Markets Today: RBA Rate Hold, Nikkei Recovers, FTSE 100 Struggles as Markets Remain Cautious Ahead of FOMC

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The Nikkei index finished higher on Tuesday, overcoming an initial slump thanks to strong gains from chip-related companies. Three of the five biggest contributors to the index's rise were semiconductor firms, with the chip-making tool maker Tokyo Electron leading the way, following a positive performance by their US counterparts overnight. The Nikkei index ultimately added 0.1% to close the day slightly higher, while the broader Topix index ended flat.

Japanese stocks started the day cautiously because investors are waiting for the US Federal Reserve's policy decision on Wednesday. Although a cut in US interest rates is widely anticipated, the future direction of the Fed's monetary policy is uncertain due to disagreements among board members.

Meanwhile, MSCI Inc.'s global equities index saw a small decrease of 0.1%.

The MSCI index of emerging Asia equities experienced a significant decline on Tuesday, falling by 0.7%. This was the single largest drop this index has seen in over two weeks. In contrast, the index that tracks the value of currencies in emerging markets remained unchanged.

In its final meeting of 2025, the Reserve Bank of Australia (RBA) decided unanimously to keep its main interest rate (cash rate) unchanged at 3.6%, which was expected by the market and marks the third meeting in a row without a change. This keeps the cost of borrowing money at its lowest level since April 2023.

The central bank acknowledged that inflation has dropped significantly since its peak in 2022, but they noted a recent slight increase in prices. Although some of this recent rise seems temporary, the RBA sees early signs of more widespread and long-lasting price pressures that need close attention. Regarding jobs, the RBA said the market is "a little tight" where unemployment is going up slightly and job creation is slowing, but overall unused capacity remains low, and businesses are still having trouble finding workers.

Given the uncertain outlook both in Australia and globally, especially concerning how much the current low interest rate setting is actually limiting growth, the board warned that stronger-than-expected spending by the private sector could put further strain on the economy if it continues. Because of all these mixed signals, policymakers decided to be cautious and wait for more data before making any new changes to the interest rate.

European stock markets saw a small increase on Tuesday, with both the STOXX 50 and STOXX 600 indices rising by almost 0.2%, bouncing back slightly after a quiet day on Monday.

Traders were generally cautious and avoided making big moves while waiting for the US. Federal Reserve's interest rate decision, which is due tomorrow. Markets also reacted to news that US President Trump will allow Nvidia to ship its advanced H200 AI chips to "approved customers" in China.

Defense company stocks were notable gainers, including Hensoldt, Rheinmetall, and BAE Systems, after reports suggested German lawmakers are set to approve a record €52 billion worth of military spending next week. Renewable energy stocks were also up, with Orsted gaining after a US federal judge reportedly found President Trump's proposed ban on wind energy to be illegal.

However, offsetting these gains was a sharp drop of over 13% in the stock of Thyssenkrupp, which finished at the bottom of the STOXX 600 after forecasting a significant loss of up to €800 million for the year 2026

On the FX front, the Australian dollar got stronger after the Reserve Bank of Australia (RBA) chose to keep its interest rates steady, a decision that had been widely expected. The Australian currency rose by 0.2% as markets waited for the US Federal Reserve's important meeting later this week, especially since the RBA warned that a recent rise in inflation might continue.

Meanwhile, the Japanese yen also gained ground in Asian trading following a strong 7.5-magnitude earthquake in Japan's northeast, which made investors cautious before the expected decisions from the US Fed and other central banks. Also helping the yen was strong interest in an auction of five-year Japanese government bonds.

The overall US dollar index remained mostly unchanged.

Separately, the euro stabilized after European Central Bank (ECB) board member Isabel Schnabel suggested that the ECB's next move might be to raise interest rates, not cut them as some people expect, though she clarified that a move would not happen very soon.

The British pound and the New Zealand dollar also both saw small gains

Currency Power Balance

Oil prices fell slightly on Tuesday, adding to the 2% drop seen the day before. Markets are currently keeping a close watch on several factors: the ongoing peace talks aimed at ending the war between Russia and Ukraine; worries about having too much oil supply available globally; and the important upcoming decision on US interest rates.

Specifically, Brent crude oil futures fell by 7 cents (0.1%) to trade at 62.42 per barrel, while US West Texas Intermediate (WTI) crude fell by 13 cents (0.2%) to trade at 58.75 per barrel.

Gold prices declined slightly on Tuesday. While investors have largely already factored in the expectation that the US Federal Reserve will cut interest rates, they are now focused on what might happen next.

Specifically, they are looking for any hints that the central bank might choose to reduce rates more slowly than anticipated, a strategy called a "gentler-than-expected easing cycle." This repositioning by investors is happening just ahead of the start of the Fed's two-day policy meeting later today.

As of the latest update, the price of immediate gold delivery (spot gold) was down 0.3% at 4,174.91/oz, and US gold futures for December delivery were down 0.4% at 4,202.70/oz.

Read More:

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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.

The US session will also be a bit slow from a data perspective with Jolts job opening numbers the only high impact release ahead of the FOMC meeting tomorrow.

There is a probability that markets may remain rangebound and cautious ahead of the FOMC meeting. Lack of commitment by market participants as uncertainty remains a key concern.

From a technical standpoint, the FTSE 100 has failed to hold above the 100-day MA.

At present the FTSE is hovering around the 100-day MA but does appear at risk of further downside.

The current malaise could also be down to concerns around the implications of the Federal Reserve rate decision tomorrow.

Immediate support rests at 9610, 9550 and 9450 respectively.

A move higher may encounter some resistance at 9687, 9720 and 9850.

FTSE 100 Index Daily Chart, December 9. 2025

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