Cautious Optimism in European Markets as Fed Meeting and Ukraine Tensions Dominate Investor Outlook

Economic

Stocks

Summary:

European stocks opened higher on Friday, supported by rising expectations of a Fed rate cut and cautious hopes surrounding Ukraine negotiations, even as geopolitical risks remain elevated....

Market Opens with Modest Gains as Fed Signals Drive Sentiment

European equity markets showed a moderate but broad-based uptick on Friday, with the pan-European Stoxx 600 climbing 0.18% shortly after the bell. Major indices across the region reflected similar momentum: Germany’s DAX rose 0.45%, France’s CAC 40 added 0.13%, the UK’s FTSE 100 increased 0.17%, and Spain’s IBEX 35 edged up 0.29%. The rally was primarily driven by investor anticipation of a potential interest rate cut from the Federal Reserve in its upcoming Federal Open Market Committee (FOMC) meeting next week.

The causality here is clear: market optimism was fueled by the belief that looser monetary policy could ease borrowing costs and support equity valuations. This is a direct causal relationship rather than a coincidental correlation, as traders priced in an 87.1% probability of a 25-basis-point rate cut, according to CME’s FedWatch Tool.

Inflation Data and U.S. Labor Market Trends Underpin Policy Bets

Investor focus also remains sharply fixed on upcoming U.S. data releases, especially the personal consumption expenditures (PCE) index, consumer spending figures, and the University of Michigan’s consumer sentiment survey. These indicators are crucial inputs for the Fed’s policy considerations. Meanwhile, the latest U.S. jobless claims, which fell by 27,000 in the week ending November 29, undercut some arguments for aggressive easing, as the data suggested a still-resilient labor market.

This relationship illustrates a nuanced interplay between data and policy: while falling jobless claims might normally signal economic strength (and thus reduce the need for easing), the broader context of slowing inflation and consumption still supports market confidence in a rate cut. Here, the relationship between economic data and market expectations is partly causal (in terms of influencing Fed policy) and partly correlational (in terms of how investors perceive trends across multiple indicators).

Geopolitical Risk from Ukraine War Continues to Hover Over Markets

Another influential yet less predictable factor is the evolving geopolitical landscape. Investors are keeping an eye on U.S.-led diplomatic efforts to resolve the war in Ukraine, which could affect energy markets, defense stocks, and overall European sentiment. Recent developments include Russian President Vladimir Putin’s state visit to India and his warning that Russia may forcibly take Donbas if Ukrainian forces don’t withdraw. Additionally, the European Union is considering using frozen Russian assets to fund aid for Kyiv—a proposal Russia has warned could be interpreted as an act of war.

In this case, the link between geopolitical risk and equity market performance is best understood as a correlation rather than direct causation. While no immediate sell-off occurred, the uncertainty continues to weigh on investor psychology and adds a layer of risk that tempers bullishness from monetary factors.

Mixed Signals in Corporate Headlines Add to Market Texture

Corporate news added both drag and lift to the broader market. Swiss Re shares dropped 5.6% after the reinsurer released modest 2026 financial targets, including a $4.5 billion profit and a 7% annual dividend growth plan. While this reflects stable earnings potential, investor expectations may have been higher, leading to the sell-off. Conversely, Ocado surged 10.2% after reports that U.S. retailer Kroger would compensate the UK online grocer with $350 million for a canceled American distribution center project.

These reactions highlight how firm-specific developments can generate sharp divergences in stock performance, independent of macro factors, reinforcing the complexity of sentiment in a market driven by both top-down and bottom-up signals.

Upcoming European Economic Data Will Shape Regional Outlook

Investors are also awaiting key economic releases from the eurozone, including EU-wide GDP figures, German factory orders, French trade data, and Italian retail sales. These will serve as precursors to the following week’s interest rate decisions from the European Central Bank, the Bank of England, Sweden’s Riksbank, and Norway’s Norges Bank, all scheduled for December 18.

While these data points may not shift markets as forcefully as U.S. policy decisions, they carry causal weight for regional monetary authorities and could significantly impact local bond yields and equity valuations.

