SNB cuts 50bps while ECB set for 25bps, BoE next week expected to hold

EU Mid-Market Update: SNB cuts 50bps while ECB set for 25bps; BOE next week expected to hold; Variable pace of easing across Europe before disruptive Trump tariffs in new year.

Notes/observations

- Indecisive trade for Europe with focus on US tech trade after several breakthroughs and upgraded features in AI space from the likes of Google, OpenAI etc. Nasdaq100 outperformed +1.8% while Dow futures point to 6th straight daily loss. Europe retail sector underperforms for 2nd day after Inditex earnings.

- Swiss National Bank cut rates by 50bps, more than expected by analysts but in line with market pricing; In the statement, SNB noted concern with services inflation and uncertainty from Pres-Elect Trump proposed tariffs. Swissie weaker against dollar and euro; ECB up next with broad consensus for 25bps cut to Key Rates. Decision at 08:15 ET and press conf at 08:45 ET with Chief Lagarde.

- Innovation is moving at a breakneck speed in the final weeks of 2024 with OpenAI doing its daily product announcements and Google unveiling ongoing projects like Project Astra (personal AI assistant) and Project Mariner (web navigation agent); These systems can act autonomously on behalf of a user, a capability often referred to in the industry as "agentic AI.", meaning we are now moving to the next phase of AI deployment. As a reminder, Salesforce Agentforce 2.0 scheduled for release next week, December 17th.

- Tesla passes $420 handle as Musk wealth soars to $400B after Trump win. Crypto positive incoming US Admin still giving tailwinds to Bitcoin, returning back above $100K.

- Asia closed mixed with KOSPI outperforming +1.6%. EU indices are -0.1% to +0.5%. US futures are -0.2% to -0.3%. Gold -0.2%, DXY -0.2%; Commodity: Brent +0.2%, WTI +0.2%; Crypto: BTC +2.6%, ETH +5.2%.

Asia

- Australia Nov Employment Change: +35.6K v +25.0Ke; Unemployment Rate: 3.9% v 4.2%e.

Mid-East

- Hamas said to have yielded to two of Israel’s key demands for a cease-fire deal and handed over a list of hostages to be released, including Americans.

Europe

- French Pres Macron due back in Paris by late afternoon to name a new French PM.

- Reports in Polish and other European media that Macron is ready to discuss French (and possibly British) involvement in a post-ceasefire European peacekeeping force for Ukraine of up to 40,000 men.

- UK Nov RICS House Price Balance: 25% v 19%e (highest since Sept 2022)

Americas

- US Nov Monthly Budget Statement: -$366.8B v -$351.0Be

- US House passed $895B defense spending bill for 2025 by 281-140 count

- Pres-elect Trump said to invite China's Pres Xi to his Presidential Inauguration (Jan 20th)

- Brazil Central Bank (BCB) raised Selic Target Rate by 100bps to 12.25% (more-than-expected) for its 3rd straight hike under the current tightening cycle. Decision to hike by 100bps was unanimous as it saw the need for even more restrictive rates. Foresaw the same magnitude of rate hike in the next two meetings

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.09% at 519.70, FTSE +0.22% at 8,321.03, DAX +0.18% at 20,450.05, CAC-40 +0.07% at 7,428.58, IBEX-35 -0.10% at 11,778.00, FTSE MIB +0.45% at 34,886.00, SMI +0.34% at 11,717.42, S&P 500 Futures -0.18%]

Market Focal Points/Key Themes: European indices open generally higher but failed to build on the momentum through the early part of the session; outperforming sectors include consumer discretionary and energy; materials and communication services; defense subsector supported following reports NATO to increase defense requirements; oil & gas subsector supported by Brent rising to highs for the month; Hexagon to acquire 3D Systems’ geomagic portfolio; reportedly Sidenor looking to take controlling interest in Talgo; focus on the rate decision from the ECB later in the day; earnings expected in the upcoming US session include Broadcom, Costco and Ciena.

