French PM announcement expected imminently as traders digest ECB decision and commentary

EU mid-market update: French PM announcement expected imminently as traders digest ECB decision and commentary; Political instability main focus for Europe.

Notes/observations

- European markets are up modestly as lack of major catalysts sees seasonality factors at play on run up to Christmas holidays.

- UK monthly GDP contracted for second straight month, weighing on sterling as rate cut expectations were pared for next week's BOE decision. Consensus remains for Bank Rate to be left changed.

- Political instability a major theme for Europe in general: France is expected to announce new PM in coming hours. Pres Macron missed the 48-hour deadline to appoint a new one, which ended yesterday. Elsewhere, German Chancellor Scholz faces a confidence vote on Dec 16th ahead of snap election on Feb 23rd.

- ECB speakers flood wires (typical for day after ECB decision): Broad view is for further cuts, including Jan and possibly Mar, noting slow economic growth and current premium above perceived neutral rate.

- Asia closed mixed with Hang Seng underperforming -2.1%. EU indices are -0.2% to +0.5%. US futures are +0.1-0.6%. Gold -0.4%, DXY +0.1%; Commodity: Brent +0.6%, WTI +0.6%; Crypto: BTC -0.7%, ETH -0.8%.

Asia

- New Zealand Nov Manufacturing PMI: 45.5 v 45.7 prior (21st month of contraction).

- Japan Q4 Tankan Large Manufacturing Index: 14 v 13e; Large Manufacturing Outlook: 13 v 12e.

- Japan Q4 Tankan Large Non-Manufacturing Index: 33 v 33e; Large Non-Manufacturing Outlook: 28 v 28e prior.

- South Korea Nov Import Price Index M/M: 1.1% v 2.1% prior; Y/Y: +3.0% v -2.5% prior; Export Price Index M/M: 1.6% v 1.4% prior; Y/Y: 7.0% v 1.7% prior.

- South Korea opposition leader Lee reiterated stance that impeaching Pres Yoon was "best way to restore order. Opposition party stated it would propose new a new (2nd) impeachment bill against President Yoon Suk Yeol which would be put on vote on Dec. 14th. Party pledged to seek impeachment "every Saturday", if necessary (**Insight: Parliament needs 200 votes out of 300 total for impeachment).

Europe

- ECB sources noted that policymakers had little appetite for rushing policy; initially, a handful of policymakers were in favor of 50bps cut. Some argued that the ECB was overestimating growth, which could be below 1% next year under Trump's planned tariffs.

- UK Dec GfK Consumer Confidence: -17 v -18e.

Americas

- Pres-elect Trump reportedly weighing options for stopping Iran from being able to build a nuclear weapon, including the possibility of preventive airstrikes; The military-strike option against nuclear facilities was now under more serious review by some members of his transition team.

- Trump advisors said to be seeking to shrink or eliminate bank regulators in the US; Advisors also discussed whether Trump should abolish the FDIC.

- Trump's Senior Counselor for trade and manufacturing Peter Navarro warned against Chinese currency manipulation after financial press reports that China was considering a weaker Yuan.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.18% at 518.24, FTSE +0.07% at 8,317.97, DAX +0.37% at 20,503.95, CAC-40 +0.09% at 7,427.49, IBEX-35 +0.58% at 11,832.77, FTSE MIB +0.22% at 34,934.00, SMI -0.06% at 11,704.60, S&P 500 Futures +0.25%].

Market focal points/key themes: European indices open mixed before taking on a generalized upward swing; markets taking their time to calibrate reaction to yesterday’s ECB meeting; Malta closed for holiday; among sectors trending higher are financials and energy; lagging sectors include health care and materials; Tullow in talks to be acquired by Kosmos Energy; SoftwareOne confirms is in advanced talks to acquire Crayon Group; Corporacion Financiera Alba to be taken private; De La Rue confirms strategic talks with Disruptive Capital; no major corporate earnings expected in the upcoming US session.

Equities

[MUV2.DE] +5.0% (2025 targets), Swiss Re [RUKN.CH] +3.0% (2025 targets), Impax Asset Management [IPX.UK] -22.0% (notice from SJP of termination of Impax's mandate to manage the SRE).

