Federal Reserve Signals Potential Interest Rate Cuts Amid Inflation Concerns

Global stock markets have rebounded as the market anticipates an 80% likelihood that the US Federal Reserve will cut interest rates at its upcoming December ninth and tenth meeting, a significant increase from less than 40% earlier.

This shift in sentiment follows a productive phone call between US President Donald Trump and Chinese President Xi Jinping, along with an expected face-to-face meeting in Beijing in April 2026, which has eased global concerns regarding tariffs and geopolitical tensions.

The S&P 500 has begun to recover, rising past 6,800 points after a short-term correction of roughly 5%, buoyed by lessening fears around the high valuations of technology and artificial intelligence stocks, as well as improved clarity on the interest rate outlook.

Analysts expect the index to potentially retest its all-time high of 6,900 points before the Fed's meeting this week. The report emphasizes an overweight rating on US, Chinese, and Indian stock markets.

In Southeast Asia, equity markets are experiencing a tug-of-war between global monetary expectations and regional headwinds. The region has benefitted from a renewed 'risk-on' sentiment globally, although domestic resilience has been challenged by catastrophic storms and flooding affecting Thailand, Malaysia, Vietnam, and the Philippines in late November.

While Indonesia's Jakarta Composite Index has reached record levels above 8,500 points, the Stock Exchange of Thailand is projected to trade within a range of 1,220 to 1,290 points this month, with political developments expected to impact market swings.

The main risk for Thailand is a possible early House dissolution if the opposition files a no-confidence motion, potentially leading to a caretaker government unable to approve new budget commitments. This uncertainty may weigh on the Stock Exchange of Thailand until the election timeline becomes clearer.

The Bank of Thailand is also expected to cut its key rate by 25 basis points at its meeting on December 17. December stock picks include AOT with a target price of 49 baht, HMPRO with a target price of 8.30 baht, and TRUE with a target price of 15 baht, each expected to benefit from the evolving economic conditions.