MARKET WRAPS
Watch For:
ECB interest rate announcement; Bank of England rate decision; trading updates from Bunzl, Capita, Currys, Serco Group
Opening Call:
Shares are set to open in positive territory in Europe on Thursday, with investors focused on the interest rate decisions of the European Central Bank and the Bank of England. In Asia, stock benchmarks rose; Treasury yields mostly lost ground; the dollar weakened; while oil and gold both advanced.
Equities:
European stocks are headed for higher ground on Thursday amid expectations the ECB and the BOE will follow the same course as the U.S. Federal Reserve in keeping interest rates unchanged this month.
The U.S. central bank on Wednesday kept its key policy rate unchanged at the range of 5.25% to 5.5%, a 22-year high, while officials penciled in three rate cuts in 2024, according to its revised dot-plot forecast.
In an afternoon press conference, Fed Chair Jerome Powell said the central bank was "very focused" on not making the mistake of keeping rates restrictive for too long.
Fed fund futures traders are now pricing in a 58% likelihood that the Fed will deliver its first rate cut in March 2024, according to CME FedWatch tool.
Forex:
The dollar retreated in Asia in the wake of signals from the FOMC that rate cuts are in the offing for 2024.
"The upshot is that the Fed has pivoted" and the market "has jumped ahead and frontloaded rate cuts into early 2024," DBS said.
There are several possible paths to lower rates, DBS analysts said, adding that they "do not necessarily agree with the current aggressive pricing."
Bonds:
Treasury yields extended losses after Fed officials penciled in three quarter-point rate cuts for 2024.
The post-meeting statement nods to a slowing U.S. economy, while saying that employment and inflation remain elevated.
"My initial reaction is that the Fed is clearly acknowledging inflation is coming down, which is good, but also lowered its expectations for GDP at the same time, which is bad," said Brian Mulberry, client portfolio manager at Zacks Investment Management.
"There's no question that the Fed has moved closer to where the market's expectations were for rate cuts in 2024, which eases financial conditions and affects everything."
Energy:
Oil futures rose in Asia, rebounding from recent lows after data from the U.S. Energy Information Administration showed U.S. crude inventories dropped for a second consecutive week.
U.S. stockpiles were drawn down by 4.3 million barrels last week, ANZ said, adding that total oil and product inventories fell the most since October.
OPEC's monthly oil market report is also supporting market sentiment, with the producer group expecting a supply shortfall in the first quarter of 2024 and rising demand next year, ANZ added.
Metals:
Gold prices were higher after the Fed held rates steady and said it expected to cut interest rates three times next year, ANZ said.
As investors have been concerned about rising interest rates, the shift in tone from the Fed may attract more investors to the precious metal and support gold prices, ANZ added.
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Copper prices gained amid tightening supply and low inventory, ANZ said.
The recent shutdown of First Quantum Minerals' Cobre mine in Panama and reduced production at Anglo American's operations may see 0.6 million tons removed from the market next year, it said, adding that it now expects copper supply to move to a deficit in 2024 from a small surplus it projected earlier.
Also, recent inventories in LME warehouses have dropped for three consecutive weeks, which is also supporting prices, it added.
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Iron ore futures declined, with sentiment weighed by the lack of new stimulus measures from China's government, ANZ said.
Steel mills have been increasing supply despite weak economic data in the hope that Chinese officials would announce fresh stimulus for the construction and the property sector, ANZ said.
However, the lack of clear signs on more specific measures from the recent China economic work conference has disappointed investors, it added.
TODAY'S TOP HEADLINES
Fed Begins Pivot Toward Lowering Rates as Inflation Declines
WASHINGTON-Slowing inflation prompted Federal Reserve Chair Jerome Powell to pivot away from raising interest rates and toward considering when to cut them, igniting a rally on Wall Street.
The Fed held its benchmark federal-funds rate steady at a 22-year high on Wednesday and offered every reason to think that its most recent increase this past July probably marked the end of the most aggressive cycle of hikes in four decades.
ECB, Bank of England Expected to Follow the Fed on Keeping Rates Steady
The European Central Bank and the Bank of England are expected to follow the same course as the Federal Reserve in keeping interest rates unchanged this month.
Both make their final decisions of the year on Thursday, and economists expect them to hold steady. The ECB will update its forecasts for inflation and growth, giving investors clues about when rates might change.
