Post by : Meena Ariff

Global markets turned cautious on Wednesday as investors awaited a crucial U.S. Federal Reserve interest rate call and earnings from major AI-linked companies that could challenge hefty sector valuations. While most assets remained quiet, the spotlight shifted to a record-setting surge in silver and a rapid slide in the Japanese yen.

Futures data shows near certainty that the Fed will trim interest rates by 25 basis points to 3.50–3.75%, yet investors see little chance of another reduction in January. Analysts say the tone of updated Fed projections — the “dot plot” — will heavily influence market sentiment. Any hint of fewer cuts ahead could spark a wave of hawkish repricing.

European shares slipped around 0.1% while U.S. futures ticked slightly higher. The Fed’s policy debate is expected to be divided, leaving Chair Jerome Powell in a challenging position. Added uncertainty stems from delayed economic reports due to the U.S. government shutdown, including the November jobs data now rescheduled for December 16.

Markets are also weighing whether a cautious Fed outlook could derail the traditional late-December “Santa rally”, when equities typically rise as investors close their books for the year.

A spike in volatility is expected Thursday, after the Fed decision and corporate results from Oracle and Broadcom. Both firms are viewed as key indicators for AI infrastructure spending, and options pricing points to potential share swings nearing 10%.

Bond yields held at 4.18% after a sharp climb this month, lending support to the dollar and unsettling the yen. The euro hit a record 182.64 yen, while the British pound touched levels last seen in 2008. The dollar stood near 156.62 yen after gaining on Tuesday.

In commodities, silver stole the show, crossing the $60 milestone and setting a new record near $61.45 an ounce. The metal has more than doubled this year as inventories tightened and demand surged, particularly from the solar, EV and data centre industries — sectors boosted by the AI boom. Gold hovered around $4,202 an ounce, below its October peak.

Oil stabilised as Brent traded near $62.05 a barrel after earlier losses tied to restored production at Iraq’s West Qurna 2 — one of the world's largest oilfields.

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