- Industrials: Maersk [MAERSKB.DK] +2.5% (North America Market Update; Pres-elect Trump reportedly appeared to indicate his support for the dockworkers union in its contract dispute with the United States Maritime Alliance (USMX)).

- Technology: STMicroelectronics [STM.FR] +0.5% (Broadcom earnings), CD Projekt [CDR.PL] -3.5% (presents new game trailer), Siltronic [WAF.DE] +2.5% (Hauck raised to buy), Teamviewer [TMV.DE] -4.5% (Berenberg cuts to hold), SoftwareONE [SWON.CH] +11.5% (confirms is in advanced talks to acquire Crayon Group) - Telecom: Mobilezone [MOB.CH] -9.0% (cuts FY24 adj EBIT citing weaker German trade).

Speakers

- ECB's Villeroy (France) stated that more rate cuts to come next year; At ease with market rate expectations for 2025. Current level of rate remained significantly above neutral. More confident ECB could bring inflation to 2%.

- ECB's Holzmann (Austria) stated that saw no inflation risk if cut rates next year. Noted that the neutral rate is around 2%.

- ECB's Escriva (Spain) stated that rate cuts to continue if the baseline holds.

- ECB's Muller (Estonia): Expecting to see a slow recovery in Europe.

- ECB's Kazaks (Latvia) noted that bigger rate cut was possible if needed; Neutral rate was closer to 2% than 3%; Significant reduction in rates was still necessary.

- German Bundesbank semi-annual economic forecasts cut the 025 GDP growth from 1.1% to 0.2% and cut the 2026 GDP growth from 1.4% to 0.8%. Also cut the 2025 CPI forecast from 2.7% to 2.4% and cut 2026 CPI forecast from 2.2% to 2.1%.

- China PBOC Official Zou Lan stated it would deepen FX market reform next year and resolutely prevent risk of exchange rate overshooting. Monetary policy stance enhanced its response. capacity

Currencies/fixed income

- USD continued its weekly gains on speculation that the Fed could enact a pause in Jan in the aftermath of next week’s potential rate cut.

EUR/USD moved lower to test below 1.0460 as various ECB members spoke on the need to continue with rate cuts.

- GBP/USD was lower after UK Nov GDP data came in below consensus and registered a contraction. Dealers noted that the recent weak data out of the UK could prompt greater chance that BOE would enact speedier rate cuts.

- Dealers noted that the message from China's CEWC did not offer much new information. US Trump advisor Navarro warned against any Chinese currency manipulation.

Economic data

- (FI) Finland Oct GDP Indicator Y/Y: -0.5% v -1.0% prior.

- (FI) Finland Nov CPI M/M: % v 0.5% prior; Y/Y: 1.0% v 1.1% prior.

- (FI) Finland Oct Current Account: -€0.3B v +€1.1B prior.

- (UK) Oct Monthly GDP M/M: -0.1% v +0.1%e; GDP 3M/3M: 0.1% v 0.1%e.

- (UK) Oct Industrial Production M/M: -0.6% v +0.3%e; Y/Y: -0.7% v +0.2%e.

- (UK) Oct Manufacturing Production M/M: -0.6% v +0.2%e; Y/Y: 0.0% v 0.9%e.

- (UK) Oct Construction Output M/M: -0.4% v +0.3%e; Y/Y: -0.7% v 0.0%e.

- (UK) Oct Index of Services M/M: 0.0% v 0.1%e; 3M/3M: 0.1% v 0.2%e.

- (UK) Oct Visible Trade Balance: -£19.0B v -£16.0Be; Overall Trade Balance: -£3.7B v -£3.5Be.

- (DE) Germany Oct Trade Balance: £13.4B v €15.7Be; Exports MoM: -2.8% v -2.6%e; Imports MoM: -0.1% v -1.0%e.

- (DE) Germany Nov Wholesale Price Index M/M: 0.0% v 0.4% prior; Y/Y: -0.6% v -0.8% prior.

- (SE) Sweden Nov Unemployment Rate: 7.4% v 7.8% prior; Unemployment Rate (seasonally adj): 8.3% v 8.6%e; Trend Unemployment Rate: 8.5% v 8.4% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 84.6K v 97.8K tons prior.