European stocks are navigating a delicate equilibrium between central bank easing hopes and geopolitical instability. The market reaction so far suggests cautious optimism, driven largely by confidence in upcoming Fed policy. However, potential shocks whether from Ukraine-related developments or macroeconomic disappointments could shift sentiment quickly. Investors remain in a wait-and-see mode, with eyes trained on both economic dashboards and diplomatic chessboards.

Source: CNBC

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Gerik

Economic

Stocks

Chey Tae-won: AI’s Growth Is Real, But Stocks May Cool Off

At a recent forum in Seoul, SK Group Chairman Chey Tae-won pushed back on fears that the artificial intelligence industry is in a speculative bubble. Responding to questions from the Bank of Korea governor, Chey emphasized that while AI is not in a bubble, AI-related stocks have surged too quickly, creating a risk of short-term corrections.

"Overshooting is not a new phenomenon for high-growth industries," Chey noted, pointing out that rapid capital inflows and investor enthusiasm often lead to stock valuations outpacing actual business fundamentals, especially in transformative sectors like artificial intelligence.

AI Boom Driving SK Hynix Supercycle

SK Group is the parent company of SK Hynix, one of the world’s leading suppliers of high-end memory chips. The firm plays a critical role in the AI ecosystem, particularly by supplying memory chips for Nvidia’s flagship AI chipsets used in data centers.

Over the past year, SK Hynix shares have soared 214%, fueled by the massive demand from AI data infrastructure builders. In October, SK Hynix reported record-breaking quarterly profits and revealed that its chip production for 2026 is already sold out, reinforcing the narrative of an ongoing "chip super cycle."

This kind of performance has placed SK Hynix at the forefront of the global AI investment wave, mirroring similar growth seen in companies like Nvidia, AMD, and other AI hardware leaders.

Market Valuations vs. Real Profits: A Familiar Dilemma

Despite the earnings momentum, Chey noted that investors should be cautious, as AI stock prices may have outpaced current profit realities. This echoes broader market sentiment: while the AI revolution is expected to drive major productivity gains across industries, questions linger about how and when these gains will convert into sustainable, widespread profits.

Chey emphasized that a correction would be a natural, healthy adjustment, not a signal of a collapsing bubble. “It’s part of the maturation process of any high-growth sector,” he said.

AI Still Has a Long Runway But Stocks May Need to Breathe

Chey Tae-won’s remarks offer a grounded perspective amid growing excitement and skepticism around AI. While SK Group remains bullish on the long-term potential of artificial intelligence, particularly in its core semiconductor business, the chairman’s candid warning about overheated valuations serves as a reality check for investors.

As the AI narrative continues to unfold, markets may need to recalibrate expectations and align valuations more closely with fundamentals, even as the industry itself marches forward with accelerating technological breakthroughs.

Source: Reuters

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Daniel Carter

Economic

UK house prices stalled ahead of the budget, according to data from one of the biggest mortgage lenders that suggested fears of tax rises had a dampening effect on the property market.

Halifax said that average property values were unchanged at £299,892 ($400,430) in November after a 0.5% gain the previous month. Values were up 0.7% from a year earlier, the weakest rate since March 2024.

The figures suggest the market may have been held back by growing concerns that would Chancellor of the Exchequer Rachel Reeves' would target the property market in her Nov. 26 budget. It chimes with Bank of England data showing a slight dip in mortgage approvals in October.

However, Halifax's report contrasts with recent data from Nationwide Building Society showing prices climbing by more than expected last month. Differences may reflect the loan book of each lender. The figures are based on the valuations carried out by lenders to determine the true worth of a property prior to it being bought.

While Reeves postponed much of the pain for households from her £26 billion of tax increases, her new levy on homes worth more than £2 million may hit the top of the property ladder and her squeeze on rental incomes on landlords may tempt more to exit the sector. Fears that Reeves might target homes well below that level proved unfounded.

