Stalemate on using frozen Russian assets for Ukraine support

EU mid-market update: Calm EU trade amid key rate decisions; Stalemate on using frozen Russian assets for Ukraine support; US CPI at 08:30 ET.

Notes/observations

- Indices are marginally higher in a morning session that saw Sweden, Norway and Taiwan leave interest rates unchanged. Later on, at 07:00 ET, BOE are expected to cut by 25bps (market prices for ~70bps of cuts in 2026) while ECB are pegged to leave policy unchanged at 08:15 ET

- Bund yields unfazed after German Debt Agency announced a record €512B of debt issuance planned for 2026 to help fund large-scale investments and defense programs

- For geopolitics, we are monitoring EU leaders’ summit in Brussels where contentious debate over using profits/cash from frozen Russian central bank assets (around €210B held mostly in the EU) to back a large "reparations loan" (proposed at up to €90-165B) for Ukraine's military and civilian needs in 2026-2027. Summit currently appears to have enough dissenters against the plan that it will be blocked. Similarly, Ukraine Pres Zelenskiy chimed in on the peace plan, saying not ready to withdraw troops from Donbas (sticking point for Russia/Ukraine) and notes his team will visit UK on Dec 19-20th. Brent/WTI higher by ~0.5% by more so on Venezuela and US confrontation

- Oracle’s total debt is projected to swell toward $148 billion following the collapse of the Blue Owl financing deal, pushing lease-adjusted leverage to a distressed 7.4x level that far exceeds investment-grade thresholds. This massive debt burden and sustained negative free cash flow make a "fallen angel" downgrade to junk status (BB+/Ba1) possible during 2026 - while Oracle CDS stabilizes above 150bps.

- The rumored $10B investment from Amazon in OpenAI may represent a shift toward "vendor-financed industrial policy," where hyperscalers use equity injections to lock in long-term tenancy for their proprietary silicon like Trainium. This "circular" accounting loop allows Amazon to recognize these funds twice - first as an investment and later as high-margin cloud revenue - effectively creating a synthetic floor for demand that challenges Nvidia’s dominance through subsidized infrastructure.

- Thus, Nvidia CEO Jensen Huang clarified overnight that the company has not yet provided "a single penny" to OpenAI. Concurrently, Google is collaborating with Meta on "TorchTPU," a strategic initiative designed to break Nvidia’s CUDA monopoly by making Google’s TPU chips fully compatible with the industry-standard PyTorch framework.

- Bitcoin stuck below $90K while gold bit lower to $4,325 ahead of key US inflation print for Nov and weekly jobless claims.

- Asia closed mixed with KOSPI underperforming -1.5%. EU indices +0.2-0.6%. US futures +0.1-0.8%. Gold -0.3%, DXY +0.1%; Commodity: Brent +0.2%, WTI +0.3%; Crypto: BTC +0.9%, ETH -2.1%.

Asia

- New Zealand Q3 GDP Q/Q: 1.4% v 0.9%e; Y/Y: 1.3% v 1.3%e.

- Australia Dec Consumer Inflation Expectation: 4.7% v 4.5% prior.

- China Nov Swift Global Payments (CNY): 2.9% v 2.5% prior.

Global conflict/tensions

- US said to have warned Europe against giving frozen Russian billions to Ukraine.

- China Foreign Min Wang Yi: Beijing opposes “unilateral bullying” and supports all countries in safeguarding their sovereignty and national dignity.

- Brazil Pres Lula: Offered help to Trump to talk with Venezuela.

Trade

- USTR Greer said to indicate that he supports keeping the US in the trade accord with Canada and Mexico.

- Brazil Diplomat: Proposed EU safeguards are worrisome for Mercosur deal (**Note: Brazil President Lula said to threatened to walk away from deal).

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.29% at 13,083.30, FTSE +0.29% at 9,802.35, DAX +0.16% at 23,995.12, CAC-40 +0.34% at 8,113.22, IBEX-35 +0.53% at 17,027.70, FTSE MIB +0.28% at 44,224.50, SMI +0.45% at 13,083.30, S&P 500 Futures +0.41%].

Market focal points/key themes: European indices opened mixed but took on a modest upward bias in early trading; markets in a holding pattern ahead of Monterey policy decisions; outperforming sectors include consumer discretionary and energy; among sectors inclined to the downside are financials and health care; tech sector supported following Micron’s earnings yesterday; oil & gas subsector supported on rumors of new US sanctions on Russia and Venezuela; BNP in exclusive talks with Arvaland to acquire Athlon; Aena acquires stakes in two UK airports; DNO agrees oil take off financing with Exxon and Shell; focus on ECB and BOE rate decisions later in the day; earnings expected in the upcoming US session include FedEx, Nike and Accenture.

Equities

- Consumer discretionary: Currys [CURY.UK] +10.5% (earnings; recent trading update), Douglas [DOUG.DE] -3.5% (earnings).

