Key Highlights

• President Trump warned that “thorny” issues remain following peace talks with President Zelenskyy.
• Difficult issues are expected to arise as Trump meets with Prime Minister Netanyahu today.
• Silver prices fell 5% after surging to a record $84/oz in early Asian trading.

Chart of the Day

Metals beating chips toward year end

^{Source: BNY}

Silver prices surged to new highs at the Monday open. As markets approach year end, the impact of rising global precious metals prices on asset allocation is becoming abundantly clear.

Barring a severe drop this week, our data indicate that, on an industry holdings basis (GICS level 3), Metals & Mining looks set to end the year at the top of the rankings, out of nearly 70 peers we track. Unsurprisingly, tech-based industries dominate the top ten, with Semiconductor Manufacturers and Internet Media/Service Providers completing the top three.

Along with Metals & Mining, these are the only industries whose equity holdings will end the year at more than 20% above their rolling 12-month average. Still, the gap between Metals & Mining and the other top performers stands at around 20pp.

The price effect in place is evident. Even though fundamental drivers are lacking at this time of year for most assets, trading in silver and commodity markets remains extremely active. This will likely have a knock-on impact on valuations for companies with specific exposures.

We also anticipate implications for year-end adjustments in exposed currencies, driven not just by asset inflows, but also by terms-of-trade adjustments. However, we stress that any moves may be more tactical in nature. Silver, as a commodity, is not large enough to impose valuation effects on any major currency.

The broader demand outlook for commodity prices remains globally challenging. Still, price action throughout 2025 has shown limited sensitivity to such factors, suggesting this framework may extend into next year.

What's Changed?

Volatility returns as markets begin the last week of the year. There is a tentative twinkle to trading, given the strength of returns already posted in 2025. Noisy moves in silver and gold dominate.

Beyond profit-taking in precious metals, FX markets continue to watch USD pullbacks in APAC, with the won (KRW) and the yuan (CNY) gaining while the New Zealand dollar (NZD) and krone (NOK) lag. MSCI World shares are flat in EMEA on the hopes for peace, after 0.4% gains in APAC led by South Korea.

U.S. futures are mixed as growth expectations shift higher. Tech shares remain caught in a boom-or-bubble debate, with rotation trades dominant. Bonds are an island of calm amid sparse economic data, aside from Bank of Japan (BoJ) minutes, which warned of potential further hikes.

• Geopolitics: Energy prices are higher on renewed geopolitical tensions, though gold isn’t following. Focus is on Ukraine peace hopes, Chinese military drills around Taiwan, and ISIS returning to headlines. Over the weekend, the U.S. bombed ISIS sites in Syria, and Turkish police clashed with militants. Following U.S. arms sales to Taiwan, China launched new war games around the island. Meanwhile, talks between Presidents Trump and Volodymyr Zelenskyy showed “good progress,” suggesting further EU discussions in January, though “thorny issues” over territory remain unresolved. Despite this, peace hopes have not yet influenced energy prices.
• Politics: Frontier markets remain volatile as Gen Z parties shift alliances. Kosovo Prime Minister Albin Kurti will form a new government after winning a majority – the second vote since February, ending political deadlock. In Nepal, the March 5 election is heating up as a new alliance forms. In Bangladesh, Gen Z-led party NCP faces internal division over an alliance with Jamaat-e-Islami announced over the weekend.
• Carry vs. trend: The iFlow mood index shows a near-term peak into the Christmas holidays. Today reflects tension between chasing the tape to new record equity highs against rebalancing risk into 2026. Rotation out of outperformers trades may also drive unwinding of carry trades. 

Bottom Line: Preliminary holiday retail spending rose 4.2% y/y, suggesting Q4 growth will be broadly in line with Q3. Consumer demand remains resilient despite job concerns and income uncertainty. While the K-shaped recovery narrative continues, it isn’t driving trading today.

Focus will be on how rates support equities in a quiet, holiday-shortened week marked by rebalancing flows. Fed Minutes tomorrow will guide interest rate cuts into 2026. Watch 10y at 4.10% and the dollar index at 98.15 as triggers for momentum buying – both tied to a resurgence in U.S. exceptionalism positioning. 

What You Need to Know

Global silver prices retreated after a record-breaking surge briefly lifted spot above $80/oz, peaking near $84, before profit-taking triggered a 5% pullback. The rally – which still leaves silver still on track for an annual gain of more than 160% (its strongest since 1979) – has been driven by speculative positioning, a weaker USD, geopolitical tensions, and a severe structural imbalance between supply and demand. Thin market liquidity has amplified price swings, while strong industrial demand has added to investor enthusiasm. Analysts warn that recent gains may have gone too far too fast, citing overbought technical signals and overstated risks tied to China and supply constraints. Gold -1.195% to 4479.07, Silver -4.85% to 75.469, Platinum -7.17% to 2282.33.

