EMEA Morning Briefing : All Eyes on the Fed

MARKET WRAPS

Watch For:

Germany foreign trade; trading updates from Thyssenkrupp, Ashtead Group, BAT

Opening Call:

European stock futures broadly edged lower. Asian stock benchmarks were mixed; the dollar weakened slightly, and Treasury yields were little changed; oil futures fell, while gold advanced.

Equities:

Stock futures were treading water with a broadly negative bias in Europe. U.S. stocks declined Monday as the battle for Warner Bros. Discovery went hostile. All eyes are now on the Federal Reserve, which begins its two-day meeting later Tuesday with a decision on interest rates due out on Wednesday. Odds of a quarter-point cut were up to 89.4% from 86.2%, according to the CME FedWatch tool.

"The market reaction is likely to focus on the dot plot, statement language changes, and communication from Chair Powell and any potential guidance on the timing and magnitude of future rate cuts," said David Doyle, head of economics at Macquarie Group. "Here, we believe, the compromise will be for a more neutral (less dovish) outlook, one that makes it clear the committee sees the timing and cadence of future cuts as more ambiguous."

Focus is expected to shift back to AI and the health of the consumer post the Fed meeting with Oracle, Broadcom, and Costco due to report later this week.

Forex:

The dollar edged lower as investors focus on the Fed meeting. Market participants expect the FOMC to deliver a rate cut, with the Summary of Economic Projections showing a subtle shift in risk emphasis rather than a wholesale dovish turn, DBS Group Research's Philip Wee said.

"Recent speeches suggest more officials are recognizing that downside employment risks outweigh upside inflation risks," the senior FX strategist said.

Bonds:

Treasury yields were little changed ahead of the Fed's final meeting of the year. For months, President Trump has leaned on the Fed to lower interest rates more aggressively. And although a number of senior Fed officials appear willing to sign off on another cut after the central bank wraps up its December meeting on Wednesday, whether investors will see more cuts during the first half of 2026 seems murky.

Tom Graff, chief investment officer at Baltimore-based Facet, said senior Fed officials have shown "considerably more skepticism around inflation than what Wall Street thought."

"Even if we get a new Fed chair, there's more uncertainty around the 2026 rate-cut outlook than two or four weeks ago," he added.

Energy:

Oil prices fell slightly. Investors were monitoring ongoing talks to end the Ukraine-Russia war ahead of an expected Fed rate cut this week, said UOB's global economics and markets research team. Progress on peace talks in Europe remains slow, with disputes over security guarantees for Kyiv and the status of Russian-occupied territory still unresolved, the team said.

U.S. and Russian officials also have differing views on the peace proposal made by the Trump administration, UOB added.

Metals:

Gold edged higher, as investors await the Fed's December rate decision.

"With the Fed meeting now the dominant driver, we expect metals to remain range-bound until [Fed Chair] Powell provides clearer guidance on the pace of easing beyond December," said Sucden Financial analysts.

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Copper gained after notching a record high on Monday. The prospect of stronger demand in China is supporting the base metal's gains, said ANZ Research analysts. China's Politburo announced that it would stick with a proactive fiscal approach and maintain a "moderately loose" monetary stance, after recent data showed a slowdown in economic activity, the analysts noted.

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Iron ore prices declined. The prospect of further fiscal stimulus in China has failed to boost sentiment in steel and iron ore markets, ANZ analysts said. Concerns over rising inventories persist, with total stockpiles at Chinese ports rising due to strong imports. Steel mills are actively restocking, despite Beijing's crackdown on overcapacity, driven by strong steel demand in international markets.

TODAY'S TOP HEADLINES

Americans See Inflation Stuck Where It Is Now-and Are Still Downbeat About the Economy

Americans are still worried about inflation and the broader state of the economy, but they are growing marginally more confident that inflation won't get worse.

The Federal Reserve Bank of New York's Survey of Consumer Expectations shows that households' inflation expectations were unchanged in November across both the short and longer term, according to survey results released Monday.

China's Manufacturing Is Booming Despite Trump's Tariffs

President Trump retook the White House almost a year ago promising a manufacturing boom.

He got one-in China.

Europe Scrambles for Influence in U.S.-Led Peace Talks on War in Ukraine

European powers are pushing to have a bigger say in the U.S.-led peace process to ensure that Ukraine isn't forced to accept a deal that leaves it, and the rest of Europe, vulnerable to future Russian aggression.

The leaders of the U.K., France and Germany met in British Prime Minister Keir Starmer's Downing Street residence with Ukrainian President Volodymyr Zelensky on Monday, their latest effort to influence negotiations as the U.S. pushes for a swift agreement to end the war.

Gaza Sits Under 68 Million Tons of Rubble. A Look at the Daunting Task Ahead.

The war in Gaza has reduced much of the enclave to rubble, with most of its buildings either destroyed or damaged. Clearing it to pave the way for rebuilding will be a gargantuan task that is expected to take years and cost over a billion dollars.

Thousands of Israeli airstrikes, along with fighting on the ground and controlled demolitions, have destroyed more than 123,000 buildings in the Gaza Strip and left an additional 75,000 damaged to varying degrees, accounting for 81% of all the structures in the enclave, according to the latest review of satellite images by the United Nations.

Trump Says U.S. Will Allow Nvidia H200 Chip Sales to China, Get 25% Cut

WASHINGTON-President Trump said he would let Nvidia export its H200 chip to China and that the U.S. would receive a 25% cut, his latest bid to make money for the government in an unusual agreement with a private company.

"I have informed President Xi of China that the United States will allow Nvidia to ship its H200 products to approved customers in China and other countries under conditions that allow for strong national security, " Trump said on Truth Social. He added: "25% will be paid to the United States of America."

PepsiCo to Cut Costs, Lower Food Prices in Deal With Activist

PepsiCo struck an agreement with activist investor Elliott Investment Management, committing to cut costs across the company and lower prices in an effort to jump-start its slowing food business.

The maker of Pepsi-Cola, Lay's and Doritos said it would reduce expenses in its food and beverages operations, while cutting the number of individual products by 20% across its U.S. businesses. PepsiCo also plans to lower prices for some food products in the new year.

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Expected Major Events for Tuesday

00:01/UK: Nov BRC-KPMG Retail Sales Monitor

00:01/UK: Nov UK Nations and Regions Growth Tracker

00:01/UK: 1Q Manpower UK Employment Outlook Survey

05:30/NED: Oct Consumer Spending

05:30/NED: Nov CPI

07:00/GER: 3Q Labour cost index

07:00/DEN: Oct Balance of payments (provisional figures)

07:00/DEN: Oct External trade (provisional figures)

07:00/NOR: Nov PPI

07:00/GER: Oct Foreign Trade

07:30/HUN: Nov CPI

08:00/SVK: Oct Foreign trade

09:30/UK: 3Q Mortgage Lenders and Administrators Return (MLAR) statistics

10:00/CRO: Nov PPI

10:00/MLT: Oct Industrial Production Index

10:00/CRO: Oct Foreign Trade

10:00/GRE: Nov CPI

11:00/IRL: Oct Industrial Production and Turnover

15:59/UKR: 3Q GDP

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

12-09-25 0015ET