Updated: Thursday, December 18, 2025 — 4:18 p.m. ET
Global stock markets ended broadly higher on Thursday as investors leaned into a cooler-than-expected U.S. inflation update, digested a pivotal batch of central-bank decisions in Europe, and watched the latest twist in the AI-led tech trade. The day’s mood: relief, but not complacency—because the inflation report came with an asterisk, and the global rate outlook is diverging again.
In the U.S., a delayed Consumer Price Index (CPI) release helped snap a multi-session skid for major indexes, while upbeat Micron guidance calmed nerves after a week of “AI bubble” chatter. In Europe, stocks rallied into a record close as the European Central Bank stayed on hold and the Bank of England delivered a closely split rate cut. Asia finished mixed earlier, with Japan’s Nikkei sliding as traders positioned ahead of a widely expected Bank of Japan hike.
Market snapshot: where major indexes finished
By the time U.S. markets wrapped up (and Europe was already closed), the day’s key benchmarks looked like this:
- S&P 500: 6,774.76 (+0.79%)
- Dow Jones Industrial Average: 47,951.85 (+0.14%)
- Nasdaq Composite: 23,006.36 (+1.38%)
- Stoxx Europe 600: about 585 (~+0.9%, record close)
- FTSE 100: 9,837.77 (+0.65%)
- DAX (Germany): 24,199.50 (+1.00%)
- Nikkei 225 (Japan): 49,001.50 (-1.03%)
- Hang Seng (Hong Kong): 25,498.13 (+0.12%)
- Shanghai Composite (China): 3,876.37 (+0.16%)
- KOSPI (South Korea): 3,994.51 (-1.53%) 1
U.S. stocks: CPI “good news,” plus an AI reset powered by Micron
U.S. equities rose after the November CPI showed inflation up 2.7% year-over-year, below the 3.1% economists expected. “Core” CPI (excluding food and energy) came in at 2.6% year-over-year, another better-than-expected reading. 2
But investors weren’t treating the data as perfectly clean. The report was distorted by the recent 43-day U.S. government shutdown, which delayed data collection and led the Bureau of Labor Statistics to omit monthly inflation rates (and previously cancel October CPI and unemployment releases). Economists cautioned against over-interpreting what some called a “Swiss-cheese” dataset—especially with holiday discounting potentially biasing the results. 2
Even with the caveats, the inflation headline mattered because it fed directly into the market’s main macro debate: how much room the Federal Reserve has to cut again in 2026. Reuters noted the Fed has signaled only one cut next year, while traders have been leaning toward two, and Thursday’s CPI didn’t dramatically change that tug-of-war. 3
The AI trade: from “bubble worries” to “earnings reality” in 24 hours
Tech was the day’s leadership engine, but the tone was defensive—more “prove it” than “party on.”
- Micron surged after strong results and forward guidance, helping stabilize sentiment around AI infrastructure demand. 4
- Big AI-linked names that had been sliding earlier in the week rebounded, with investors focusing on whether AI spending is translating into durable profits rather than just capacity buildouts. 4
Europe: record close as ECB holds steady and BoE cuts—carefully
European stocks rose broadly, with the Stoxx Europe 600 finishing around 585—up roughly 0.9% and setting a new record close. 5
Two macro forces drove the move:
- U.S. inflation came in softer than expected, reinforcing the “global easing bias” narrative—at least for the Fed. 5
- The ECB kept rates unchanged and presented a somewhat more upbeat assessment of euro-zone resilience, a mix markets often read as supportive for risk assets. 5
ECB: on hold at 2%, growth nudged up, markets eye the next move
The European Central Bank held its benchmark policy rate at 2% and modestly raised growth and inflation forecasts, reinforcing expectations that euro-zone rates may stay steady for an extended stretch. Reuters reported markets are increasingly pricing the possibility of a rate hike in 2027, even as other major central banks continue easing. 6
BoE: a 25 bp cut to 3.75%, but the vote split signals caution
The Bank of England cut its policy rate to 3.75%, but the decision was tight (5–4)—and the message was “gradual, limited room,” not a green light for rapid easing. Sterling reversed earlier weakness and gilt yields rose after the decision as investors pushed out the timing of the next fully priced cut (Reuters cited a shift toward June 2026 from earlier expectations). 7
Asia-Pacific: mixed close, with Japan in focus ahead of a likely BoJ hike
Asia’s session earlier Thursday ended uneven as traders balanced two competing forces:
- AI/tech valuation concerns continued to weigh on some markets.
- A growing global policy split—BoJ tightening vs. others easing/holding—kept currency and rate expectations in motion.