Israel–U.S. relations face renewed strain ahead of Prime Minister Benjamin Netanyahu’s meeting with Trump at Mar-a-Lago, as the two leaders diverge sharply on Gaza and broader Middle East policy. Netanyahu is expected to push for Hamas’s disarmament before further withdrawals and seek U.S. backing for possible new strikes on Iran’s missile program. Trump, by contrast, has prioritized de-escalation, reopening diplomacy with Tehran and warning against destabilizing actions in Syria and Lebanon. Tensions are most acute over Gaza, where implementation of the peace plan has stalled, Israel continues military strikes and senior Israeli ministers have openly rejected full withdrawal, drawing U.S. rebukes. With Trump focused on cementing a peacemaker legacy and Netanyahu facing domestic political pressure ahead of elections, the talks risk exposing a widening strategic rift. TA-35 +0.428% to 3618.8, EURILS +0.035% to 3.1953, 10y IGB -3bp to 3.94%.

Japan’s December BoJ policy meeting highlighted that members judged the economy as continuing to recover at a moderate pace despite pockets of weakness, with growth expected to remain subdued in the near term before improving as overseas demand normalizes. Members noted business sentiment remained broadly solid, including among auto-related SMEs, while labor shortages were supporting capex through labor-saving investment. Inflation was seen rising gradually, with the underlying CPI trend expected to align with the 2% price stability target in the latter half of the projection period, supported by sustained wage growth. Several members argued that conditions for adjusting monetary accommodation were falling into place, citing resilient corporate profits, continued wage momentum and sticky price-setting behavior. Many favored a 25bp policy rate hike while stressing the need for careful monitoring of market and economic reactions. Nikkei -0.44% to 50526.92, USDJPY -0.262% to 156.16, 10y JGB +1.1bp to 2.052%.

U.S.-led Ukraine peace talks saw limited progress over the weekend, with Trump saying discussions brought the sides closer to a deal but left several “thorny” issues unresolved. Trump described the Mar-a-Lago meeting as productive, noting follow-up calls with European leaders including U.K. Prime Minister Keir Starmer and French President Emmanuel Macron. Zelenskyy said around 90% of the peace plan was agreed, with the military component fully settled, though Trump cautioned that formal agreement was premature. A proposed demilitarized zone in Donbas remains unresolved, while U.S. security guarantees for Ukraine remain vague, with Trump pointing to a larger European role. Russia signaled resistance, with Foreign Minister Sergei Lavrov accusing Kyiv of avoiding constructive negotiations. PFTS 0% to 458.79, USDUAH -0.027% to 42.1205, 10y UGB -3.6bp to 13.501%.

Chinese authorities appear to be guiding against expectations of renminbi (yuan) appreciation, with quasi-official papers cautioning that “uncertainty remains high.” Messaging noted that the yuan’s rise was driven by a weaker dollar following the Federal Reserve’s December rate cut. Increased seasonal, driven by exporters converting foreign earnings, also contributed. Meanwhile, global conditions, capital flows and interest rate differentials remain key constraints on more sustained appreciation. Chinese regulators have reiterated guidance against one-way currency bets, urging firms to manage FX risk prudently. The central bank has also signaled it will prevent excessive currency moves, aiming to keep the yuan broadly stable at reasonable and balanced levels. CSI 300 -0.384% to 4639.37, USDCNY +0.053% to 7.0091, 10y CGB +1.8bp to 1.853%.

What We're Watching

U.S. November pending home sales are forecast to rise 1.0% m/m, 0.1% y/y from 1.9% m/m, -0.4% in October.

U.S. December Dallas Fed manufacturing activity index is expected to improve to -6 from -10.4.

U.S. Treasury sells $86bn in 13-week bills and $77bn 26-week bills.

What iFlow is Showing Us

Mood: iFlow Mood continues to ease toward a neutral position of 0.146 from mid-December highs of 0.302. Equities demand stabilized, while buying of core sovereign bonds gained further momentum.

FX: Mixed and light trading into year end. CZK, PLN and SGD posted the most inflows against most outflows in CNY and USD. USD and CNY weekly average scored holdings narrowed to -1.06 and -0.86, while EUR stayed overheld, with weekly average scored holdings at 0.56.

FI: Good demand for U.S. Treasurys, Eurozone and Chinese government bonds, followed by Colombia and Mexico government bonds. South Africa and Indonesia government bonds were sold the most.

Equities: U.S., South Korean, Mexican and Colombian equities were sold the most against good buying in Brazil, followed by Türkiye, Indonesia and China.

