MARKET WRAPS
Stocks:
European stocks fell Wednesday, extending Tuesday's mostly lower close, as investors on both sides of the Atlantic waited for the Federal Reserve's final rate decision for the year.
The Italian FTSE MIB saw the steepest early decline as Leonardo and Banca Mediolanum handed back some of Tuesday's gains.
The Dutch AEX edged lower as Aegon fell after outlining plans to rename and relocate its headquarters to the U.S.
The FTSE 100 rose, thanks to support from miners and the financial sector, while the CAC 40, IBEX 35 and the DAX fell.
Investors widely expect the Fed to cut rates for the third time in a row, but are increasingly uncertain about where rates will go from here. Analysts expect a cautious message from the Fed which could potentially lift Treasury yields.
Market Insight
Shares in London-listed house builders rose after Berkeley reiterated guidance for the year despite a fall in revenue and sales.
Crest Nicholson, Berkeley and Vistry were gaining.
"Of course, this is a highly cyclical sector and if nothing else, the perennial undersupply of homes in the U.K. will provide future opportunities," Interactive Investor said.
U.S. Markets:
Stock futures pointed to a mostly higher open Wednesday.
A 25-basis-point Fed rate cut is priced with a 89% probability, according to LSEG, and investors are likely to pay close attention to the Fed's projections and comments by chair Jerome Powell.
The central bank's main debate is likely to be about how close it is to ending the easing cycle , First Abu Dhabi Bank said, anticipating a lack of consensus. It added that Kevin Hassett, Trump's favored candidate to head the Fed, could rally support for rate cuts but there are mounting calls for relative rate stability over the coming months.
Forex:
The euro rose against the pound and sterling needs favorable news about economic growth for it to strengthen versus the EU's single currency, Insight Investment said.
"We continue to favor Scandinavian currencies over sterling given a more robust economic outlook and prudent central bank policy."
The dollar declined against a basket of currencies as risks surrounding the Fed's policy meeting were skewed towards less hawkish commentary and a willingness to further cut rates , ADSS said.
The dollar would weaken should the Fed be more open to further rate cuts, while stocks and metals should rise, it said.
The dollar could receive a limited boost by the Fed's monetary policy, but the rally might not last in the face of pressure from weak jobs data next week and seasonal December weakness, ING said.
Bonds:
Eurozone government bond yields rose in early trade, but increases could fade as the market shifts to the Fed's policy announcement at 1900 GMT.
"As the data calendar remains thin, Bunds should continue to stabilise in the European session, before the Fed takes centre stage in the evening," Commerzbank said.
The 10-year Bund yield is up and staying close to the highest levels since March, according to Tradeweb.
Yields on U.K. government bonds rose slightly as investors awaited the Fed's interest-rate decision. After Wednesday's Fed decision, however, focus will turn to next week's Bank of England decision , where a rate reduction is also anticipated.
Italian government bonds are a 'standout opportunity' , based on the country's political stability and improving debt-trajectory, according to Amundi. The country is "one of the few developed market sovereign issuers with clear near-term support."
At the same time, Amundi said it has reduced its exposure to U.S. bonds.
"Amundi has reduced U.S. duration exposure due to a mixed macro picture--weakening consumption, softening labour markets."
Two-year and 10-year Treasury yields edged lower, suggesting investors already positioned themselves ahead of the Fed's policy decision, according to MFS Investment Management.
"The Fed will likely try hard to sound cautious and deliver some hawkish undertones, mainly because the Fed wants to keep maximum policy flexibility," it said.
Metals:
Gold prices slipped, but continued to hold above the $4,200 mark as investors awaited the Fed's interest-rate guidance for next year. Futures in New York were down.
"A slump in U.S. government bonds over the past few days has curbed risk appetite, as traders grow cautious about the pace of monetary easing," ANZ Research said.
Silver prices continued to climb, hitting fresh record highs on as investors bet on an imminent interest-rate cut in the U.S.
"Although inventory pressures have eased as shipments boosted London vault stocks, tight conditions in the over-the-counter market and tariff-related concerns have kept prices elevated," MUFG said.
Energy:
Oil prices held broadly steady as investors tracked diplomatic efforts to end the war in Ukraine and looked to Fed Chair Jerome Powell's remarks on interest rates.