- Industrials: Mercedes-Benz [MBG.DE] -1.0% (shortens timeframe for fixed cost target from end-2027 to end-2026), Rheinmetall [RHM.DE] -1.0% (raised outlook; Ukraine-US official to talk tomorrow).

- Technology: Aixtron [AIXA.DE] +1.5%, STMicro [STM.FR] +0.5% (Micron results), SESA [SES.IT] +1.0% (earnings).

Speakers

- Various comments from EU Leader Summit on Russian frozen assets. German Chancellor Merz stated that wanted to use frozen Russian assets for Ukraine; believe we can find a common EU solution. Time to decide on Mercosur trade deal. Pres Macron: EU-Mercosur deal can't be signed; Would find technical solution to back Ukraine funding. Hungary PM Orban stated that the issue of Russian assets was dead and had enough for blocking minority (**Note: Current known position: In Favor: Germany, Finland, Ireland, Poland, Sweden, Denmark, Romania; Against: Belgium, Hungary, Slovakia, Italy, Bulgaria, Malta.

- Germany Debt Agency (DFA) on 2026 issuance: Planned to raise record €512B in debt: with €318B from capital markets and €176B in money markets (analysts estimated would 'likely exceed €500B').

- Sweden Central Bank (Riksbank) Policy Statement reiterated rate to remain at current level for some time to come. Recovery underway but would take time to return to normal.

- Sweden Central Bank updated its Staff Projections cut 2026 Avg CPI from 0.9% to 0.6% while maintaining 2027 Avg CPI at 2.1%. Projections 2026 raised Avg GDP from 2.7% to 2.9% and raised 2027 GDP growth from 2.4% to 2.5%.

- Sweden Central Bank (Riksbank) Gov Thedeen post rate decision press conference stated that saw the policy rate staying at this level for some time going forward, and this view essentially covered the first three quarters of 2026 (aka horizon) for our rate path.

- Norway Central Bank Policy Statement reiterated stance that rate would further be cut in coming year but in hurry to do so. Reiterated that a restrictive policy was still needed. Still envisage a cautious normalization of policy rate in next years. Projections cut CPI-ATE forecast from 2.8% to 2.7% and cut 2027 CPI-ATE forecast from 2.4% to 2.3%.

- Norway Central Bank updated its Staff Projections which cut 2025 Mainland GDP growth from 2.0% to 1.5% and cut 2026 Mainland GDP growth from 1.5% to 1.3%.

- Norway Central Bank (Norges) Gov Bache post rate decision press conference noted that the NOK currency (Krone) is weaker than previously assumed which raises the inflation prospects slightly.

- Taiwan Central Bank Policy Statement noted that the decision to keep policy steady was unanimous. Would adjust monetary policy in a timely way. Steady policy to help maintain stable economic and financial development. Staff Projections raised 2026 GDP growth from 2.7% to 3.7% and maintained Headline CPI forecast at 1.6%.

- Ukraine Pres Zelenskiy stated that was not ready to withdraw troops from Donbas; Ukraine team would be in US on Dec 19-20th. There was no final aligned peace proposals for now.

- Japan PM Takaichi stated that agreed with DPP to lift tax-free ceiling to ¥1.78M from ¥1.60M temporary ceiling.

- South Korea Fin Min Koo Yun-cheol FX market to stabilize once policy responses materialize. No intentions to utilize the National Pension Fund to stabilize the Won currency.

Currencies/fixed income

- USD was steady ahead of key rate decisions from BOE, ECB and BOJ.

- The session saw no surprises from Riksbank and Norge which kept their policy steady.

- EUR/USD at 1.1726 and contained within a tight range ahead of the ECB decision. Dealers focusing on the press conference to see if ECB chief Lagarde plays down rate hike expectations.

- GBP/USD at 1.3370 ahead of the BOE rate decision. MPC expected to resume rate cuts in a close vote. Dealers are expecting a 25 basis-point rate cut with the vote seen at 5-4 vote in favor of a cut. The 1.34 level has been good resistance in recent sessions.

- USD/JPY just under the 156 level with focus on the upcoming BOJ decision. Dealers expect a 25bps hike in Dec and current market pricing implying just one additional rate increase expected in 2026. Fiscal concerns has been a headwind for any stronger yen currency thus far in the tightening cycle. BOJ would likely signal that the next move is some distance away.

Economic data

- (NL) Netherlands Nov Unemployment Rate: 4.0% v 4.0% prior.

- (CH) Swiss Nov Trade Balance (CHF): 3.8B v 4.2B prior; Real Exports M/M: -0.6% v -1.1% prior; Real Imports M/M: +0.2% v -0.1% prior; Swiss Watch Exports Y/Y: -7.3% v -4.1% prior.

- (FR) France Dec Business Confidence: 99 v 98e; Manufacturing Confidence: 102 v 98e; Production Outlook Indicator: -7 v -10e; Own-Company Production Outlook: 11 v 13e.

- (TW) Taiwan Nov M2 Money Supply Y/Y: 5.1% v 5.0% prior; M1 Money Supply Y/Y: 4.9% v 4.8% prior.