Vivendi to Explore Split Into Three Businesses
Vivendi will examine a possible split into three businesses around Canal+, Havas and an investment company.
The French digital entertainment and communications company said its management board had proposed a study of the feasibility of a split into publicly-traded entities.
Credit Suisse to Pay $10 Million After SEC Alleges Prohibited Underwriting, Advising
Credit Suisse Securities and two affiliated entities will pay more than $10 million to settle charges from the U.S. Securities and Exchange Commission that it allegedly provided certain prohibited services.
The SEC said Wednesday that the bank acted as an underwriter and investment adviser to mutual funds after being prohibited from doing so by a New Jersey court in October 2022.
BP Docks Former CEO Bernard Looney as Much as $40 Million Over 'Serious Misconduct'
LONDON-BP said former Chief Executive Bernard Looney will lose out on as much as $40.6 million in compensation as the result of his abrupt resignation over past relationships with colleagues.
The significant cost to Looney of his September departure from the London-based company includes the maximum potential value of salary, pension payments, deferred bonuses and other compensation he might have received, before taxes, BP said in a release on Wednesday.
Ukrainian Civilians Endure Russian Missile Barrage, Cyberattack
KYIV, Ukraine-Residents of Ukraine's capital were weathering missile strikes and a cyberattack on a mobile-network operator that authorities called Russian efforts to sow chaos and sap national morale.
Ukrainian air defense shot down 10 ballistic missiles over Kyiv early Wednesday morning, according to Ukrainian officials. The falling debris hit residential buildings, a kindergarten and a hospital, injuring more than 50 people and damaging the municipal water system.
U.S. Blocks Shipment of Rifles to Israel Over Concerns of West Bank Settler Violence
WASHINGTON-The Biden administration is holding back a shipment of more than 27,000 U.S.-made rifles intended for Israel's national police over concerns they could end up transferred to extremist Israeli settlers in the West Bank, U.S. officials said.
The three cases of firearms, which include M4 and M16 rifles, have been awaiting the administration's mandated notification to Congress for more than a month. The administration has yet to approve their transfer, as officials and members of Congress press Israel for assurances that they won't land in the hands of extremists, the officials said.
Russia Opens New Criminal Case Against Radio Free Europe/Radio Liberty Journalist
Russian authorities have opened a new criminal case against a Russian-U.S. journalist for Radio Free Europe/Radio Liberty on an allegation that she spread false information about Russia's military, according to the Russian state news agency TASS.
TASS reported on Wednesday that Russia's Investigative Committee, the country's main federal investigating authority, opened a case against Alsu Kurmasheva, a dual U.S.-Russian citizen, for spreading false information about the Russian armed forces. Kurmasheva has been in pretrial detention since October on a charge that she failed to register herself as a foreign agent.
Tesla Recalls Millions of Vehicles Amid Probe of Autopilot Crashes
Tesla is recalling more than two million vehicles over government contentions that its Autopilot system can be misused by drivers, in the midst of a yearslong probe by the top U.S. auto-safety regulator into crashes involving the driver-assistance technology.
The safety recall, which covers nearly all Tesla vehicles sold in the U.S., could dent the carmaker's reputation. It is unlikely to be expensive to implement and won't meaningfully limit drivers' access to Tesla's advanced driver-assistance features.
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Expected Major Events for Thursday
00:01/UK: Nov RICS Residential Market Survey
06:00/FIN: Nov CPI
07:00/SWE: Nov CPI
07:00/SWE: 3Q Financial accounts
07:30/SWI: Nov Import Price Index
07:30/SWI: Nov PPI
08:00/SVK: Nov CPI
08:00/SVK: Nov Core & net inflation development
08:00/SPN: Nov CPI
08:30/SWI: Swiss National Bank monetary policy assessment
09:00/CZE: 3Q Quarterly Balance of Payments
09:00/CZE: Oct Monthly Balance of Payments
09:00/FRA: Dec IEA Oil Market Report
09:00/GER: Ifo Economic Forecast
09:00/NOR: Norges Bank monetary policy decision and presentation of Monetary Policy Report
11:00/IRL: Nov CPI
11:00/FRA: 3Q OECD Quarterly National Accounts G20 GDP growth
11:00/POR: Nov CPI
12:00/UK: Agents' Summary of Business Conditions
12:00/UK: UK interest rate decision
13:00/POL: Oct Balance of payments
13:15/EU: ECB interest rate announcement
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12-14-23 0016ET
