European Futures Fall Ahead of Key Rate Decisions: Markets Wrap

This content was published on December 17, 2024 - 07:55

5 minutes

(Bloomberg) — European equity futures inched lower after Asian shares fluctuated, as traders awaited a raft of interest-rate decisions by central banks this week.

Contracts for the Euro Stoxx 50 dipped. A key Asian stock gauge traded in a tight range, while an equity benchmark in mainland China climbed. Reuters reported that Beijing plans to set an annual growth goal of about 5% for next year, and raise the budget deficit to 4% of gross domestic product.

All eyes will be on a multitude of central bank policy decisions slated for this week, including the US and Japan. Sentiment in the US is relatively positive, with a widely expected quarter-point rate cut from the Fed on Wednesday seen as adding fresh support and extending gains in stocks. The yen snapped a six-day losing streak after weakening beyond the 154 level versus the dollar overnight.

“This week will probably be the final active week for the year,” said Wong Kok Hoong, head of institutional equities sales trading at Maybank Securities. “A rate cut is pretty much all priced in for the Fed, and it is also all but sure the Bank of Japan will maintain status quo. So we will expect stocks in the US and Japan to be well supported ahead of these key decisions.”

In foreign-exchange markets, an index of Asian currencies fell to the lowest in more than two years amid pessimism over China’s economic outlook and speculation that Donald Trump’s second administration will drive dollar gains.

Meanwhile, the yen’s rapid decline in the past week toward 155 against the dollar has strategists warning that further weakness may trigger verbal intervention from authorities and add pressure on the Bank of Japan to hike rates. Traders are pricing in a less than 20% chance of a rate hike in December, according to swaps market pricing.

Bloomberg’s dollar index was little changed Tuesday. The 10-year Treasury yield was steady at 4.40%.

Over in Hong Kong, Alibaba Group Holding Ltd. led the Hang Seng Index’s decline after the company agreed to sell its Intime department stores business for around $1 billion and record a loss of 9.3 billion yuan ($1.3 billion) on its initial investment.

In Japan, shares of SoftBank Group Corp. rose 4.4% after President-elect Trump announced at an event, alongside Chief Executive Officer Masayoshi Son, that the company planned to invest $100 billion in the US over the next four years.

South Korean electric vehicle battery stocks fell, driven by a selloff by foreign investors, as a media report deepened concerns over US policy issues. Samsung Electronics shares declined 2.5% after Goldman Sachs reduced its price target on the stock and lowered its earnings estimates by 11%.

Investors’ main focus for the rest of the week remains Wednesday’s Fed decision, which will be followed by policy announcements in Japan, the Nordics and the UK.

Contracts for US equities slipped 0.2% after the Nasdaq 100 reached another record high.

Bitcoin rose to a record high on Trump’s support for digital assets and optimism about the upcoming inclusion of MicroStrategy Inc., an accumulator of the token, in a key US stock gauge.

Oil steadied after a decline, as lackluster economic data from China reinforced concerns about weakening demand in the world’s biggest crude importer. Gold fell after a slight gain in its previous session.

Key events this week: