Markets Today: Gold Breaches $4300/oz, UK Economy Contracts, Equities Soar. DAX Breaks Bull Flag Pattern

Most Read: The Fed cuts rates by 25 bps to 3.75% – Market Reactions

The Nikkei rose on Friday, marking its third consecutive weekly gain. This positive performance was driven by the optimistic mood on Wall Street, which is benefiting from the period between two major central bank meetings.

The Nikkei 225 index closed 1.4% higher at 50,836.55, achieving 0.7% gain for the week. The broader Topix index climbed even more, rising 2% to reach a record closing high of 3,423.83.However, the technology sector did not fully participate in the rally. Despite a recent surge due to excitement over artificial intelligence, these stocks were held back by the disappointing financial outlook from the US company, Oracle.

The biggest decliners on the Nikkei were in this sector, with the chipmaker Tokyo Electron falling 3.4% and the semiconductor supplier Advantest dipping 1.2%.

The British economy performed worse than expected in October 2025, actually shrinking by 0.1% compared to the previous month, instead of growing as analysts predicted.

This decline followed a similar drop in September, meaning the economy has gone four consecutive months without any growth.

The biggest drag came from the services sector, which fell 0.3%. Key areas that struggled were wholesale and retail trade (down 4.3%) and computer-related services (down 3.6%). The construction sector also saw a drop of $0.6\%$, mainly due to a decline in new private house building (down 2.4%).

In contrast, the production sector offered a bright spot, bouncing back with a 1.1% increase. This growth was seen across various industries, including manufacturing (up 0.5%, boosted significantly by a 9.5% rise in the manufacture of motor vehicles and trailers), mining (up 4.3%), and utilities like electricity and gas.

Overall, looking at the three-month period leading up to October, the Gross Domestic Product (GDP) also contracted by 0.1%.

European stock markets were set for a third straight week of gains on Friday, following the positive performance of Wall Street. Investors were encouraged by the US Federal Reserve's recent interest rate cut and continued to believe more cuts would follow in 2026.

The main pan-European STOXX 600 index rose by 0.4%, moving close to a new all-time high. Major country markets, including Spain's IBEX (up 0.8%) and Germany's DAX (up 0.6%), were also trading higher.

The banking sector was strong, with shares of UBS jumping 4.4% to a 17-year high after Swiss lawmakers suggested easing new capital rules for the bank.

European markets were lifted by overnight gains in the US, where the S&P 500 and the Dow closed at record highs, as the Fed's comments were seen as less aggressive than feared. Investors also largely ignored persistent worries about the high valuations of tech companies, even after disappointing forecasts from Oracle and Broadcom.

The basic resources sector advanced 0.5% as copper prices hit a new record high, supported by China's promise of future financial stimulus and the Fed's rate cut.

Other sectors also gained, with Lufthansa shares climbing 5.5% after an analyst upgrade, and retailers like Adidas and Puma rising over 2% after good news from their US peer, Lululemon Athletica. LPP, a Polish fashion retailer, was the best performer on the STOXX 600, surging 11.2%.

On the FX front, the US dollar remained stable on Friday, but it is still heading for its third consecutive weekly decline, largely due to expectations that interest rates will be cut next year.1

Meanwhile, the British pound held steady even after new data revealed the UK economy unexpectedly shrank in the three months leading up to October, a development that could increase anticipation of future Bank of England rate cuts.

The US Dollar Index (DXY), which tracks the dollar against six other major currencies, was flat at 98.34 and is on track for a 0.64% weekly loss. The index has dropped over 9% this year, putting it on pace for its sharpest annual decline since 2017.

Against this weaker dollar, the euro was trading at 1.1737 (near a two-month high), and the pound was firmer at 1.3383 (near a seven-week high).

The Japanese yen weakened slightly, trading at 155.87 per dollar, ahead of the Bank of Japan's meeting next week where a rate hike is widely anticipated.

Finally, the Swiss franc was stable at 0.7951 per US dollar, following its rise to a nearly one-month high on Thursday. .

Currency Power Balance

Gold prices reached a seven-week high on Friday, driven by several factors: the US dollar was weak, investors were anticipating future interest rate cuts, and global political unrest increased the demand for gold as a safe-haven asset.

Simultaneously, silver hit a record high. Specifically, spot gold rose 0.7% to 4,311.73 per ounce, heading for a strong 2.7% weekly gain.

In the energy markets, oil prices moved higher on Friday due to concerns about potential supply disruptions in Venezuela.

However, oil is still expected to post a weekly loss because market focus remains on the persistent global supply surplus and the possibility of a peace deal between Russia and Ukraine. Brent crude futures gained 33 cents (0.54%) to 61.61 a barrel, and US West Texas Intermediate crude was up 35 cents (0.61%) at 57.95.

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The European session will be quiet from a data perspective.

Today's US economic calendar is light on major news, which should allow the market to calm down and stabilize after the significant event risk of the Federal Reserve's meeting earlier in the week.

Given this quiet environment, the US Dollar Index (DXY) is expected to trade consistently around the 98.35 level, with the potential to edge down slightly to the 98.20 mark for the time being.

Looking ahead to next week, market focus will shift to the European Central Bank's final rate decision of the year, especially since a policymaker recently hinted that the next move could potentially be an interest rate hike, contrasting with the Fed's current path.

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

Further strengthening the bullish narrative is that we have broken out of the bull flag pattern hinting at a potential 1200 point move.

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 24500 before the swing high just below the 24800 handle comes into focus.

Immediate support rests at 24000 before the swing high at 23880 and the 20-day MA at 23716 come into focus.

DAX Index Daily Chart, December 12, 2025

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