Home buyers have enjoyed an easing in mortgage rates this year and climbing real incomes, supporting the market. Mortgage holders with variable rate loans are expected to get further relief later this month with markets betting on a Bank of England cut in interest rates to 3.75%. However, they also faced a hike in stamp duty in April and a subdued economic backdrop with unemployment ticking higher in recent months.

"This consistency in average prices reflects what has been one of the most stable years for the housing market over the last decade," said Amanda Bryden, head of mortgages at Halifax. "Even with the changes to Stamp Duty back in spring and some uncertainty ahead of the Autumn Budget, property values have remained steady."

Bryden said Halifax expects prices will "continue to grow gradually into 2026" given the prospect of further rate cuts.

Prices in London, the highest in the country at an average of £539,766, slipped back 1% year-on-year. The South East and East of England also saw small price falls, while Northern Ireland continued to be the best-performing region after a 8.9% gain.

"The outlook for 2026 rests on the path of mortgage rates and the resilience of household incomes," said Karen Noye, mortgage expert at Quilter. "Greater clarity post budget and the prospect of lower borrowing costs give the market a firmer footing, but affordability will remain the defining constraint."

Source: Bloomberg Europe

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Samantha Luan

Political

Stocks

India's government is reviewing a telecom industry proposal to force smartphone firms to enable satellite location tracking that is always activated for better surveillance, a move opposed by Apple, Google and Samsung due to privacy concerns, according to documents, emails and five sources.

A fierce privacy debate erupted in India this week after Prime Minister Narendra Modi's government was forced to rescind an order requiring smartphone makers to preload a state-run cyber safety app on all devices after activists and politicians raised concerns about potential snooping.

For years, the Modi administration has been concerned its agencies do not get precise locations when legal requests are made to telecom firms during investigations. Under the current system, the firms are limited to using cellular tower data that can only provide an estimated area location, which can be off by several meters.

The Cellular Operators Association of India (COAI), which represents Reliance's Jio and Bharti Airtel, has proposed that precise user locations should only be provided if the government orders smartphone makers to activate A-GPS technology - which uses satellite signals and cellular data - according to a June internal federal IT ministry email.

That would require location services to always be activated in smartphones with no option for users to disable them. Apple, Samsung and Alphabet's Google have told New Delhi that should not be mandated, said three of the sources who have direct knowledge of the deliberations.

A measure to track device-level location has no precedent anywhere else in the world, lobbying group India Cellular & Electronics Association (ICEA), which represents both Apple and Google, wrote in a confidential July letter to the government, which was viewed by Reuters.

"The A-GPS network service ... (is) not deployed or supported for location surveillance," said the letter, which added that the measure "would be a regulatory overreach."

'DEDICATED SURVEILLANCE DEVICE'

India's home ministry had scheduled a meeting of top smartphone industry executives to discuss the matter on Friday but it was postponed, a source with direct knowledge of the matter said. On Thursday, Reuters sent questions related to this topic to the ministry.

India's IT and home ministries, which are both analysing the telecom industry's proposal, did not respond to Reuters queries.

Apple, Samsung, Google, Reliance and Airtel did not respond to requests for comment. Lobby groups ICEA and COAI also did not respond.

At this point, no policy decision has been made by the IT or home ministries.

Taking advantage of A-GPS technology - which is typically only turned on when certain apps are running or when emergency calls are being made - could provide authorities with location data precise enough that a user can be tracked to within about a meter, according to technology experts.

"This proposal would see phones operate as a dedicated surveillance device," said Junade Ali, a digital forensics expert associated with Britain's Institution of Engineering and Technology.

Cooper Quintin, a security researcher at the U.S.-based Electronic Frontier Foundation, said he had not heard of any such proposal elsewhere, calling it "pretty horrifying."

Governments worldwide routinely seek new ways to better track cellphone users' movements or data. Russia has mandated the installation of a state-backed communications app on all mobile phones in the country.

TELCOS VS SMARTPHONE FIRMS

India is the world's second-biggest mobile market with 735 million smartphones as of mid-2025, where Google's Android powers more than 95% of the devices, with the rest using Apple's iOS, Counterpoint Research says.

