📉 Market Report.
😞 The German economy faced challenges in November, with the Ifo business climate index falling to 85.7, missing analyst forecasts of 86.0. This decline was mainly due to concerns over U.S. trade policy under Trump and political uncertainty following the government’s collapse. The Ifo results and decline in the German PMI suggest the economy may contract again in Q3, with a poor outlook for 2025 due to Germany’s loss of industrial competitiveness and adverse demographics. The German economy is expected to be the worst performer among the G7 countries.
💷 UK households’ disposable income fell in October, with a 2.3% rise in inflation in October, primarily driven by higher energy prices, according to supermarket group Asda survey. This fall is the second time this year, reflecting a loss of momentum in the economy in the run-up to Prime Minister Keir Starmer’s first budget. Major UK retailers, such as Primark, Marks & Spencer, and Tesco, have been upbeat about the festive season, while sportswear retailer JD Sports Fashion warned about a lower annual profit due to a tough October.
🇯🇵 Japan’s services producer price index, which measures the prices companies charge each other for services, rose 2.9% in October from a year earlier, accelerating from a 2.8% gain in September. The increase was driven by services like machinery repair, accommodation, and construction work, reinforcing the BOJ’s view that rising wages are leading more firms to pass on higher labor costs through price hikes. This service-sector inflation data will be among the factors the BOJ will scrutinize at its next policy meeting in December, when some analysts expect it to hike interest rates from the current 0.25%. While uncertainty over U.S. President-elect Donald Trump’s policies clouds the outlook, many analysts expect Japan’s economy to sustain a moderate recovery and help keep inflation around the BOJ’s 2% target.
🇫🇷 The European Commission is set to approve France’s 2025 budget, but is seeking more clarity on Paris’s control of longer-term expenditure. The Commission believes France is on the right track to cut its deficit by 2025, with a draft budget containing €60 billion in tax increases and spending cuts. The Commission is also seeking details on reforms to expand the fiscal adjustment period. The EU is considering satisfactory net expenditure ceilings to balance public accounts by 2025. France has the highest public expenditure relative to GDP in the EU.
🏦 The European Central Bank (ECB) is preparing to lower interest rates, with Chief Economist Philip Lane urging a gradual approach. The bank is navigating risks such as global politics and wars. Analysts predict a fourth 25 basis point rate cut this year, bringing the deposit rate to 3%. Event 50 bp cut it could be considered given the situation of the EU economy. Joachim Nagel and Gabriel Makhlouf also call for caution, while Mario Centeno and Yannis Stournaras advocate for a steady 2% rate, seen as the neutral rate.
📊 Market View:
🇺🇸 US futures remain strong and near record highs, with the Mini S&P 500 trading at 6,000 points, close to the highs reached earlier this month after the US elections. The Nasdaq 100, meanwhile, has retreated slightly after a strong recovery yesterday to 21,080 points. It now stands at 20,895 points.
💵 The dollar has retreated from yesterday’s session, although its DXY index remains above 107 points. The EUR/USD managed to regain the 1.05 level in the last few hours, but has fallen back and is currently trading at 1.0475.
🇪🇺 European markets opened lower. After yesterday’s miraculous recovery, which took the DAX 40 to 19,500 points, despite having repeatedly lost the 19,000 level during the previous week, today’s opening was down, with the DAX at 19,340 points. The EuroStoxx 50 also started the day in the red, trading at 4,775 points.
🛢️ There has been a significant fall in the price of crude oil. Brent crude has fallen from 75 dollars to 72.59 dollars. Gold, which reached $2,720 per ounce in the early hours of Monday morning, has seen a sharp correction and is now trading at $2,625.
🌍 Geopolitics:
🇺🇳 The G7 is set to take “appropriate measures” against China and other third countries supporting Russia’s “war machine” in Ukraine, a move that is escalating from the previous meeting. The draft communique condemns North Korea’s deployment of soldiers to fight alongside Russia in Ukraine, calling it a “dangerous expansion of the conflict.” However, there may not be consensus among G7 members on approving the use of long-range weapons against Russia, with some nations like Italy opposing this stance.
🇨🇭 Switzerland’s largest party opposes new multi-million dollar aid to Kiev.
🇳🇦 NATO’s top commander, Rob Bauer, says the alliance is debating moving from a defensive role to more proactive action and attacking Russia to neutralise its capabilities.
