A look at the day ahead in European and global markets from Kevin Buckland
A crucial two weeks for global central banks brings policy decisions from two of the biggest on Thursday: the European Central Bank and the Swiss National Bank.
A rate cut by both is not in question, but how deep the cut will be is still up for debate.
The Swiss central bank decides first, and market-driven odds are leaning toward a half-point cut to 0.5%, with Chairman Martin Schlegel likely to return to negative rates if necessary to dampen investor appetite. have increased in recent weeks after inviting Safe-haven Frank.
At the ECB, a more-than-standard quarter-point cut is seen as the most likely outcome, but the 15% odds on a half-point cut suggest traders see it as an unnecessary risk. The balancing act for European central bankers is an economy heading into recession, even as some more hawkish officials argue that inflation is still a concern due to rapid wage growth and rising services costs.
The prospect of major US tariffs looming in January and the political crisis in both Germany and France – the heart of the euro zone – present additional uncertainty.
Whichever way the ECB goes today, more easing is undoubtedly coming: Markets are pricing in cuts at every meeting until June, followed by at least one additional cut in the final half of 2025.
Some key euro milestones are being watched by market corners, including pre-Brexit levels against sterling and even parity with the dollar for the first time since late 2022.
The United States released PPI data later on Thursday, a day later, as consumer inflation was expected and not too hot, but the Federal Reserve’s rate cut for December 18 is limited on the market’s mind.
The Wall Street rally that followed the CPI numbers, pushing the Nasdaq above 20,000 for the first time, has spread to Asia, boding well for European shares.
Meanwhile, the yuan steadied on Thursday after the PBOC set a slightly firmer fixing. It came under pressure a day before a Reuters report that Beijing was considering further declines to counter any US trade war.
Key developments that may affect the markets on Thursday:
-SNB, ECB policy decisions
-Sweden, Ireland CPI (both November)
-US PPI (November)
(By Kevin Buckland; Editing by Edmund Klaman)
