Stocks Steady as ECB to Extend Global Rate-Cut Run: Markets Wrap

(Bloomberg) — The euro gained and European stocks were steady ahead of a European Central Bank meeting that is expected to deliver a smaller interest-rate reduction than this week’s moves in Switzerland and Canada. 

The Stoxx Europe 600 index was less than 0.1% lower, while the euro jumped 0.7% against the franc, after the Swiss National Bank surprised with a 50-basis-point rate cut. Swiss stocks and bonds also climbed after the move, which aims to prevent further franc gains and stop an inflation undershoot. 

The ECB, meanwhile, is set to lower its policy rate for the fourth time this year, by 25 basis points, according to a Bloomberg survey of analysts. Traders will wait for clues from rate-setters on the extent of loosening needed in this cycle. 

“We anticipate a dovish 25-basis-point rate cut, alongside signals of flexibility on future adjustments,” said Mohamad Al-Saraf, an FX and rates analyst at Danske Bank. “Post-decision communication will be pivotal, given divisions within the Governing Council.”

The ECB meeting is the latest in a big week for monetary policy. Aside from Switzerland’s move, Canada lowered its policy rates by a half point and US inflation data all but sealed the case for a Federal Reserve interest-rate cut next week. Japan, meanwhile signaled it’s in no hurry to hike rates. 

US futures contracts slipped after stocks rallied Wednesday, while a dollar gauge slipped as China set a stronger yuan fixing, a day after the currency weakened following a Reuters report that a depreciation was being considered. Ten-year Treasury yields rose about three basis points.

US consumer-price index data out Wednesday was in line with expectations, and swaps traders have now virtually priced in a quarter-point cut at the Fed’s December meeting, compared with a 75% chance a week ago. 

Analysts at Brown Brothers Harriman noted, however, that elevated price pressures “argue for a shallow Fed easing cycle. Higher 10-year Treasury yields supports the fundamental uptrend in the dollar.” 

Among individual stock movers, European luxury goods firm Brunello Cucinelli SpA rallied as much as 6.6% to an eight-month high after an increased revenue growth forecast. Luxury stocks were broadly firmer alongside other China-exposed sectors such as miners, after the country’s commerce ministry said it’s open to trade talks with the US. 

In US premarket trading, software firm Adobe Inc. dropped more than 10% after a weaker-than-expected full-year forecast, while Uber Technologies Inc. was lifted by upbeat management comments at an industry conference.

Earlier, Asian equities rebounded on expectations of more growth measures from Beijing, with China’s two-day Central Economic Work Conference seen mapping out policies for next year.  

In commodities, oil steadied after a three-day gain fueled by the possibility of tighter curbs on Russian and Iranian flows. 

Key events this week:

• ECB rate decision, Thursday
• US initial jobless claims, PPI, Thursday
• Eurozone industrial production, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.1% as of 10:12 a.m. London time
• S&P 500 futures fell 0.2%
• Nasdaq 100 futures fell 0.3%
• Futures on the Dow Jones Industrial Average fell 0.2%
• The MSCI Asia Pacific Index rose 0.7%
• The MSCI Emerging Markets Index rose 0.6%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro rose 0.2% to $1.0512
• The Japanese yen was little changed at 152.51 per dollar
• The offshore yuan rose 0.1% to 7.2683 per dollar
• The British pound was little changed at $1.2762

Cryptocurrencies

• Bitcoin fell 1% to $100,552.76
• Ether rose 1.7% to $3,895.89

Bonds

• The yield on 10-year Treasuries advanced three basis points to 4.30%
• Germany’s 10-year yield advanced four basis points to 2.16%
• Britain’s 10-year yield advanced five basis points to 4.36%

Commodities

• Brent crude rose 0.4% to $73.78 a barrel
• Spot gold fell 0.2% to $2,712.75 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Yasutaka Tamura, Zhu Lin, Richard Henderson and Chiranjivi Chakraborty.

©2024 Bloomberg L.P.