By the close, Japan’s Nikkei fell more than 1%, while China’s Shanghai Composite edged higher and Hong Kong’s Hang Seng finished slightly up. South Korea’s KOSPI dropped about 1.5%. 1
Japan: the yen’s “danger zone” and the cost of being the lone hiker
A major undercurrent for global markets is what happens next in Japan.
Reuters analysis highlighted that the Bank of Japan is expected to raise rates to 0.75% (a three-decade high) at its Friday decision, but the yen has still struggled in 2025 and remains near levels historically associated with intervention risk. The constraint: Japan’s heavy debt load and sensitivity in the JGB market, which makes tightening a delicate operation—even if inflation has stayed above the BoJ’s 2% target. 8
Rates, FX, and commodities: yields eased, the dollar chopped, oil rose, gold flirted with records
Cross-asset markets echoed the day’s main themes—rates and geopolitics.
Bonds and FX
- U.S. Treasury yields eased after the CPI release (Reuters put the 10-year near 4.12%), consistent with slightly improved expectations for future Fed easing. 3
- The dollar weakened versus safe-haven peers like the yen and Swiss franc after CPI, while the euro softened after the ECB decision and sterling firmed after the BoE’s cautious cut. 9
Oil and gold
- Oil settled higher for a second day, with Reuters pointing to supply-risk headlines tied to a blockade of Venezuelan oil tankers and the prospect of additional U.S. sanctions on Russian oil. 3
- Gold remained elevated; Investopedia reported gold futures briefly topped $4,400/oz before easing, while Reuters showed spot gold still above $4,300/oz—reflecting a mix of lower yields, policy uncertainty, and geopolitical hedging demand. 10
Forecasts and analysis: what today’s moves suggest for 2026 positioning
Thursday’s rally wasn’t just a “CPI pop.” It was a real-time stress test of the market’s 2026 narrative across three fronts:
1) Inflation is easing—but the data quality problem is now part of the forecast
The shutdown-distorted CPI complicates the Fed debate. Reuters reported economists expect inflation could pick up in December, with tariffs and rising power demand linked to AI and cloud data centers among the pressures still feeding into the system. Translation for markets: risk assets can rally on softer prints, but conviction may stay fragile until data normalizes. 2
2) Central banks are diverging again
- Fed: traders continue to debate the number of 2026 cuts. 3
- ECB: signaling “steady for longer,” with investors even whispering about later hikes. 6
- BoE: cutting, but with a split committee and cautious forward guidance. 7
- BoJ: still tightening, but with currency and bond-market fragility in the background. 8
This kind of divergence tends to matter most through FX and rates volatility, which can quickly spill into equities—especially in crowded trades.
3) The “AI premium” is being re-priced, not removed
Today was a reminder that the AI story is increasingly earnings-sensitive. Strong guidance can restore confidence fast, but skepticism returns just as quickly when investors worry about capex returns and balance-sheet strain. That back-and-forth is likely to define the first quarter of 2026 as companies set new spending budgets and investors demand clearer profitability timelines. 3
4) Europe’s relative story: valuations are tempting, but catalysts must deliver
A separate Reuters analysis warned that Europe’s 2025 outperformance story (“Make Europe Great Again” trades) has lost momentum, with attention shifting to whether Germany’s fiscal shift and spending plans translate into durable growth and earnings acceleration. Big-picture: European equities trade at a steep valuation discount to the U.S., but many major banks still expect Europe to lag next year due to the U.S. market’s heavier AI exposure—unless Europe’s catalysts show real follow-through. 11
5) IPOs as a confidence barometer: Nasdaq expects a bigger 2026
Looking beyond day-to-day volatility, Nasdaq told Reuters it expects a stronger pipeline of $1 billion-plus IPOs in 2026, helped by lower rates, high valuations, and improved sentiment versus earlier tariff-driven turbulence. If that forecast proves right, it could reinforce the “risk-on” backdrop—especially for growth and tech. 12
What to watch next
Key near-term catalysts that could reshape the “soft landing + selective easing” narrative:
- Bank of Japan decision (Friday): expected hike to 0.75% and, critically, guidance on how far tightening goes in 2026. 8
- Follow-up U.S. inflation and labor prints: markets want confirmation that November wasn’t a shutdown-driven mirage. 2
- AI capex scrutiny: after Micron’s jolt, the next wave of earnings and capex updates will matter more than macro headlines for the sector’s leadership status. 4
- Energy/geopolitics: oil supply risk headlines are back in the pricing mix, with knock-on effects for inflation expectations and rates. 3
