Global markets are heading into the busiest week before Christmas, fully engaged with political shifts and central bank decisions. Germany could hold an early election in February following Chancellor Olaf Scholz's no-confidence vote, which has not affected the stock market as much, evident by the markets rising 21% this year. Political tensions are growing in countries like South Korea and Canada, where leadership resignations are being called for, all while major central banking rate decisions draw near.

Equity markets are showing signs of divergence and optimism, especially in the tech sector. The tech-heavy Nasdaq is in euphoria, lifted by Microstrategy's upcoming inclusion, while Tesla has received a substantial boost from Wedbush Securities' optimistic price target. Broadcom, a crucial chip supplier for Apple, has seen an impressive 38% gain in just two days given its positive earnings projections, especially in AI-related chip revenues. The volatility index, VIX, has jumped 6% ahead of the FOMC meeting, though analysts suggest this remains within acceptable ranges.

Commodity markets, on the other hand, stay muted, with gold and oil prices waiting for high-impact data. Gold prices are slightly higher as the US dollar pulls back, while crude oil markets are operating within a sideways bound, heavily influenced by OPEC's uncertain production strategies and China's complex economic situation. The potential economic stimulus from the Federal Reserve and People's Bank of China could provide support to both of these commodities in the near term.

Currency markets remain in focus, with the Federal Reserve, Bank of Japan, People Bank of China, and Bank of England rate decisions in view. The US dollar has shown slight weakness as market projections for 2025 interest rates are recalibrated, with economists expecting fewer rate cuts or a rest period with a wait-and-see strategy. For the upcoming meeting, the Federal Reserve is expected to announce a 25 basis point rate cut, though strong services sector performance and healthy GDP growth may challenge current economic projections. China's yuan had also come into focus with its 10-year government bond yield continuing to decline at a faster pace. With only two weeks left until 2025, it is the last major week for investors to benefit from high-volatility trading until the holidays.

Sources: Reuters, Investing.com, CME Fedwatch
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