Market Report.
📊 Further changes in Fed policy? The U.S. consumer price index (CPI) rose 0.2% in October, in line with expectations. Economists expect inflation to rise further next year if President-elect Trump follows through on policies like tax cuts and higher tariffs. While the Federal Reserve is still expected to cut rates again in December, the scope for more cuts next year is seen as limited. The lack of progress in reducing core inflation could raise concerns among policymakers that the 2% target may be stalling out.
🇩🇪 The Council of Economic Experts, which advised Scholz, projects that the German GDP would grow by 0.4% in 2025 as opposed to the 0.9% anticipated in May. Joachim Nagel, president of the Bundesbank, cautioned that the possibility of Trump’s tariffs may cost Germany’s economy 1% of its production.
📉 ABN Amro have changed their forecast, now predicting the ECB’s deposit facility rate will fall to 1% in early 2026, down from a previous low of 1.5%. Deutsche Bank has also lowered its terminal rate prediction for the ECB, considering 1-1.75% as the main landing zone for the deposit rate.
🇪🇺 The Eurozone economy grew faster than expected in Q3 2024, but threats loom:
📈 Today we will know the GDP of the EU. GDP grew 0.4% in Q3 compared to the previous quarter based on the preliminary data, beating expectations of 0.2% growth. However, the outlook remains weak, with industry in recession and muted consumer confidence. The biggest surprise came from Germany, which expanded 0.2% despite struggles in its industrial sector. Threats of large tariffs from a potential Trump presidency, as well as escalating trade tensions with China, are weighing on the Eurozone’s outlook.
📉 The IMF study reveals that trade barriers in the EU are causing a widening GDP per capita gap between the EU and the US. This is due to slower productivity growth, a lack of a unified capital market, and higher barriers to worker mobility. Lowering trade barriers could boost European productivity by 7 percentage points, while also addressing capital market fragmentation and labor mobility.
🇫🇷 Macron fears the US administration under Trump will protect the American market, potentially leading to escalating tariff wars and impacting Europe’s export-reliant industries. Trade tensions with China and the EU’s anti-subsidy probe could further divide Europe, potentially fracturing European unity based on individual countries’ economic ties. He fears the U.S. could force Europe to separate from China more quickly by imposing heavy tariffs on China, while threatening tariffs on Europe if it remains “complacent”. high risk of Europe getting caught in the middle of escalating trade wars between the U.S. and China, potentially fracturing European unity depending on individual countries’ economic ties He said.
📉 Market View:
📉 Negative closes on Asian stock markets could drag down the European stock market. The falls in the HSI and the SSE have led to negative openings in European markets. At the moment, both the DAX 40 and the EuroStoxx 50 are trying to return to a bullish tone and act as a firewall for the US stock market. The DAX 40 is at stake at 19,050 points, which, if lost, would initiate a tough corrective phase.
📈 Meanwhile, the US stock markets remain sideways. The S&P 500 remains above 6,000 points, currently trading at 6,015 points futures. The Nasdaq 100 also remains strong above 21,000 points, currently trading at 21,130 points.
💵 The dollar’s performance is impressive; the dollar index is now trading above 106.50 points and the EUR/USD has lost 1.06 and is down to 1.0550. US bonds continue to strengthen, discounting that the Fed could change its mind if the Trump administration generates inflation; the 10-year bond trades above 4.45%.
🛢️ Crude oil remains lower with Brent crude trading near 72 dollars. Gold loses the $2,650 support level and is now trading at $2,560, dragged down by the strong dollar. Bitcoin continues like an unstoppable rocket and a few hours ago traded near 93,500 dollars, now falling back to 90,800 dollars.
🌍 Geopolitics:
🇺🇦 The Biden administration is intensifying aid efforts to Ukraine, including withdrawing military equipment and funding from a $61 billion aid package. Secretary of State Antony Blinken reassured NATO and EU allies, while Trump’s Defense Secretary Pete Hegseth raises concerns.
🇪🇺 Socialists threatened to disrupt the EU’s top jobs deal after the EPP blocked the confirmation of Teresa Ribera, a socialist with climate policy background, until she clarifies her role in handling Spain’s floods. Ribera will use the EU’s foreign subsidy law to block anticompetitive investments.
🛡️ NATO is openly critical of the new US administration, the president and one of his advisors. NATO Military Chief Rob Bauer: “I’m very much in favor of freedom of speech, but I’m not necessarily convinced that what Mr. Trump and Mr. Musk is doing on X is the right approach.” Robert Kennedy says, “There was no time in history where the people censoring speech were the good guys.”
