EMEA Morning Briefing : ECB, Swiss Rate Decisions Eyed

MARKET WRAPS

Watch For:

ECB interest rate announcement; Germany balance of payments; trading update from Currys

Opening Call:

European stock futures were little changed early Thursday ahead of expected rate cuts by the ECB and the Swiss National Bank. Asian stock benchmarks gained; the dollar edged lower; Treasury yields and oil were little changed, while gold was slightly lower.

Equities:

Stock futures were muted ahead of rate decisions from the European Central Bank and the Swiss National Bank.

The ECB is expected to cut the deposit rate by 25 basis points to 3% and signal further rate reductions to come, Vanguard Europe's Shaan Raithatha said. This should reflect the softening growth outlook and the increasing chance that inflation will weaken more than expected, the senior economist said. It could also opt to drop the reference to policy being "sufficiently restrictive for as long as necessary," he said.

Vanguard continues to expect the ECB will accelerate the pace of rate cuts in early 2025, taking the deposit rate down to 1.75% by the middle of 2025, a notch below neutral.

Forex:

U.S. CPI data released overnight was "benign enough for the market to price in an almost 25bps Fed rate cut next week," said RBC Capital Markets' Alvin T. Tan. "Risk sentiment remains very positive into year-end," the head of Asia forex strategy said.

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The offshore yuan strengthened, aided by a Chinese state media report on the currency's stability. A piece from the PBOC-affiliated Financial News said the yuan is on solid footing and will stay balanced. With the support of continued improvement in China's economic fundamentals, there is a solid foundation for the yuan to remain stable, according to the article.

This helped stabilize the yuan, said Rodrigo Catril, senior forex strategist at National Australia Bank.

Bonds:

Fixed income will continue to play an important role as a ballast in long-term portfolios, Vanguard said in a 2025 outlook. The greatest downside risk to bonds is a rise in long-term rates and this also pertains to stocks, it said. This risk could emerge due to factors that could include continued fiscal-deficit spending or removal of supply-side support, the asset manager said.

"The long-term attractiveness of bonds continues to persist in the current interest rate environment," Vanguard's global chief economist Joe Davis said. Long-term investors will continue to benefit from a diversified portfolio consisting of fixed income and globally diversified equities, he added.

Energy:

Oil has priced in a little geopolitical risk premium on the tightening of sanctions against Russia by the U.S., while prospects of a Fed rate cut next week may also be boosting market sentiment, ANZ said. Investors are also awaiting the IEA's market balance estimates for 2025, ANZ added.

Metals:

ING expects the Fed to cut rates by 25bps next week, though the outlook thereafter seems less clear. "Lower borrowing costs are positive for gold as the metal doesn't pay interest," said ING's Ewa Manthey.

The bank forecasts the gold price to average $2,760/oz in 2025.

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Copper rose slightly in Asia, trading in a sideways range. U.S. inflation data was in line with expectations, and markets remain cautious about the Fed's meeting next week and its rate cycle next year, Galaxy Futures said.

Any rebound in prices appears limited as downstream purchasing sentiment looks weaker and copper will likely be in a surplus in supply this year, it added.

TODAY'S TOP HEADLINES

Strengthening Inflation Poses Challenge for Trump, Fed

Progress on bringing down inflation stalled in November, with the consumer-price index of goods and services costs ticking up to a 2.7% increase.

Prices of consumer goods-everything from cars to living-room furniture, but excluding food and energy-increased at the fastest month-over-month pace in a year and a half, led by a jump in vehicle prices. That was partly because drivers replaced damaged cars and trucks after recent devastating hurricanes.

China Comes Out Swinging as Trump Trade War Looms

During Donald Trump's first administration, China learned that it couldn't match the much larger U.S. economy's tit-for-tat when it came to tariffs, and quickly found other ways to try to inflict pain-often by borrowing from his playbook.

Now, as Trump's second stint in office approaches, Beijing is brandishing an expanded arsenal of countermeasures that it is likely to draw upon as the president-elect threatens across-the-board tariffs and levies of as high as 60% on Chinese-made goods.

Sotheby's Announces Round of Layoffs

Sotheby's is laying off more than 100 people, the latest chapter in its effort to right its finances after receiving $1 billion earlier this fall in a joint deal involving its highly leveraged owner, Patrick Drahi, and an Abu Dhabi sovereign-wealth fund.

The layoffs represent roughly 6% of its 1,800-person workforce.

Mark Zuckerberg's Meta Donates $1 Million to Trump's Inaugural Fund

Meta Platforms has donated $1 million to president-elect Donald Trump's inaugural fund, the latest step by CEO Mark Zuckerberg to bolster his once-fraught relationship with the incoming president.

The donation, confirmed by the company, is a departure from past practice by Zuckerberg and his company, and comes after an election campaign in which Trump threatened to punish the tech tycoon if he tried to influence the election against him.

Microsoft to Incur $800 Million Charge Tied to Cruise Robotaxi

Microsoft will record an $800 million impairment charge tied to its minority investment in General Motors' now-scrapped Cruise robotaxi program.

The tech giant expects to incur the charge, which is estimated to ding earnings by about 9 cents a share, during its second fiscal quarter, it said in a regulatory filing Wednesday.

Netflix's Extraordinary Parental Leave Was Part of Its Culture. That's Over.

Netflix made headlines nearly a decade ago when it unveiled one of corporate America's most generous parental-leave benefits, pledging to give new moms and dads unlimited time off in their child's first year.

It was a promise Netflix couldn't keep.

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Expected Major Events for Thursday

00:01/UK: Nov RICS Residential Market Survey

05:30/NED: Oct International trade

07:00/TUR: Oct Balance of Payments

07:00/SWE: Nov CPI

08:00/SVK: Oct Employment and average monthly wage in selected branches

08:00/SVK: Oct Turnover in selected branches of economy, incl Industry & Construction

08:30/SWI: Swiss National Bank monetary policy assessment

09:00/BUL: Sep Trade with EU Member States - preliminary data

09:00/BUL: Oct Trade with third countries - preliminary data

09:00/ITA: 3Q Labour Cost Index

09:00/FRA: Dec IEA Oil Market Report

09:30/UK: 3Q Business Finance Review

09:30/GER: ifo Economic Forecast

11:00/IRL: Nov CPI

11:00/FRA: 3Q OECD Quarterly National Accounts G20 GDP growth

13:15/EU: ECB interest rate announcement

16:59/GER: Oct Balance of Payments

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

12-12-24 0017ET