Markets Today: BoJ Hikes Rates, German Consumer Confidence at 2024 Lows as FTSE 100 Holds the High Ground

[Ben Graham]

Asia Market Wrap - BoJ Hikes Rates, Nikkei Rises 1%

Most Read: Bank of England (BoE) Preview: A Hawkish Cut in a Stagnating Economy? Implications for the GBP & FTSE 100

Japan's stock market rose significantly on Friday, with the main Nikkei index climbing more than 1% to reach a level of 49,629.

This rally occurred after the Bank of Japan raised interest rates to 0.75%, the highest level in thirty years and warned that more increases are likely on the way. Investors were also in a good mood because of a strong performance by US technology stocks the night before.

The central bank's decision had a major impact on the bond market as well. For the first time since 2006, the return (yield) on 10-year government bonds hit 2%. This is a symbolic milestone that marks a shift away from Japan's long history of falling prices (deflation).

As is typical when interest rates rise, the actual price of these bonds fell, dropping to their lowest level since 2008.

German Consumer Confidence Drops Near Two-Year Lows

Consumer confidence in Germany has taken a sharp downturn heading into January 2026, dropping to its lowest level since April 2024. This decline was far worse than experts predicted and reflects a growing caution among households.

People are less willing to spend money and have instead ramped up their savings to the highest level seen since 2008, largely due to fears that high inflation might return and uncertainty surrounding government pension reforms. While families are pessimistic about their own income for the third month in a row, there is a small bright spot: they are slightly more optimistic about the general economy than before.

However, experts warn that this pessimistic mood casts a shadow over the end of the Christmas shopping season and suggests a difficult start for the economy in the new year.

European Session - European Shares Muted

European stock markets were mostly quiet on Friday. Although technology and retail companies saw some losses, strong performance from major banks helped balance things out.

Overall, the markets were set to finish the week with solid gains after a busy few days of economic news. The STOXX 600 index dropped just slightly, with similar small declines seen in Germany and London.

Some well-known brands struggled, specifically German sportswear makers Adidas and Puma. Their stock prices fell after their American rival, Nike, announced it was making less profit than expected.

On the other hand, banks were among the best performers, helping to prop up the market. Investors were generally feeling hopeful because inflation in the United States slowed down unexpectedly on Thursday, leading many to believe that interest rates might be cut in 2026.

However, financial experts warned that these inflation numbers might be misleading because the recent US government shutdown made it hard to collect accurate data.

In political news, European Union leaders agreed to borrow money to provide a €90 billion loan to Ukraine for its defense against Russia. They chose this path instead of using frozen Russian assets. This decision had a ripple effect on the financial markets, causing the interest rates (yields) on German government bonds to go up.

On the FX front, the Japanese Yen lost value on Friday during a chaotic day of trading. Although the Bank of Japan raised interest rates from 0.5% to 0.75% as predicted, traders immediately sold off the Yen once the news was confirmed.

The currency weakened even more after the bank's Governor, Kazuo Ueda, avoided giving a clear timeline for when rates might rise again. Consequently, the Yen dropped 0.6% against the US dollar, while the Euro surged to a record high against the Japanese currency.

Meanwhile, the British Pound had a bumpy ride but ended up roughly where it started against the dollar at 1.3374. This happened after the Bank of England cut interest rates to 3.75%; however, the vote among policymakers was much closer than expected, which suggests they might not be able to cut rates again soon.

The Euro remained flat against the dollar because the head of the European Central Bank, Christine Lagarde, refused to commit to a specific future plan, stating only that all options remain open.

Currency Power Balance

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Source: OANDA Labs

Oil prices dropped on Friday and are on track to finish lower for the second week in a row. The main reasons for this decline are fears that there is simply too much oil available in the market and growing hopes for a peace deal between Russia and Ukraine.

These factors were strong enough to overshadow concerns about blocked oil shipments from Venezuela. Specifically, the price of Brent crude fell by 17 cents to roughly $59.65 per barrel, while US crude dropped by 31 cents to $55.84.

Gold prices dropped slightly on Friday because the US dollar got stronger and investors started adjusting their portfolios before the year ends. Despite this small daily dip, gold is still on track to finish the week with a profit, largely because recent data showed lower inflation, which makes people hopeful that interest rates will be cut soon.

The price of gold fell just 0.1% to around $4,326 per ounce, though it remains close to the record highs seen in October. Silver had an even better week; it rose another 0.7% to roughly $66 per ounce and is set to finish the week with a 6% total gain after hitting an all-time high on Wednesday.

Read More:

Nikkei 225: A gradual interest rate hike stance by BoJ maintains the bullish trend

EUR/USD Forecast: ECB & US CPI to Drive Price Action, Bulls Remain in Control Above 1.1600 Handle

USD Stabilizes on CPI Doubts: USD/JPY Ahead of BoJ Decision and FX Overview

Economic Calendar and Final Thoughts

The European session has seen some medium impact data releases as well as

Later today, the US will release existing home sales data and University of Michigan consumer expectations etc.

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For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Day - FTSE 100

From a technical standpoint, the FTSE 100 index is finally breaking higher after a period of consolidation.

The index bounced off support at 9661 before breaking above both the 100 and 200-day MAs and making a fresh high eyeing the ATH at 9943.

The question now is can the FTSE 100 reach the 10000 handle?

The period-14 RSI remains above the 50 neutral level which hints at bullish momentum still being strong.

FTSE 100 Index Daily Chart, December 19, 2025

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Source: TradingView.com (click to enlarge)

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