As of the early morning on December 4th, 2025, financial markets are navigating a complex intersection of macroeconomic data, geopolitical concerns, and central bank policy expectations. Reviewing updates on Investing.com, I’m observing several key developments that are driving both equity and commodity markets in divergent directions, especially as traders recalibrate their expectations heading into the final stretch of the year.
The most important macro development at this moment is related to the latest U.S. labor data that was released yesterday. The ADP Non-Farm Employment Change report surprised on the downside, showing a softer-than-expected job increase. Combined with signs of cooling wage inflation in the most recent JOLTS data, this is starting to reinforce market anticipation that the Federal Reserve could begin cutting rates as early as Q2 2026. The CME FedWatch Tool now reflects a 68% probability of a cut in May, up from just 54% a week ago. Bond markets are responding in kind: the U.S. 10-year Treasury yield dropped to 3.89% this morning, breaking below the critical 4% level, which I interpret as a strong technical signal that investors are currently positioning more defensively.
On the equity front, we’re seeing an interesting divergence between U.S. and European markets. The S&P 500 futures are trading slightly higher, boosted by optimism around the potential for a dovish Fed pivot, while the DAX is underperforming due to weaker manufacturing PMI data out of Germany. Industrial orders from German firms contracted more than expected in October, reflecting weakening demand from both domestic and international clients. That, in turn, is pressuring the euro, which is now trading below 1.0800 against the dollar. From my perspective, the short-term strength in the dollar is not driven by Fed hawkishness—as was the case earlier this year—but rather by comparative economic weakness in Europe and Asia.
Speaking of Asia, China remains in the crosshairs as investors digest the implications of both continued property sector weakness and the government’s more aggressive economic stabilization measures. The PBOC signaled overnight that it would maintain liquidity support into the new year, yet the Shanghai Composite still closed slightly down, suggesting market participants are looking for more decisive fiscal action, not just monetary easing. Additionally, the ongoing sluggishness in Chinese exports is weighing on broader commodity sentiment. Copper prices, for example, fell below $3.70 per pound this morning despite a weaker dollar—a clear indication that demand-side concerns are overshadowing supply dynamics.
Interestingly, crude oil continues to face downward pressure even after the OPEC+ decision to extend voluntary production cuts into Q1 2026. Brent is now hovering near $77 per barrel. In my view, this reflects strong skepticism about global demand recovery, especially with U.S. crude inventories surprising to the upside in the latest EIA report. The market’s reaction suggests that OPEC’s credibility is being questioned, or at least that traders expect cheating on quotas to persist, especially from Russia and Iraq.
In sum, while there is growing optimism about a potential soft landing in the U.S. and easing financial conditions in 2026, pockets of weakness globally are tempering risk appetite. Markets are increasingly nuanced in their reactions—not all dovish signals are rally fuel anymore, especially when accompanied by weak economic data.