European Midday Briefing : ECB Rate Cut Prospects Continue to Support Mood

MARKET WRAPS

Stocks:

European equities were mostly higher on Friday with sentiment still buoyed by the European Central Bank's hint that further interest-rates cuts are likely.

However gains were capped after stronger-than-expected U.S. producer price data on Thursday damped prospects of many more Federal Reserve cuts.

U.S. Markets:

Stock futures were rising with the Dow on track to end a losing streak of six straight sessions.

Stocks to Watch

Broadcom rose 14% premarket after the semiconductor company reported fiscal fourth-quarter adjusted earnings that beat analysts' estimates.

Forex:

The euro was trading at a 17-day low against the dollar after the ECB's rate cut, but the single currency could turn higher next week with the Fed expected to trim rates too, Danske Bank said.

The pound weakened after data showed the U.K. economy unexpectedly contracted during October.

The U.K. currency has had a good couple of weeks but its fortunes have started to reverse and this has continued after Friday's data, Monex said.

Focus will turn to next week's purchasing managers' data to see whether or not the economy is now starting to pick up.

The PMI figures "should offer some steer on whether this current soft spot for growth is set to continue into year-end."

Bonds:

Eurozone core government bond yields are expected to fall in 2025, led by the short end of the curve, HSBC said.

"This view differs from the U.S. because we look for the ECB to diverge further from the Fed as the market prices more chance of a hard landing scenario."

HSBC has forecast the 10-year Bund yield at 1.90% at the end-2025 and 1.75% at the end of 2026.

HSBC said there is more potential for Treasury yields to fall once there is a clearer path for rates, HSBC said, which forecasts the 10-year yield at 3.5% for the end-2025 level.

"But we don't expect to get there in a straight line, and project the biggest decline in yields will come after the first quarter of 2025."

Uncertainties remain over policy implementation, from both the incoming administration and the Federal Reserve.

Candriam favors European rates over U.S. peers in terms of duration due to diverging monetary policy.

"The monetary policy divergence between the U.S. and Europe is expected to continue widening in 2025."

While the ECB's quantitative tightening will put additional pressure on eurozone sovereign issuance programs, the central bank could opt to increase the increment of rate cuts to 50bp from 25bp if the economic outlook worsens further, Candriam said.

Demand for ESG bonds has slowed, UniCredit Research said, with issuance expected to flatten in 2025 after solid supply growth in 2024. It added that the premium paid should still attract debut issuers, however.

Energy:

Oil was on track to gain over the week as prospects of tighter sanctions against Russia and Iran have raised market concerns over supply disruptions.

Prices were up 3%-4% on the week, boosted by Treasury Secretary Janet Yellen saying the U.S. is looking for ways to curb Russia's revenue, and Trump's national security pick vowing a return to maximum pressure on Iran. Prices have also found support in China's pledge to adopt a moderately loose monetary policy and political turmoil in the Middle East.

Metals:

Gold was being pressured by a stronger dollar ahead of the Fed's monetary policy meeting next week. Still, the metal was on track for weekly gains as elevated geopolitical tensions in Eastern Europe and the Middle East spur safe-haven demand.

"The main question for the gold market now is the pace at which the Fed will ease its policy following Donald Trump's win in the U.S. presidential election," ING said.

Gold futures may edge lower after forming a "bearish outside day" on the charts, FOREX.com and City Index said. This "now relegates Wednesday's break above $2,748/oz as a fakeout."

Uranium

There are few reasons to believe uranium prices can rise in the near term, UBS said, cutting its 2025 price forecast by 9% to $78/pound, and its 2026 projection by 6% to $80/pound.

EMEA HEADLINES

Germany's Goods Surplus Shrinks as Trade Uncertainty Mounts

Germany's trade surplus narrowed in October, after exports fell more than imports, with the potential for further troubles for the export sector as the threat of U.S. goods tariffs looms.

The surplus-which measures the value of goods Germany exported against those it imported-fell to 13.4 billion euros ($14.03 billion) in October, from 16.9 billion euros a month earlier, according to data released Friday by Germany's statistics agency Destatis.

Europe's Economy Is Looking Up. Where to Find Bargain Stocks.

Europe looks like the global economic sick man right now.

