Last week, the international market was anything but stable, as the United States Congress scrambled to prevent a government shutdown at the last minute, and the Federal Reserve's decisions stirred up new waves of uncertaintyThis intense climate in the financial world has left many investors feeling uneasy, and the market's reaction reflected this sentiment.

In a surprising downturn, US stock markets experienced a widespread decline, with the Dow Jones Industrial Average dropping by 2.25% for the week, the Nasdaq Composite Index slipping by 1.78%, and the S&P 500 Index losing 1.99%. Beyond the Atlantic, European indices mirrored this trend, with the UK's FTSE 100 down by 2.60%, the German DAX 30 falling 2.55%, and France's CAC 40 declining by 1.82%.

As the Christmas holidays approach this week, it is anticipated that both US and European markets will see a slowdown in activity

Following the Federal Reserve's announcement, eyes will be on key economic indicators, including the Conference Board's Consumer Confidence Index and the November Trade BalanceAdditionally, the Bank of Canada and the Reserve Bank of Australia are set to release their meeting minutes, which will likely be closely scrutinized by analysts.

The Bank of Japan, maintaining its current monetary policy in December, has led to a significant short-term decline in the yenInvestors remain cautious about potential interventions in the foreign exchange market by the Bank of Japan, especially as its Governor, Kazuo Ueda, is scheduled to deliver a speech on the 25thMarket speculation suggests that Japan might hold off on raising interest rates until at least March, when there will be better clarity on wage pressures following the spring labor negotiationsMeanwhile, inflation in Japan continues to hover above the central bank's 2% target, with the Tokyo Consumer Price Index for December set to be released on the 27th.

On the employment front, just hours before a potential federal government shutdown, the House of Representatives passed funding legislation to keep the government operational until mid-March

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The passage of this bill now requires approval from the Senate before heading to the White House.

During its year-end meeting last week, the Federal Reserve made a noteworthy decision to lower interest rates for the third consecutive time, trimming the rates by 25 basis pointsThe latest dot plot indicates members of the Federal Open Market Committee foresee only two 25 basis point cuts in 2025, revealing an unexpectedly hawkish attitude from the central bankFollowing the meeting, Fed Chairman Jerome Powell highlighted that officials are considering how their policies might affect the economy and inflation.

Data releases are set to capture market attention, particularly the December Consumer Confidence IndexAfter witnessing an upward trend over the past two months, the index's subcomponent concerning "difficulty in finding employment" has notably declinedThis correlation with official unemployment rates suggests that further drops can indicate a resurgence in job growth.

Moreover, the November durable goods orders and new home sales data will serve as vital indicators for assessing the US economic landscape as 2024 approaches

After a slight rise of 0.3% in October, durable goods orders are forecasted to decrease by 0.4%. However, investors often prefer the core figures that exclude the volatile defense capital goods, providing a more stable snapshot of the economy's performanceIn terms of employment trends, new unemployment claims will also help in evaluating labor market conditions.

In the commodities market, oil prices faced pressure last week, primarily due to a stronger dollar and persistent concerns over demand outlookLight crude oil (WTI) futures for the nearest month fell by 1.92%, settling at $69.46 per barrel, while Brent crude also dipped by 2.08%, closing at $72.94.

Sevens Report Research, a market research organization, remains bearish on the oil sector, citing ongoing fears of a surplus in the physical market by 2025 amidst revised demand expectations while supply and production trends remain robust

The volatility seen in the stock markets has further compounded the negative sentiment surrounding oil and other commodities, particularly after the Federal Reserve hinted that anticipated rate cuts in 2025 might be less than previously expectedThe ICE Dollar Index actually increased by more than 1% last week, reaching a two-year highA stronger dollar generally has adverse effects on commodities priced in that currency.

Gold also felt impacts from shifting market expectations, with prices facing significant fluctuationsCOMEX gold futures for December delivery slipped by 1.0%, settling at $2,622.10 per ounce as the market navigated the Fed's diminished cut prospects.

JPMorgan's recent report underscored the current low levels of physical demand for gold, stressing an upcoming promising outlook in light of potential inflation concerns that could reignite interest, if exaggerated

“If inflation concerns ultimately escalate, it could drive more buying into gold and add significance to the Fed’s policy,” they suggested.

Blue Line Futures' chief market strategist, Streible, explained that recent data surrounding November's Personal Consumption Expenditures (PCE), personal income statistics, and spending numbers have all fallen short of expectationsThey observed a trend of capital returning to the gold market as investors looked to re-establish positions.

In the UK, expectations for interest rate reductions have also been notably subdued, as uncertainties cloud the economic outlookLast week, European Central Bank President Christine Lagarde indicated that the outlook for growth remained bleak given the US tariff threats, leading to the likelihood of further rate cuts"The path forward is clear; we anticipate further reductions in interest rates," said Lagarde, expressing concern over rapid service price inflation linked to wage growth.

The European Central Bank also forecasted a decline in wage growth from 4.8% this year to 3% by 2025. Lagarde noted remarkable inertia in consumer spending, with many households saving a significant portion of their income

Socio-economic factors such as rising tariffs on imports from Europe pose additional threats to growth prospects, especially if the US shifts toward protectionist policies, potentially impacting the Eurozone.

The Bank of England’s decision to hold its benchmark interest rate at 4.75% during the year-end meeting highlighted existing divisions among policymakers regarding future cutsDespite persistent inflation pressures, three members of the Monetary Policy Committee voted for a rate cut of 25 basis points, including Deputy Governor Ramsden.

Economic forecasts indicate that the UK's growth for the fourth quarter has been revised down to zero from an earlier projection of 0.3%. This downturn followed official data indicating that the UK economy experienced contractions in both September and October—the first back-to-back monthly declines since 2020. Since the Chancellor of the Exchequer announced tax hikes of £25 billion on October 30, business sentiment has significantly deteriorated.

Supporters of maintaining the current interest rates suggested that rising costs could either be passed onto consumers through higher prices or could lead to increased unemployment and wage stagnation, making the future highly uncertain