Traders now await monthly reports from OPEC and the IEA on Thursday for further clues on crude's outlook.
EMEA HEADLINES
Trump and U.S. CEOs Agree: European Red Tape Goes Too Far
BRUSSELS-President Trump doesn't have many good things to say about Europe these days. Neither do some of America's most powerful CEOs.
The new U.S. National Security Strategy, a foreign-policy declaration that shocked European leaders with its harsh language about the continent, echoed complaints from American executives about what they see as the European Union's oppressive business regulations.
America Has a New Ally in Syria and Wants Israel to Get on Board
TEL AVIV-Israel's aggressive posture toward the new government in Syria has emerged as a rare point of disagreement with Washington, where President Trump wants a quick resolution to the two countries' decades-old tensions.
After the collapse of Bashar al-Assad's regime a year ago, Israel carved out a 155-square-mile area inside Syria that it still holds. Since then, it has carried out arrests, seized weapons and conducted frequent airstrikes in the south of the country. Over the summer, Israel struck Syria's military headquarters in Damascus in what it said was an effort to defend the Druze minority, which has strong ties to Israel, from sectarian attacks.
Trump Pushes Ukraine to Accept Peace Deal, Saying It Is Losing
President Trump dialed up pressure on Ukraine to swiftly accept a U.S.-designed peace plan, hardening his position toward the embattled country and its European backers, who insist U.S. security guarantees are vital to a peace deal.
Exacerbating tensions between Europe and Washington, Trump lambasted European leaders as weak and said Russia holds the cards in any peace negotiation with Ukraine.
Inside Ukraine's Daring 'Operation Spiderweb' Attack on Russia
GLOBAL NEWS
JPMorgan's Stock Slide Weighs on Dow Industrials
A sharp drop in JPMorgan Chase shares dragged down the Dow Jones Industrial Average on Tuesday.
JPMorgan fell 4.7%, marking the stock's worst day since April, after the nation's largest bank told investors that expenses next year will rise to $105 billion, above analysts' expectations of approximately $101 billion.
Trump Plans Final Interviews With Fed Chair Candidates in Coming Days
President Trump is planning to start his final round of interviews in the coming days with candidates to be the next Federal Reserve chair.
Trump and some of his aides are scheduled to interview former Fed governor Kevin Warsh on Wednesday, according to senior administration officials. Other candidates, including Trump's National Economic Council director Kevin Hassett, are soon expected to meet with the president, the officials said.
Massive Debt-Fueled Deals Are Back on Wall Street
The megadeal is back and so is Wall Street's immense appetite for debt.
Paramount's hostile bid for Warner Bros. Discovery this week, the leveraged buyout of gaming company Electronic Arts earlier this year and other recent debt-laden transactions have all been possible thanks to a spike in lending by banks and even some private-credit funds.
China's Consumer Inflation Ticks Up, But Factory Deflation Worsens
China's consumer inflation gained pace in November but was slightly below expectations, benefiting from a low base while factory deflation worsened.
The country's consumer-price index rose 0.7% from a year earlier last month, surpassing October's 0.2% increase and marking the second straight month of improvement, data released by the National Bureau of Statistics showed Wednesday. A poll of economists by The Wall Street Journal had predicted the index to rise 0.8%.
Asia Shows Economic Resilience in Year of Tariffs, But Growth Set to Slow, ADB Says
SINGAPORE-Asia's economies have fared better than expected in a year dominated by U.S. tariff threats but growth will slow next year, the Asian Development Bank said.
A surprisingly strong showing by India-Asia's third-largest economy-offset a deceleration in China, the ADB said as it raised its 2025 growth forecast for the region.
Russian and Chinese Bombers Fly Joint Patrol Close to Japan
TOKYO-Russian and Chinese bombers flew near Japan and South Korea in a joint patrol Tuesday that Tokyo described as a show of force, adding further strain to the worst diplomatic crisis in years between Tokyo and Beijing.
The military exercise, which Russian state media said lasted around eight hours, comes amid a series of Chinese reprisals against Tokyo over remarks last month by Japanese Prime Minister Sanae Takaichi suggesting that Japan might be dragged into any conflict over Taiwan, the self-ruled island that Beijing claims as its own.
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