- (TW) Taiwan Central Bank (CBC) left Benchmark Interest Rate unchanged at 2.00%; as expected.

- (SE) Sweden Central Bank (Riksbank) left Repo Rate unchanged at 1.75%; as expected.

- (NO) Norway Central Bank (Norges) left Deposit Rate unchanged at 4.00%; as expected.

- (PL) Poland Nov Sold Industrial Output M/M: -9.3% v -6.2%e; Y/Y: -1.1% v +2.7%e; Construction Output Y/Y:0.1 % v 2.4%e.

- (PL) Poland Nov Employment M/M: 0.1% v 0.0%e; Y/Y: -0.8% v -0.9%e.

- (PL) Poland Nov; Average Gross Wages M/M: 2.4% v 1.5%e; Y/Y: 7.1% v 6.2%e.

- (PL) Poland Nov PPI M/M: +0.1% v -0.1%e; Y/Y: -2.4% v -2.5%e.

- (ZA) South Africa Nov PPI M/M: 0.0% v -0.1%e; Y/Y: 2.9% v 2.8%e.

- (EU) Euro Zone Oct Construction Output M/M: +0.9% v -0.6% prior; Y/Y: +0.5% v -0.4% prior.

- (BE) Belgium Dec Consumer Confidence Index: -1 v +2 prior.

Fixed income issuance

- None seen.

Looking ahead

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 12-month Bills.

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

- 06:00 (BR) Brazil Central Bank (BCB) Monetary Policy Report.

- 06:00 (PT) Portugal Nov PPI M/M: No est v 0.3% prior; Y/Y: No est v -2.8% prior.

- 07:00 (UK) Bank of England (BOE) Interest Rate Decision: Expected to cut Bank Rate by 25bps to 3.75%.

- 07:00 (CA) Canada Dec CFIB Business Barometer: No est v 55.5 prior.

- 07:00 (MX) Mexico Oct Retail Sales M/M: 0.4%e v 0.0% prior; Y/Y: 3.0%e v 3.3% prior.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 12th: No est v $741.5B prior.

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

- 08:15 (EU) ECB Interest Rate Decision: Expected to leave Key Rate unchanged.

- 08:30 (US) Initial Jobless Claims: 225Ke v 191K prior; Continuing Claims: 1.92Me v 1.939M prior.

- 08:30 (US) Dec Philadelphia Fed Business Outlook: +2.3e v -1.7 prior.

- 08:30 (US) Nov CPI Y/Y: 3.1%e.

- 08:30 (US) Nov CPI (ex-food/energy) Y/Y: 3.0%e.

- 08:30 (US) Nov CPI Index NSA: 325.189e; CPI Core Index: 332.060e.

- 08:30 (US) Nov Real Avg Hourly Earning Y/Y: No est v 0.8% prior; Avg Weekly Earnings Y/Y: No est v 0.7% prior.

- 08:30 (CZ) Czech Central Bank (CNB) Interest Rate Decision: Expected to leave 2-Week Repurchase Rate unchanged at 3.50%.

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

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

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

- 11:00 (US) Dec Kansas City Fed Manufacturing Activity: 6e v 8 prior.

- 11:00 (CO) Colombia Oct Economic Activity Index (Monthly GDP) Y/Y: 2.9%e v 4.0% prior.

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

-12:00 (CA) Canada to sell 5-year and 10-year Bonds.

- 13:00 (US) Treasury to sell 5-year TIPS.

- 13:00 (US) Treasury to sell 20-year bonds.

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25bps to 7.00%.

- 14:00 (AR) Argentina Q3 Unemployment Rate: No est v 7.6% prior.

- 14:00 (AR) Argentina Nov Trade Balance: $0.7Be v $0.8B prior.

- 16:00 (US) Oct Total Net TIC Flows: No est v $190.1B prior; Net Long-Term TIC Flows: No est v $179.8B prior.

- 16:00 (NZ) New Zealand Dec ANZ Consumer Confidence Index: No est v 98.4 prior.

- 16:00 (KR) South Korea Nov PPI Y/Y: No est v 1.5% prior.

- 16:45 (NZ) New Zealand Nov Trade Balance (NZD): No est v -1.5B prior; Exports: No est v 6.5B prior; Imports: No est v 8.0B prior.

- 18:30 (JP) Japan Nov National CPI Y/Y: 2.9%e v 3.0% prior; CPI (ex-fresh food) Y/Y: 3.0%e v 3.0% prior; CPI (ex-fresh food/energy) Y/Y: 3.0%e v 3.1% prior.

- 19:00 (NZ) New Zealand Dec ANZ Business Confidence: No est v 67.1 prior; Activity Outlook: No est v 53.1 prior.

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

- 23:00 (MY) Malaysia Nov Trade Balance (MYR): 17.2Be v 19.0B prior; Exports Y/Y: 11.6%e v 15.7% prior; Imports Y/Y: 11.4%e v 11.2% prior.

- (JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to raise Policy Rate by 25bps to 0.75%.