MARKET WRAPS
Stocks:
European stocks fell on Thursday after the Federal Reserve reduced interest rates by a quarter point but signaled it expects to make two cuts in 2025, down from projections of four made at the central bank's meeting in September.
"The Fed may have spoiled this year's Santa rally, as its hawkish shift could trigger a deeper correction across U.S. equity markets," Swissquote Bank said.
Meanwhile, European stocks in the semiconductor supply chain traded lower after U.S. memory-chip maker Micron issued a cautious outlook for the current quarter. Micron Technology was down 15% in U.S. premarket trading.
The Bank of England is the next major central bank to announce its policy decision later today.
The BOE is unlikely to follow the Fed and the European Central Bank with a rate cut this month as the U.K. economy potentially faces a more troubling outlook for 2025 than the U.S. or the eurozone.
U.K. Retail Sales
U.K. retailers are likely experiencing a poor Christmas period due to the deteriorating consumer confidence and increased costs after the October budget, Deutsche Bank said.
Industry data suggests a fall in retail sales, particularly dragged by the clothing and housing segment. These downbeat expectations follow a positive year of earnings upgrades for retailers, DB added.
U.S. Markets:
Stock futures were up modestly following a plunge on Wall Street Wednesday.
Earnings reports are expected from Nike and FedEx .
Stocks to Watch
Lennar was falling 9.3% after the home builder posted fiscal fourth-quarter earnings and revenue that fell from a year earlier, with co-CEO Stuart Miller citing higher mortgage rates.
Tesla was rising 2.6% after the stock tumbled 8% on Wednesday following the Fed's projections of fewer rate cuts next year.
Forex:
The dollar hovered close to a two-year high after the Fed signalled a slower pace of interest rate cuts next year. Most Fed officials penciled in two cuts for 2025, down from four at their meeting in September.
Standard Chartered now expects the Fed to pause rate cuts in January, having previously forecast another reduction.
The dollar's "exceptionalism case" is likely to remain intact until data suggest the Fed's cautious messaging is overdone, it said.
Sterling looks likely to rise as the Bank of England should stick to a gradual pace of interest-rate cuts, Commerzbank said.
"Although yesterday's inflation reading was slightly below analysts' expectations, the stronger fiscal impulse expected next year has pushed up growth and inflation expectations, which is why the central bank will exercise caution today."
This caution should keep the pound supported versus the euro in 2025, Commerzbank said.
The Swedish krona extended its gains slightly after the Riksbank cut its key interest rate by 25 basis points to 2.5%, as expected, but signalled a cautious approach to future policy easing.
The Norwegian krone stayed higher after the Norges Bank left interest rates unchanged as expected and indicated it will cut rates gradually starting from March.
Bonds:
Eurozone government bond yields rose in early trade, tracking Treasury yields higher.
Investors sold Treasurys as the Fed cut rates but signaled a slower pace of easing to come.
"Powell's 'hawkish Fed cut' pours cold water on any hopes of a year-end rally," Commerzbank Research said.
Treasurys typically continue to weaken when the Fed skips a meeting or pauses rate adjustments, Citi said.
"For fixed-income, the skip or pause generally means higher yields, though rates move more in the case of an end of cycle."
Historical evidence is not reassuring for yields, which reaffirms Citi's current underweight position in U.S. rates within its global asset allocation strategy.
Energy:
Oil prices retreated from the previous trading session after the Fed signaled fewer interest-rate cuts next year, fueling demand concerns.
The U.S. central bank's cautious outlook, coupled with widespread concerns about weaker global demand and an anticipated supply surplus, weighed on market sentiment.
"The Fed's hawkish shift dampened an early rebound in oil prices yesterday," Swissquote Bank said.
"The barrel of U.S. crude slipped back to $70 per barrel... We anticipate rangebound trading within the $67-$70 per barrel range."
Metals:
Gold prices fell after the Fed lowered interest rates but signaled fewer cuts next year, boosting the dollar and bond yields.
"The Fed's hawkish shift means we're going to have to contend with a strong dollar well into 2025," Peak Trading Research said.
Traders now await U.S. GDP and PCE inflation data, which could further shape the path of monetary policy next year.
Value Partners said gold prices are expected to remain range-bound in the near term after hitting record highs in recent months.
