US Economy: Weekly Commentary – December 1, 2025

US Market Review

Treasury yields declined, Japanese yields surged, and the yen approached 160. U.S. equities advanced, led by tech; dollar softened, crude stabilized, while gold and Bitcoin posted gains.

Treasury yields ended the week lower, which implies higher bond prices. The 10-year Treasury note once again found support at 4.00%. Meanwhile, the yield on the 10-year Japanese Government Bond rose to 1.81%, a level not observed since 2008. The spread between the 10-year US Treasury and its Japanese counterpart has narrowed to 2.2% from 3.3% a year ago, potentially reigniting the unwinding of the yen carry trade. Additionally, the 40-year Japanese Treasury bond reached record highs, while the yen approached 160 against the US dollar—a level at which the Bank of Japan has indicated it may intervene. Following nearly a decade of negative interest rates aimed at spurring inflation, Japan now faces rising yields while approving a record fiscal stimulus of ¥21.3 trillion, further increasing debt issuance amid a debt burden exceeding 250% of GDP.

US equity markets closed the week in positive territory. Micro-cap and small-cap stocks gained 6.25% and 5.60%, respectively, while large-cap equities rose 3.75%. The "Magnificent 7" recorded a 5.23% increase. All sectors posted gains, led by Technology, which rose 4.80% over the week.

In currency markets, the US dollar depreciated by 0.73% against the euro. WTI crude oil rose 0.86%; however, on a monthly basis, crude prices fell for the fourth consecutive month following extended Russia–Ukraine peace talks and expectations of global oversupply. US crude oil production reached a record high in September, while OPEC+ is expected to maintain current production levels and review member output capacity. Gold advanced 4.77%, driven by rising demand and ongoing economic uncertainty. Bitcoin increased by 5.87%.

US Market Views Synopsis

U.S. retail sales and consumer confidence weakened, inflation remained mixed, while housing sales rose on moderate rates and inventory.

U.S. economic data in September and October showed a mix of weakening consumer activity and steady housing market momentum. Retail sales rose only 0.2% in September, below the expected 0.4%, reflecting softer consumer spending amid higher prices, tariffs, and a weakening labour market. Core retail sales, excluding autos, gasoline, building materials, and food services, declined 0.1%, with notable drops in vehicles, clothing, electronics, sporting goods, and online retail, while gasoline stations and food services posted gains. Consumer confidence fell to a seven-month low, driven by concerns over job availability and a four-year high unemployment rate, highlighting a K-shaped spending pattern across income groups. Inflation pressures persisted, with the PPI up 0.3% MoM and core PPI rising 0.2%, keeping annual rates near 2.6–2.7%. Meanwhile, October pending home sales increased 1.9% month-over-month, supported by moderate mortgage rates, rising inventory, and more affordable regional pricing, though high-cost markets, particularly in the West, remained subdued. These trends heighten expectations for a possible December Fed rate cut.

Retail Sales

U.S. retail sales and consumer sentiment weakened in September amid higher prices and labour market concerns, while inflation stayed mixed, intensifying expectations for a December Fed rate cut despite policymaker divisions.

U.S. retail sales increased a modest 0.2% in September, below the expected 0.4%, signalling a cooling in consumer momentum after months of steady gains as higher prices—exacerbated by tariffs—and a weakening labour market weigh on household demand. Category performance was mixed: sales excluding autos rose 0.3%, but core retail sales (excluding autos, gasoline, building materials and food services) fell 0.1%, with declines in motor vehicles, clothing, electronics, sporting goods and online retail, while gasoline stations and food services posted solid gains. The softer handoff to the fourth quarter coincided with a sharp deterioration in consumer sentiment, as the Conference Board’s confidence index dropped to a seven-month low and households reported growing concern over job availability amid an unemployment rate at a four-year high—a trend that is increasingly driving a K-shaped spending pattern across income groups. Inflation pressures persisted, with the Producer Price Index rising 0.3% on the month—driven mainly by energy and food—leaving annual PPI at 2.7%, while core PPI edged up 0.2%, bringing its year-over-year rate to 2.6%, the lowest since mid-2024. Despite a 16.1% nominal rise in retail sales since January 2022, real gains amount to just 1.1%, underscoring the strain on purchasing power. Against this backdrop of softer consumption and mixed inflation progress, market expectations for a December Federal Reserve rate cut have increased, even as policymakers remain divided over the balance between cooling labour conditions and still-sticky prices.

We expect the Fed could implement a rate cut in December due to labour-market weakness and growing concerns about consumer spending, although the likelihood of such a move remains uncertain.

Housing Market

October pending home sales increased 1.9% MoM and declined 0.4% YoY. Median listing price reached $424,200. Midwest led growth, West declined, while rising inventory and moderate rates support market momentum.

October pending home sales rose 1.9% MoM, well above the 0.2% forecast and up from 0.1% in September, while declining 0.4% YoY, leaving overall activity roughly 21% below 2001 levels. The Midwest led regional growth with a 5.3% MoM increase, supported by more affordable pricing, followed by the Northeast (+2.3% MoM) and South (+1.4% MoM), while the West fell 1.5% MoM amid persistently high home prices. Pending sales—contracts signed but not yet closed—typically precede completed transactions by one to two months and can be delayed by mortgage financing, inspections, or appraisals. The national median listing price edged up 0.4% YoY to $424,200, while September’s S&P CoreLogic Case-Shiller 20-City Home Price Index rose 1.36% YoY, down from 1.57%, and the National Home Price Index increased 1.29% YoY, compared with 1.45% previously, reflecting slower price appreciation. Mortgage rates remain near 6.26% for a 30-year fixed loan, below last year’s 6.84%, while housing inventory continues to expand, exceeding 1 million homes for six consecutive months, giving buyers more negotiating leverage. Market momentum is being driven by the combination of moderate price growth, increasing supply, and historically lower—but still elevated—mortgage rates, benefiting more affordable regions such as the Midwest, while higher-cost markets such as the West continue to experience limited contract activity and extended market timelines.

We expect continued momentum in the housing market, supported by moderate mortgage rates and rising inventory, while higher-cost segments are likely to remain subdued amid persistent affordability constraints.