pivot away from batteries that use this metal. Separately, Airbus operations are normalizing after rapid software updates, while U.S. and Ukrainian officials reported productive talks regarding a Russia peace deal.