Markets Today: Chinese Inflation at 21-Month Highs, Silver Soars Above $61/oz as Markets Remain Cautious Ahead of the FED

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Japan's main stock market index, the Topix, briefly hit an all-time record high early on Wednesday before losing momentum. The index ended the day with a small 0.1% gain, while the more selective Nikkei 225 index dropped slightly by 0.1%.

Car manufacturers like Honda and Toyota performed well, helped by a weaker yen, which makes their exports cheaper abroad. Overall, more stocks rose than fell on the Nikkei index. The top performers included DOWA Holdings and the toilet maker TOTO, while the biggest losers were the drugmaker Shionogi and the chip supplier Lasertec.

Meanwhile, the interest rates (yields) on short-term Japanese government bonds (JGBs) climbed to a 17-year high. This rise in yields is a strong sign that investors are increasingly sure the Bank of Japan will raise its interest rates at its policy meeting next week.

China's annual inflation rate (the increase in consumer prices over a year) rose to 0.7% in November 2025, up from 0.2% the month before. This increase matched expectations and reached its highest point since February 2024.

For the first time in ten months, food prices went up (0.2%), driven by higher prices for fresh vegetables and fruits, and a smaller decline in pork prices. Non-food prices also continued to rise (0.8%), helped by government programs encouraging consumers to trade in old items. Key areas seeing price increases included clothing, healthcare, and education.

However, housing prices were flat, and transportation costs continued to fall. If you look at core inflation (which ignores volatile food and energy prices), it held steady at a strong 1.2%, its highest level in 20 months.

On a monthly basis, however, consumer prices actually fell by 0.1%, missing forecasts for a gain and marking the first monthly decline in five months.

European stock markets declined slightly on Wednesday, with the main pan-European STOXX 600 index dropping 0.1%. This marks the fourth straight day of losses for the index.

Investors are holding back from making large trades while they wait for the US Federal Reserve's decision on interest rates later today, and they are also looking closely at the latest company updates.

Major markets in Germany and Spain also saw small dips. France's CAC 40 index dropped 0.1% after lawmakers narrowly passed the government's 2026 social security budget, which came at a high political cost. Financial and industrial stocks, which had been boosting the market recently, fell; specifically, insurance stocks dropped, pulled down by a 7% slide in Aegon's shares after its trading update.

The main focus remains on the US Federal Reserve, which is expected to cut interest rates by a small amount (25 basis points). However, investors will be paying close attention to comments from Fed Chair Jerome Powell for any hints about how the central bank will manage its monetary policy next year given the signs of a weakening US economy.

In company news, Delivery Hero's stock jumped 6.1% after the firm told shareholders it is looking at ways to better manage its capital and considering strategic options.

On the FX front, the Japanese yen appeared weak on Wednesday, having suffered a sudden drop overnight. The main reason for the yen's weakness is the large gap between Japan's very low interest rates and the higher rates in other countries, despite the expectation that the Bank of Japan will raise its rates next week.

The yen was trading slightly stronger at 156.64 per dollar after dropping 0.6% toward the 157 level in the previous session for no clear reason. The yen also fell to a record low against the euro overnight and stayed near that weak level.

Meanwhile, the US dollar was generally steady, and most other currencies saw only small movements as traders waited for the important US Federal Reserve policy decision later in the day. Investors are betting the Fed will cut interest rates at what is expected to be a very divided meeting.

The dollar index was firm at 99.20 The euro and British pound were mostly unchanged, while the New Zealand dollar eased slightly.

Currency Power Balance

Oil prices were stable on Wednesday after dropping by about 1% yesterday, as investors are focused on progress in the peace talks between Russia and Ukraine and are also waiting for the US Federal Reserve's decision on interest rates.

Brent crude futures and U.S. West Texas Intermediate (WTI) crude both saw small gains of about 0.3%.

Meanwhile, silver is having a record-breaking run, having hit the $60/oz mark for the first time ever on Tuesday and then rising above $61/oz overnight. This surge is due to a supply shortage and growing demand for the metal.

In contrast, gold prices dipped slightly on Wednesday as investors prepared to hear comments from Federal Reserve Chair Jerome Powell later today, when the central bank is widely expected to cut interest rates.

Spot Gold continues to grind around the $4200/oz level.

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The European session will be quiet today with a lack of high impact data releases. We will hear comments from both ECB and BoE policymakers which could stoke some volatility. ECB policymakers have adopted a rather hawkish tone of late with further comments highly anticipated.

The US session will be where all focus rests today. First we will get the Bank of Canada rate decision as well as crude oil inventories data.

Finally, the highly anticipated FOMC meeting comes into focus. There is a lot of uncertainty around what to expect especially when it comes to the Feds updated economic projections. I strongly believe that the economic projections and comments from Fed Chair Powell could move markets more than the rate decision itself.

From a technical standpoint, the DAX Index has held above the key confluence level at 24000 for the last three trading days.

This could be seen as both positive and potentially slightly concerning. The failure to push higher means bulls are hesitant to push on and a lot of this is likely down to the FOMC meeting.

However, if the FOMC meeting is positive for stocks, the knock on effect could help propel the DAX toward the all-time highs once more.

The period-14 RSI is eyeing a retest of the neutral 50 level. A bounce off this level could give bulls some optimism as it does hint that bullish momentum remains intact for now.

Immediate resistance rests at 24200 before the swing high just above the 24400 handle comes into focus.

Immediate support rests at 24000 before the swing high at 23880 and the 20-day MA at 23667 come into focus.

DAX Index Daily Chart, December 10, 2025

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