Equities

- Consumer discretionary: Currys [CURY.UK] +9.5% (earnings), Dometic [DOM.SE] -2.0% (restructuring plan).

- Financials: Leonteq [LEON.CH] -12.5% (11-month trading update; Swiss Regulator FINMA concludes proceedings).

- Healthcare: DBV Technologies [DBV.FR] +25.0% (confirms alignment with U.S. FDA on Accelerated Approval Pathway for Viaskin Peanut Patch in Toddlers 1 - 3 Years-Old), Schott Pharma [1SXP.DE] -1.5% (Q4 results, initial FY25 guidance) - Industrials: Hensoldt [HAGG.DE] +2.0% (affirms FY24 guidance and raises medium-term EBITDA margin target) - Technology: STMicroelectronics [STM.FR] +1.0% (Quobly announces collaboration with STMicroelectronics to produce quantum processor units (QPUs) at scale; US said to plan on capping countries’ semiconductor chip access with focus on GPUs in order to target Chinese smuggling of chips from other sources), Nemetschek [NEM.DE] -4.5% (JPMorgan initiates at underweight).

Speakers

- Swiss National Bank Policy Statement noted it would adjust policy if necessary and reiterated stance that was prepared to intervene in FX markets if needed. Stressed that both US economic policy and European politics were uncertain. Inflation was still being mainly driven by domestic services.

- SNB updated its Staff Projections which widened 2025 GDP growth forecast from 1.5% to a 1.0-1.5% range. Projections cut the 2025 CPI forecast from 0.6% to 0.3% while raising the 2026 CPI outlook from 0.7% to 0.8%.

- SNB President Schlegel-post rate decision press conference noted that rate cuts would continue to be the main tool. Uncertainty about future inflation path remained hig. Reiterated was prepared to intervene in FX markets if needed. Stressed that overseas developments were the main risks to Switzerland; political risks in Europe have risen

- German IFO Institute updated its economic forecasts which widen its 2025 GDP growth forecast from 0.9% to range between 0.4% to 1.1%. It set 2025 Inflation forecast at 2.3% and set 2026 Inflation at 2.0%.

- Poland Central Bank (NBP) Member Wnorowski reiterated view that still expected rate cut talk to start in March.

- IEA Monthly Oil Report (OMR) cut the 2024 global oil demand growth from 921K bpd to 840K bpd while raising the 2025 global oil demand growth from 990K bpd to 1.1M bpd.

- China Commerce Ministry (MOFCOM) stated it was willing to increase trade talks with US.

Currencies/fixed income

- USD stayed within a quiet range with focus on the upcoming ECB rate decision. Dealers noted that the US CPI data was in line with forecasts and bolstered expectations that the Fed would cut interest rates next week.

- EUR/USD holding above the 1.05 level. ECB is expected to cut its key rates by 25bps but an outside change of a more aggressive 50bps cut remains on the table. Dealers to look for clues on just how fast the rate path would be seen hitting the terminal rate of approx. 1.75-2.0% area.

- USD/CHF saw the Swiss currency weaken after the SNB cut its Key Policy Rate by 50bps to 0.50% to combat its low inflation situation.

- USD/JPY holding around 152.50 as more press reports circulated that BOJ would likely hold off on its next rate hike until 2025.

Economic data

- (NL) Netherlands Oct Trade Balance: €13.0B v €13.9B prior; Exports Y/Y: 1.7% v 2.7% prior; Imports Y/Y: -2.4% v +5.7% prior.

- (SE) Sweden Nov Final CPI M/M: 0.3 v 0.3% prelim; Y/Y: 1.6 v 1.6% prelim; CPI Level: 416.75 v 415.51 prior.

- (SE) Sweden Nov Final CPIF M/M: 0.5% v 0.5% prelim; Y/Y: 1.8% v 1.9% prelim.