Quotes of the Day

“This evening is as brief as the twinkling of an eye, yet such twinkling is what eternity is made of.” – Fred Rogers

“Maybe that's what life is … a wink of the eye and winking stars.” – Jack Kerouac

Economic Details

Sweden’s November trade balance recorded a surplus of SEK 11.6bn, according to Statistics Sweden, as exports totaled SEK 173.7bn while imports amounted to SEK 162.1bn. The surplus widened from SEK 5.2bn a year earlier, reflecting sharper declines in imports than exports. Exports fell 6% y/y in value terms, while imports dropped 9% y/y, partly influenced by one fewer working day compared with November 2024. Trade with non-EU countries generated a surplus of SEK 30.7bn, offset by a SEK 19.1bn deficit in goods trade with the EU. On a seasonally adjusted basis, the November surplus rose to SEK 8.9 bn from SEK 7.4bn in October. Over the January–November period, Sweden posted a cumulative surplus of SEK 68.7bn. OMX +0.142% to 2849.094, EURSEK +0.184% to 10.8013, 10y Swedish GB -0.9bp to 2.863%.

Norway’s November retail sales volume rose 1.3% m/m, according to seasonally adjusted data from Statistics Norway, marking a rebound after weaker developments over the previous three months. Over the September–November period, retail sales increased 0.4% compared with the preceding three-month period. The monthly rise was broad-based, with online retailing and store-based sales of groceries and electronics contributing the most to overall growth. Electronics and other household goods in specialist stores recorded a 5.3% m/m increase, following two months of decline. Statistics Norway noted that price declines for audiovisual, photo and IT equipment, with CPI prices falling 5.7% m/m in November, partly linked to Black Friday promotions, supported higher sales volumes during the month. OSE 0% to 1666.51, EURNOK +0.127% to 11.7985, 10y NGB -0.1bp to 4.18%.

China’s November industrial profits fell 13.1% y/y, a sharp deterioration from October’s 5.5% decline, according to the National Bureau of Statistics. The downturn was driven primarily by the mining sector, where profits slumped 27.2% y/y. The weakness in mining significantly weighed on overall industrial performance during the month. NBS officials said the data pointed to slowing growth while remaining resilient. For the January–November period, profits at major industrial enterprises edged up 0.1% y/y, marking a fourth consecutive month of marginal expansion on a cumulative basis. Within the breakdown, equipment manufacturing stood out as the main support, with profits rising 7.7% y/y and contributing 2.8 percentage points to overall industrial profit growth over the period. CSI 300 -0.384% to 4639.37, USDCNY +0.053% to 7.0091, 10y CGB +1.8bp to 1.853%.

Thailand’s November manufacturing output fell 4.24% y/y, sharply undershooting expectations for a 0.5% increase and reversing a revised flat reading in October, according to the Office of Industrial Economics. The contraction was driven by a temporary halt in petroleum production for maintenance, weaker exports linked to the baht’s appreciation, and disruptions from severe flooding in southern provinces. Capacity utilization declined to 55.49 from 57.81 in October, while border tensions with Cambodia and softer foreign tourist arrivals also weighed on activity. Over the first 11 months of 2025, the manufacturing production index fell 1.1% y/y. Authorities expect output to contract around 0.75% in 2025 before expanding 1–2% in 2026, supported by electric vehicle investment incentives. SET -0.546% to 1252.37, USDTHB +1.005% to 31.38, 10y TGN +0.3bp to 1.653%.

Taiwan’s November overall monitoring indicator continued to flash the “yellow-red” signal, increasing 2 points to 37. The trend-adjusted leading index increased by 0.48% in November 2025 to 101.70, rising for four consecutive months. TAIEX +0.893% to 28810.89, USDTWD +0.016% to 31.45, 10y TGB -1bp to 1.35%.

Hong Kong’s November total exports rose 18.8% y/y to HK$468.9bn (October: +17.5%), and imports increased 18.1% y/y to HK$517.4bn (October: +18.3%), resulting in a trade deficit of HK$48.5bn (9.4% of imports). Exports to Asia grew 17.1% y/y, led by Malaysia (+72.0% y/y), Vietnam (+54.9% y/y), Taiwan (+45.3% y/y), Thailand (+39.6% y/y), and Mainland China (+16.4% y/y). Exports to the U.S. (44.4% y/y) and the Netherlands (36.4% y/y) also rose significantly. Key export commodities included electrical machinery (+15.9%) and telecommunications equipment (+36.8%). From January through November, exports and imports increased 14.3% and 14.1% y/y, respectively, with a trade deficit of HK$382.8bn. Hang Seng -0.711% to 25635.23, USDHKD -0.03% to 7.7736, 10y HKGB -1.2bp to 1.417%.