An in-depth analysis of the upcoming day in global and European markets by Ankur Banerjee
After an incredibly successful November, investors are eagerly anticipating a positive start to December in Europe. They have high hopes that central banks will begin to cut rates, but a “fireside chat” with Fed Chair Jerome Powell could potentially disrupt the optimistic atmosphere.
A packed calendar featuring manufacturing PMIs from various European countries will offer valuable insights into the region’s economy. At present, futures suggest that European stock markets will open higher.
Recent data from both the euro zone and the U.S. indicates a decrease in inflation, which has fueled expectations of rate cuts by central banks. Money markets are already factoring in over 100 basis points in rate cuts next year from both the Fed and the ECB.
The disconnect between financial markets and central banks has deepened as the latter push against talks of rate cuts despite the relatively mild recent inflation data being observed by markets.
However, influential and hawkish Fed voice, Fed policymaker Christopher Waller, expressed growing confidence that inflation will return to its 2% target. This statement emboldened markets to pursue rate-cut bets.
According to the CME FedWatch tool, markets are now indicating a 46% chance of a central bank rate cut in March, up from 27% just a week ago.
As a result, all eyes will be on Powell when he steps into the spotlight later in the day. The direction of the markets will be swayed by whether Powell refrains from commenting on policy or chooses to address rates.
In Asia, the final month of the year commenced tentatively, with lower stock prices, a weakened dollar, and continued decline in oil prices.
On the corporate front, Tesla’s long-awaited Cybertruck has finally been unveiled. The vehicle, constructed from lustrous stainless steel and featuring flat surfaces, will be priced starting at $60,990, over 50% higher than what CEO Elon Musk had initially suggested in 2019.
Key events that could impact markets on Friday:
Economic events: UK nationwide house prices for November, Manufacturing PMI data from France, UK, Germany, and the euro zone.
Speakers: Bank of England MPC member Megan Greene, ECB President Christine Lagarde, Fed Chair Jerome Powell.
(Reporting by Ankur Banerjee in Singapore; Editing by Edmund Klamann)