- (SE) Sweden Nov Final CPIF (ex-energy) M/M: -0.2% v -0.2% prelim; Y/Y: 2.4% v 2.4% prelim.

- (TR) Turkey Oct Current Account Balance: $1.9B v $1.3B.

- (ZA) South Africa Q4 BER Inflation Expectations Survey: 4.6% v 5.1% prior.

- (CH) Swiss National Bank (SNB) cut Policy Rate by 50bps to 0.50% (more-than-expected).

- (HK) Hong Kong Q3 PPI Y/Y: 3.2% v 3.1% prior.

- (HK) Hong Kong Q3 Industrial Production Y/Y: -0.1% v +0.7% prior.

- (IT) Italy Q3 Unemployment Rate: 6.1% v 6.7% prior.

- (NO) Norway Q4 Regional Output Survey (Current Quarter) Q/Q: 0.2% v 0.2% prior; Output Survey (Next Quarter) Q/Q: 0.3% v 0.2% prior.

- (ZA) South Africa Q3 Non-Farm Payrolls Q/Q: -1.2% v +0.6% prior; Y/Y: % v -1.3% prior.

- (ZA) South Africa Nov PPI M/M: 0.0% v 0.2%e; Y/Y: -0.1% v +0.2%e.

Fixed income issuance

(SE) Sweden sold total SEK500M vs. SEK500M indicated in 2032 and 2039 I/L Bonds.

- (IT) Italy Debt Agency (Tesoro) sold total €8.5B vs. €6.75-8.5B indicated range in 3-year, 7-year, 15-year and 30-year BTP bonds.

- Sold €3.0B vs. €2.5-3.0B indicated range in 2.70% Oct 2027 BTP bonds; Avg Yield: 2.35% v 2.73% prior; bid-to-cover: 1.66x v 1.49x prior (Nov 28th 2024).

- Sold €3.0B vs. €2.5-3.0B indicated range in 3.15% Nov 2031 BTP bonds; Avg Yield: 2.92%; bid-to-cover: 1.58 (syndicated on Oct 22nd 2024).

- Sold €1.5B vs. €1.0-1.5B indicated range in 3.35% Mar 2035 BTP; Avg Yield: 3.19% v 3.85% prior; bid-to-cover: 2.10x v 1.63x prior (Jan 30th 2024).

- Sold €1.0B vs. €0.75-1.0B indicated range in 4.30% Oct 2054 BTP; Avg Yield: 3.94%; bid-to-cover: 2.31x.

Looking ahead

- (DE) Germany Oct Current Account Balance: No est v €22.6B prior.

- (EU) European Union on H1 funding plans.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (IN) India Nov CPI Y/Y: 5.5%e v 6.2% prior.

- 05:30 (IN) India Oct Industrial Production Y/Y: 3.5%e v 3.1% prior.
05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IL) Israel Nov Trade Balance: No est v -$2.7B prior.

- 06:00 (IE) Ireland Nov CPI M/M: No est v 0.3% prior; Y/Y: No est v 0.7% prior.

- 06:00 (IE) Ireland Nov CPI EU Harmonized M/M: No est v 0.3% prior; Y/Y: No est v 0.5% prior.

- 06:00 (CZ) Czech Republic to sell CZK5.0B in 6-month Bills.

- 06:00 (RO) Romania to sell RON500M in 12-month Bills.

- 06:00 (RO) Romania to sell RON600M in 6.75% Apr 2035 bonds.

- 06:30 (CL) Chile Central Bank Traders Survey.

- 07:00 (UR) Ukraine Central Bank (NBU) Interest Rate Decision: Expected to leave Key Rate unchanged at 13.0%.

- 07:00 (MX) Mexico Oct Industrial Production M/M: -0.2%e v +0.6% prior; Y/Y: -0.6%e v -0.4% prior; Manufacturing Production Y/Y: 2.1%e v 0.8% prior.

