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• UK sees weak retail sales ahead of Christmas
• BoJ hike rates overnight
• US CPI and Micron earnings help lift US sentiment

European traders appear to be on their holidays already if price action is anything to go by, with indices throughout the region treading water at the open. On the data-front, the UK centric week continues thanks to a retail sales release which saw a second consecutive monthly decline (-0.1% for November). Coming off the back of a newly revised figure of -0.9% for October, we have seen a total 1% decline over the course of a two-month period that is typically associated with a pick-up in activity ahead of Christmas. Notably, we saw a drop-off in demand for online jewellers as the gold bull run hit jitters in October and buying pressure eased in November.

The day has kicked off with a focus on Japan, with the BoJ voting unanimously to hike its benchmark interest rate by 25bps to 0.75% - a three-decade high. This stands in stark contrast to the pro-growth fiscal measures planned by new PM Takaichi, although part of the funding for her stimulus measures will come thanks to an income tax hike which looks to come into play in 2027. Notably, the fact that we didn’t see a sharp rise in Japanese yields does highlight the easing debt concerns as the Japanese finance minister Katayama noted that the government would consider fiscal sustainability within the budget. That included an aim to increase market confidence by lowering the country’s debt-to-GDP ratio.

US markets are on the front-foot following yesterday’s inflation report, with a surprise collapse in both headline and core CPI lifting sentiment. Notably, a look into the figures does raise questions, with the BLS seemingly going on the assumption that many of the inflation figures for October were simply put down as 0%. Clearly the shutdown has not only caused missing data, but there are significant questions over the quality of the data released since. Meanwhile, stocks in the tech sector have been boosted by yesterday’s bumper earnings from Micron, with the stock rising 10% off the back of a 20% rise in revenues for the quarter. As we close out a week that has seen a huge amount of data and central bank announcements, there is an expectation that we start to see volumes and volatility ease off from here.

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