Market Report.
💷 Yesterday, Bank of England cuts rates by 25bp. In line with expectations, moving to 4.75% interest rate. Chairman Bailey warns of risks and possible fragmentation of the global economy. The GBPUSD seeks support above 1.2850.
💡 The BoE cited significant uncertainty around the impact of the UK government’s fiscal package and the labor market, as well as a cautious, gradual approach to policy moves. Barclays believes this uncertainty is unlikely to dissipate enough in the coming weeks for the BoE to cut rates in December. The BoE stated the government’s fiscal plans are expected to add nearly 0.5 percentage points to inflation at its peak and delay the return to the 2% target by a year.
📈 The Fed also cut rates, as expected, adding further bullish tone to the US market. We discuss the details in the market view section.
🇩🇪 A crisis of competitiveness has been sapping the life from Germany’s economy, leading to a net capital outflow of over €650 billion since 2010, with almost 40% of that occurring since 2021. Companies like Siemens, Volkswagen, and BASF have been shifting resources and investments outside of Germany, citing issues like high energy prices, aging technology, and overbearing bureaucracy. The election of Donald Trump as U.S. president threatens to accelerate this trend, as German firms may need to invest more in the U.S. to avoid potential tariffs. The collapse of Chancellor Olaf Scholz’s coalition government and the call for snap elections reflect the political deadlock that has hindered serious economic reforms.
🇫🇷 France posted a trade deficit of 8.3 billion euros in September, exceeding last month’s figure of 7.7 billion and the consensus of 6.5 billion. Imports declined 2.3% from the previous quarter to 169.4 billion euros. Exports fell by 3.0% in the third quarter of 2024.
📊 As Trump’s election triumph spurred investors to prepare themselves for steps towards a settlement of the crisis in Ukraine, equities exposed to Russia surged from Turkey to eastern Europe. Raiffeisen Bank, situated in Vienna, had a 10% increase in its stock yesterday. In the last two sessions, Hungary’s OTP Bank, which also operates in Russia, hit consecutive record highs.
🇪🇺 European leaders meet after Trump’s re-election, agreeing on the need to take more responsibility for security. With Germany and France weakened, Europe faces uncertainty. Trump has questioned support for NATO and proposed tariffs that would hit Europe. Divisions over support for Ukraine emerge at the summit, with leaders such as von der Leyen emphasising the importance of the transatlantic alliance. Macron urges Europe to strengthen itself and not depend on the US forever.
💼 The Hong Kong branch of billionaire George Soros’ fund is closing as part of an administrative restructuring. The New York-based company stated that after the shutdown, its London and New York offices will be in charge of managing assets throughout Asia. It also stated that it will keep paying managers in Japan, Singapore, Hong Kong, and other Asian centres. In 2010, Soros Fund Management established an office in Hong Kong.
🇨🇳 China has launched a five-year, $1.4 trillion stimulus program to boost economic development and alleviate local governments’ hefty debt loads. Following the conclusion of the parliament’s five-day session in Beijing on Friday, the measures were made public. The stimulus package is aimed at addressing the heavy debt burdens of local governments in China, which have been a significant drag on the country’s economic growth.
Market View:
📊 Bullish euphoria continues in US markets after Trump’s victory. Mini S&P 500 futures reach 6,000 points. The Nasdaq surpasses 21,000 points.
💵 The Federal Reserve’s 25 basis point interest rate cut caused the dollar to weaken after the impressive post-election rally. The dollar index retreated below 104.50 points, but is still trading close to that level. The US 10-year bond returns to the 4.30% area after being close to 4.50% on Wednesday afternoon.
📉 European markets are in the red after Thursday’s session where they recovered some of their losses. The DAX 40 falls more than 250 points during today’s session, appearing to be approaching the support zone of 19,050 points. We have warned that the loss of this support could trigger sharp corrections in the coming days. The Eurostoxx 50 also falls and is currently trading at 4,800 points.
🛢️ Crude oil has retreated in the last few hours, but remains relatively strong overall, with Brent trading near the $85 area. Gold has fallen back slightly after recovering from Wednesday’s losses following the US elections. It is now trading at 1,700 dollars per ounce.
₿ Bitcoin continues its unstoppable advance, currently trading at 76,210. It is likely to see corrections in the coming sessions, as it is losing strength, but if it manages to stay above 74,000 in the coming days, we could be entering a new bullish range.