- 07:00 (BR) Brazil Oct Retail Sales M/M: -0.2%e v +0.5% prior; Y/Y: 4.8%e v 2.1% prior.

- 07:00 (BR) Brazil Oct Broad Retail Sales M/M: 0.2%e v 1.8% prior; Y/Y: 7.3%e v 3.9% prior.

- 08:00 (BR) Brazil Nov Vehicle Production: No est v 249.2K prior; Vehicle Sales: No est v 264.9K prior; Vehicle Exports: No est v 43.5K prior.

- 07:00 (BR) Brazil CONAB Soybean Production.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 6th: No est v $614.1B prior.

- 08:00 (RU) Russia Oct Trade Balance: No est v $12.6B prior; Exports: No est v $39.1B prior; Imports: No est v $26.5B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:15 (EU) ECB Interest Rate Decision: Expected to cut Key Rates by 25bps.

- 08:30 (US) Nov PPI Final Demand M/M: 0.2%e v 0.2% prior; Y/Y: 2.6%e v 2.4% prior.

- 08:30 (US) Nov PPI (ex-food/energy) M/M: 0.2%e v 0.3% prior; Y/Y: 3.2%e v 3.1% prior

- 08:30 (US) Nov PPI (ex-food/energy/trade) M/M: 0.2%e v 0.3% prior; Y/Y: No est v 3.5% prior.

- 08:30 (US) Initial Jobless Claims: 220Ke v 224K prior; Continuing Claims: 1.88Me v 1.871M prior.

- 08:30 (CA) Canada Oct Building Permits M/M: -4.9%e v +11.5% prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (EU) ECB chief Lagarde post rate decision press conference.

- 10:00 (DK) Denmark Central Bank (Nationalbanken) Interest Rate announcement.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (US) Q3 Financial Account Household Change in Net Worth: No est v $2.760T prior.

- 12:00 (CA) Canada to sell 10 Year Bonds.

- 13:00 (US) Treasury to sell 30-Year Bond Reopening.

- 16:00 (KR) South Korea Nov Import Price Index M/M: No est v 2.2% prior; Y/Y: No est v -2.5% prior; Export Price Index M/M: No est v 1.7% prior; Y/Y: No est v 2.0% prior.

- 16:30 (NZ) New Zealand Nov Manufacturing PMI: No est v 45.8 prior.

- 16:45 (NZ) New Zealand Oct Net Migration: No est v 2.3K prior.

- 18:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 5.00%.

- 18:50 (JP) Japan Q4 Tankan Large Manufacturing Index: 13est v 13 prior; Large Manufacturing Outlook: 12e v 14 prior.

- 18:50 (JP) Japan Q4 Tankan Large Non-Manufacturing Index: 33e v 34 prior; Large Non-Manufacturing Outlook: 28e v 28 prior; Large All Industry Capex: 10.0%e v 10.6% prior.

- 18:50 (JP) Japan Q4 Tankan Small Manufacturing Index: -1e v 0 prior; Small Manufacturing Outlook: -1e v 0 prior.

- 18:50 (JP) Japan Q4 Tankan Small Non-Manufacturing Index: 12e v 14 prior; Small Non-Manufacturing Outlook: 11e v 11 prior.

- 19:01 (UK) Dec GfK Consumer Confidence: -18e v -18 prior.

- 20:10 (JP) BOJ Outright Bond Purchase 1~3 Years; 3~5 Years; 5~10 Years and 10~25Years.

- 20:30 (AU) RBA's Hunter.

- 21:30 (KR) South Korea to sell KRW100B in 50-year Bonds.

- 21:35 (CN) China to sell 2-year Bonds.

- 22:30 (JP) Japan to sell 3-month Bills.

- 23:30 (JP) Japan Oct Final Industrial Production M/M: No est v 3.0% prelim; Y/Y: No est v 1.6% prelim; Capacity Utilization M/M: No est v 4.4% prior.