- (TH) Thailand May Foreign Reserves w/e Dec 6th: $239.3B v $237.5B prior.

- (FR) France Nov Final CPI M/M: -0.1% v -0.1% prelim; Y/Y: 1.3% v 1.3% prelim.

- (FR) France Nov Final CPI EU Harmonized M/M: -0.1% v -0.1% prelim; Y/Y: 1.7% v 1.7% prelim; CPI Ex-Tobacco Index: 118.66 v 118.76e.

- (FR) France Q3 Final Wages Q/Q: 0.4% v 0.3% prelim.

- (ES) Spain Nov Final CPI M/M: 0.2% v 0.2% prelim; Y/Y: 2.4% v 2.4% prelim.

- (ES) Spain Nov Final CPI EU Harmonized M/M: 0.0% v 0.0% prelim; Y/Y: 2.4% v 2.4% prelim.

- (ES) Spain Nov CPI Core M/M: % v 0.4% prior; Y/Y (final): 2.4% v 2.4% prelim.

- (RU) Russia Narrow Money Supply w/e Dec 6th (RUB): 18.37T v 18.23T prior.

- (IS) Iceland Nov International Reserves: 903B v 893B prior.

- (PL) Poland Nov Final CPI M/M: 0.5% v 0.4% prelim; Y/Y: 4.7% v 4.6% prelim.

- (CZ) Czech Oct Current Account (CZK): 13.0B v 5.2Be.

- (UK) BoE/Ipsos Quarterly Inflation Attitude Survey (Next 12 Months): 3.0% v 2.7% prior.

- (EU) Euro Zone Oct Industrial Production M/M: 0.0% v 0.0%e; Y/Y: -1.2% v -2.0%e.

Fixed income issuance

- (IN) India sold total INR370B vs. INR370B indicated in 2034, 2054, and 2074 bonds.

- (ZA) South Africa sold total ZAR1.0B vs. ZAR1.0B indicated in I/L 2031, 2038 and 2050 bonds.

Looking ahead

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

- 06:00 (BR) Brazil Dec FGV Inflation IGP-10 M/M: 1.1%e v 1.5% prior.

- 06:00 (UK) DMO to sell £5.5B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £2.5B respectively).

- 06:00 (BE) Belgium Debt Agency (BDA) to sell OLO Bonds via Ori Auction.

- 06:30 (IN) India Forex Reserve w/e Dec 6th: No est v $658.1B prior.

- 06:30 (IS) Iceland holds exchange auction.

- 06:30(IN) India announces upcoming bill issuance (held on Wed).

- 07:00 (BR) Brazil Oct Economic Activity Index (Monthly GDP) M/M: -0.2%e v +0.8% prior; Y/Y: 6.2%e v 5.1% prior.

- 08:00 (PL) Poland Oct Current Account: -€0.1Be v -€1.4B prior; Trade Balance: -€0.9Be v -€0.7B prior; Exports: €30.6Be v €28.0B prior; Imports: €31.5Be v €28.7B prior.

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

- 08:30 (US) Nov Import Price Index M/M: -0.2%e v 0.3% prior; Y/Y: 1.0%e v 0.8% prior; Import Price Index (ex-petroleum) M/M: 0.0%e v 0.2% prior.

- 08:30 (US) Nov Export Price Index M/M: -0.3%e v 0.8% prior; Y/Y: +0.3%e v -0.1% prior.

- 08:30 (CA) Canada Q3 Capacity Utilization Rate: 78.9%e v 79.1% prior.

- 08:30 (CA) Canada Oct Manufacturing Sales M/M: +1.3%e v -0.5% prior; Wholesale Sales (ex-petroleum) M/M: 0.5%e v 0.8% prior.

- 11:00 (RU) Russia Q3 Preliminary GDP (2nd of 3 readings) Y/Y: 3.1%e v 3.1% advance.

- 11:00 (EU) Potential sovereign ratings after European close (Moody’s on Finland).

- 13:00 (US) Weekly Baker Hughes Rig Count data.