Market Report:
🇺🇸 US:The ongoing economic growth, strong job market, and inflation above the 2% target mean the Fed does not need to rush to lower rates. Powell said the economy is not sending any signals that the Fed needs to quickly cut rates, and the central bank can “approach our decisions carefully.” Powell deflected questions about how new tariffs or labor shortages might alter the inflation path, saying the effects are not yet clear until actual policies are implemented.
📉 This caused the market to reduce bets on a December cut to only 59% from 82% midweek, which raised short-term Treasury rates.
⚠️ In this scenario, strong retail sales data today could spook the markets, as it would support the Fed’s view to wait for further cuts.
🇨🇳 China: Retail sales in China increased by 4.8% YoY, reaching its highest growth since February. The surveyed jobless rate dropped to 5.0% in October, marking the lowest reading in four months. Industrial production expanded by 5.3% YoY, while new home prices shrank for the 16th consecutive month. The People’s Bank of China allocated CNY 981 billion in seven-day reverse repos to counterbalance factors like maturing medium-term lending facilities and tax payments.
📊 Despite this, Chinese stock markets have not reacted positively. The HSI and the SSE have not fallen much, but neither have they recovered the losses of the last few days.
🇯🇵 The Japanese economy expanded by an annualized 0.9% in the third quarter, slowing from the previous quarter’s 2.2% growth. The slower growth highlights the fragility of Japan’s economy amid risks of slowdowns in the U.S. and China that could weigh on exports. There are concerns that President-elect Trump’s promise of new tariffs could have a negative impact on Japan’s exports.
🇬🇧 Bad data in the UK: quarterly economic growth is weaker than expected, at 0.1% growth compared to 0.2% expected and 0.5% in the previous period. Still, the outlook for annualised growth at 1% this year remains unchanged. Manufacturing output contracts by -1% and the trade balance is weaker than expected.
📉 The narrative of, Trump is inflation is spreading. Catherine Mann, the only Monetary Policy Committee member to vote against cutting borrowing costs, said global shocks often drive excess inflation in Britain, including those from Donald Trump’s election. She suggested that the risk of global shocks should be incorporated into monetary policy decision-making.
💷 The Fed perspective change has bolstered thoughts the Bank of England will not be reducing rates anytime soon.
🚫 Meta received €798 million fine for EU antitrust violations, requiring it to stop linking classified ads to Facebook and avoid unfair trading conditions on rival second-hand goods platforms.
📈 Bitcoin’s record highs following Trump’s victory have prompted SEC Chairman Gensler to emphasize the importance of proper disclosure for tokens and the SEC’s record of approving spot Bitcoin BTC. He also highlighted investor harm in the crypto industry and the lack of sustainable use cases. Trump promised Gensler’s firing if elected, but 18 US states have filed lawsuits against the SEC and Chairman Gensler.
📉 Market View:
🇪🇺 The European markets, which managed to avoid a sharp correction yesterday, started the session in negative territory again. The DAX 40 momentarily lost the all-important support at 19,000 points, but an army of buyers rescued the index, taking it up to 19,300 points, from where it is now falling to 19,228 points.
📉 Meanwhile, US futures continue to correct after Powell’s remarks. The mini S&P 500 falls back to 5,945 points from 6,040 points this week. The Nasdaq falls below 21,000 points, having reached 21,300 points during the week. It currently trades at 20,860 points.
💵 An iron dollar remains strong, with the dollar index above 106.50 points. The EUR/USD lost 1.05 yesterday, but has recovered to trade at 1.0555 at the moment. US bonds continue to rise in yields, with the 10-year bond near 4.45%.
🛢️ In oil, Brent crude is losing support at 71.50 a barrel at the moment, continuing the slide in energy prices fuelled by expectations of further global economic contraction. Gold, which lost $2,550 per ounce yesterday, has rebounded slightly higher to $2,565 at the moment. Bitcoin, which rose above $93.450 on Wednesday, continues to cool and is currently trading at $88.285.
🌍 Geopolitics:
🇪🇺 On 19 December, the EU will hold a summit where they will discuss issues such as trade risks with the Trump administration, support for Ukraine by asking the Biden administration to lend everything available before the presidential transition, as well as strengthening trade ties with the UK.
🇫🇷 The French fiscal has requested a five-year prison sentence and five years of insolvency for leader Marine Le Pen in a trial involving 24 others. Le Pen and his party are accused of misuse of European Parliament funds to pay for a French political party, Frente Nacional. The trial, which is nearly a decade after initial investigations, aims to protect Le Pen’s party’s image for the 2027 presidential elections. If she is found guilty, she will not be able to stand for election. She, her own party and even some members of the opposition have described this as electoral interference that seems to seek, through subterfuge, to prevent what appears a party victory in next elections.
🇦🇹 According to the oil and gas business OMV in Austria, a Russian gas supply might be cut off before the year is out because of an arbitration action against Gazprom.
⛽ The European Union is preparing a new package of sanctions to target Russia’s shadow fleet of tankers used to transport its oil to market. The package, expected to be approved by the end of the year, will also include penalties against individuals involved in the trade. The EU faces challenges in gaining approval for these sanctions, with Hungary often playing a veto role.