Governments have collapsed in both continental big powers, Germany and France. Returning U.S. President Donald Trump threatens to impose massive tariffs to trim a $175 billion trade deficit with the European Union, and to leave Europe on its own to support Ukraine and contain an aggressive Russia. China is dominating green technologies that Europe pioneered and eating the continent's lunch on electric vehicles.

Swiss Re Guides for Higher Profit, Dividend Next Year

Swiss Re said it expects its net profit for 2025 to top this year's expected result and issued dividend-growth guidance.

The reinsurer forecasts that it will make more than $4.4 billion in net profit next year, up from its recently-downgraded target of more than $3 billion for the current year, it said Friday. Its life and health division should contribute $1.6 billion to the group result, it added.

Munich Re's Higher 2025 Profit Guide Tops Views

Munich Re said it expects good operational performance across its business lines to help grow its net profit for 2025.

The reinsurer forecasts around 6.0 billion euros ($6.28 billion) in net profit next year, above its more than EUR5 billion target for the current year. This compares with estimates taken from a Visible Alpha poll which has EUR5.56 billion in net profit for 2024 and EUR5.86 billion for 2025.

Novo Nordisk's Ozempic Gets EU Regulator Endorsement to Reduce Kidney Risks

Novo Nordisk said the European Union's drug regulator supports a label expansion of its Ozempic diabetes drug to reflect its potential to lower the risk of conditions related to kidney disease in adults with Type 2 diabetes.

The European Medicines Agency's backing comes after a trial earlier this year showed that Ozempic slows the progression of chronic kidney disease and cuts the risk of kidney failure, heart attack, stroke and death in patients with Type 2 diabetes.

Deutsche Bank Taps New Risk Chief

Deutsche Bank is replacing its chief risk officer, a move that follows tumult in the German lender's commercial loans portfolio and regulatory threats over its money laundering controls.

Marcus Chromik, who served for eight years as chief risk officer at German rival Commerzbank, will succeed Olivier Vigneron on May 20, 2025, Deutsche Bank said Thursday. Vigneron recently informed the bank he wouldn't seek an extension of his contract when it ends on May 19, 2025.

Daimler Truck Unit Says Bankrupt Kal Freight Owes It Millions After Alleged Fraud

Creditors including Daimler Truck Financial Services say they are owed tens of millions of dollars following alleged fraud by bankrupt trucking company Kal Freight.

The arm of truck and bus maker Daimler Truck that provides financing to commercial vehicle owners said Kal Freight owes Daimler about $139 million in debt secured by titles to 1,625 tractors and trailers, according to a filing Tuesday in U.S. Bankruptcy Court in Houston.

GLOBAL NEWS

The Fed Is Poised to Cut Rates Next Week. But 2025 Is Another Matter.

One of my favorite things about the holiday season is the music. A spin through December just isn't complete without me getting my fill of Brenda Lee's "Rockin' Around the Christmas Tree" or Judy Garland's "Have Yourself a Merry Little Christmas."

Yet econ nerds like me don't really have any good tunes for when the calendar flips to a Federal Open Market Committee meeting.

Why the Stock Market Could Gain Another 20% in 2025

The stock market is surging as the year winds down, and shows no sign of slowing in 2025. Investors should embrace the expanding bubble.

Investing arguably was too easy this year. Aside from a brief selloff in early August, the declines have been few and were best used as opportunities to reload. Events that should have sent shudders through the market-the presidential election, escalating conflicts overseas, and uncertainty about the path of inflation and the Federal Reserve's rate-cutting plans-elicited barely a shrug.

Trump Team Weighs Options, Including Airstrikes, to Stop Iran's Nuclear Program

President-elect Donald Trump is weighing options for stopping Iran from being able to build a nuclear weapon, including the possibility of preventive airstrikes, a move that would break with the longstanding policy of containing Tehran with diplomacy and sanctions.

The military-strike option against nuclear facilities is now under more serious review by some members of his transition team, who are weighing the fall of the regime of President Bashar al-Assad-Tehran's ally-in Syria, the future of U.S. troops in the region, and Israel's decimation of regime proxy militias Hezbollah and Hamas. Iran's weakened regional position and recent revelations of Tehran's burgeoning nuclear work have turbocharged sensitive internal discussions, transition officials said. All deliberation on the issue, however, remains in the early stages.

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12-13-24 0519ET