EMEA HEADLINES
French Industry Still Sanguine About Trump Tariffs, Eyes Healthier Order Books
The mood at French factories was stable this month as manufacturers shrugged off the country's fractured politics and trade uncertainty, and looked forward to higher demand for their goods in the new year.
A monthly index of sentiment in the French manufacturing industry remained at 97 in December, the same level as in November, defying economists' fears for a slight downtick in confidence. Sentiment nevertheless continues to trail the long-term average, represented by a reading of 100, in an industry that has been knocked in recent years by soaring energy prices and by fiercer competition from goods manufactured elsewhere.
German Consumers Shake off a Little Winter Gloom
German consumers feel a little less gloomy about the turn of the new year, with prospects of a fresh government and further cuts to borrowing costs.
The consumer-climate index for Europe's most important economy gained to minus 21.3 in January's forecast from minus 23.1 in that for December, research groups GfK and the Nuremburg Institute for Market Decisions said Thursday. That was a little better than the minus 22.6 reading expected by economists polled by The Wall Street Journal.
U.K. Water Companies Can Hike Bills by 36% Over Next Five Years, Watchdog Says
Water companies in England and Wales can raise customers' bills by an average of 36% over the next five years to help pay for infrastructure improvements needed to prevent sewage spills into waterways, the U.K. regulator said.
Utilities had requested an increase of 44% over the 2025-30 period, but the watchdog Ofwat, set the limit at an average of 31 pounds ($38.98) a year. The increases are significantly higher than the average bill increase of GBP19 the regulator said it would allow earlier this year.
Sibanye-Stillwater, Franco-Nevada Sign $500 Million Gold and Platinum Supply Deal
Sibanye-Stillwater said it entered into a $500 million agreement with mining royalty company Franco-Nevada for the long-term supply of gold and platinum from three of its mines in South Africa.
South African mining company Sibanye-Stillwater said Thursday that it will mainly supply gold, a minor component of the basket of metals produced from its South Africa platinum-group-metals operations, and a marginal amount of platinum. The metals will be produced from the company's Marikana, Kroondal, and Rustenburg operations, it said.
Atos Completes Financial Restructuring
Atos said it completed its financial restructuring, resulting in a more sustainable capital structure and much-needed liquidity for the beleaguered group.
The French IT company on Thursday said the implementation of the transactions in its safeguard plan reduced its gross debt by 2.1 billion euros ($2.17 billion).
GLOBAL NEWS
The Next Big Fed Debate: Has the Era of Very Low Rates Ended?
Investors shuddered on Wednesday after Chair Jerome Powell suggested the Federal Reserve was ready to take a break from cutting rates-and that the total quantity of reductions might be shallower than previously thought.
Powell has described recent rate reductions as an effort to recalibrate borrowing costs to a more "neutral" setting. His framing raises a question that hasn't been relevant until now: What, exactly, is "neutral" in the post-pandemic economy?
Japan's Central Bank Holds Rates as Uncertainties Complicate Outlook
TOKYO-The Bank of Japan held its policy rate steady as it waits for uncertainties in the U.S. to clear and for more evidence of wage growth at home, but expectations of rate hikes on the horizon remain intact.
The Japanese central bank on Thursday maintained its target for the overnight call rate at 0.25%, the level it has been at since the last hike in July, when the yen's weakness triggered fears over higher import prices.
Trump Sinks Bipartisan Spending Deal, Demands Streamlined Bill
WASHINGTON-President-elect Donald Trump torpedoed a bipartisan deal struck by congressional leaders to avoid a partial government shutdown this weekend, insisting that Republican lawmakers tear up the sprawling agreement and pass a narrower bill that also includes an increase in the nation's borrowing limit.
Trump's demands upended efforts to pass a stopgap spending bill to keep the government funded through mid-March, a measure that also includes more than $100 billion in disaster and farm aid. Trump said Congress should craft a new deal that keeps the aid but leaves out other measures that angered some GOP lawmakers, and couple that with an immediate boost in the federal debt cap, ahead of a deadline looming next year.
Gisèle Pelicot's Ex-Husband Jailed for 20 Years in Mass Rape Trial
AVIGNON, France-A French court convicted the former husband of Gisèle Pelicot and dozens of other men of raping her after he drugged her unconscious, ending a trial that transformed her into a feminist icon and shocked the conscience of a nation.
(MORE TO FOLLOW) Dow Jones Newswires
December 19, 2024 05:24 ET (10:24 GMT)
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