Apple and Google's lobby group, the ICEA, argued in their July letter that there are significant "legal, privacy, and national security concerns" with the proposal from the telecom group.

It warned their user base would include people from the military, judges, corporate executives and journalists, adding that proposed location tracking risked their security given that they hold sensitive information.

Even the old way of location tracking is becoming problematic, the telecom group said, as smartphone makers show a pop-up message to users, alerting them that their "carrier is trying to access your location."

"A target can easily ascertain that he is being tracked by security agencies," said the telecom group, urging the government to order phone makers to disable the pop-up features.

Privacy concerns should take priority and India should also not consider disabling the pop-ups, Apple and Google's group argued in its July letter to the government.

This will "ensure transparency and user control over their location."

Source: Investing

Risk Warnings and Disclaimers

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Justin

Political

Economic

Indonesian officials plan to take legal action against a dozen companies whose actions they say may have worsened deadly floods and landslides in northern Sumatra.

Forestry Minister Raja Juli Antoni told parliament on Thursday that the ministry will investigate 12 companies in connection with the disaster, adding that mismanagement of forests appeared to have contributed to a cyclone-driven catastrophe that has killed more than 800 people in Indonesia.

He said the ministry would also revoke forest-concession permits held by 20 companies managing a combined 750,000 hectares of concessions in Sumatra and elsewhere in the Southeast Asian nation, pending approval from President Prabowo Subianto.

Antoni did not identify the companies.

Hundreds of people remain missing after more than a week of flooding and landslides in Sumatra, officials say.

Separately, the environment ministry has revoked environmental permits of several companies after satellite-imagery analysis and field inspections in disaster areas revealed signs of illegal logging and land clearing, Indonesia's Government Communication Agency said Thursday.

Environment Minister Hanif Faisol Nurofiq said eight companies would be summoned for questioning starting Dec. 8, and that investigations could escalate to criminal prosecution, according to the GCA. The agency added that an initial assessment found evidence that forest areas had been cleared for agricultural use, which it said left them more vulnerable during periods of heavy rainfall.

Source: Bloomberg Europe

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Samantha Luan

Political

Economic

The US lobbied several countries in the European Union in an effort to block EU plans to use frozen Russian central bank assets to back a massive loan to Ukraine, according to European diplomats familiar with the matter.

US officials argued to member states that the assets are needed to help secure a peace deal between Kyiv and Moscow and should not be used to prolong the war, said the diplomats, who spoke on the condition of anonymity.

The EU put forward a proposal this week to use the immobilized assets to back a €90 billion ($105 billion) loan to cover Ukraine's economic and military needs for the next two years. There are about €210 billion of frozen Russian assets on EU soil and more of those could be used from 2028 on.

The US State Department's press office didn't respond to a request for comment.

The discussions come at a critical time for Ukraine, with the US pressuring Kyiv to agree to a potentially lopsided peace deal with Russia. Ukraine risks running out of money early next year and President Donald Trump's administration has cut off most US aid, putting the onus on Europe.

Washington has also been eyeing the Russian assets as part of its proposals to enable peace talks with Moscow, and had suggested they could be used to fund US-led postwar investments.

A US 28-point peace plan has been modified since it first emerged last month, but assets remain one of the key sticking points, along with the status of Ukrainian territories and providing Kyiv with robust security guarantees, some of the people said.

European leaders have been adamant that how to use the assets is a European matter as the frozen funds are mostly held in Europe.

There is "no possibility of leaving the money we mobilize to the US," German Chancellor Friedrich Merz said on Thursday.

"The American government knows this, and this is also the German government's negotiating position," he said. "This is also the consensus at the European level. There are absolutely no differences of opinion on this. This money must flow to Ukraine — it must help Ukraine."

The EU's plan to use the assets faces domestic opposition as well, particularly from Belgium, where most of the funds are held.

Merz will travel to Brussels Friday for talks with Belgian Prime Minister Bart De Wever and European Commission President Ursula von der Leyen in an effort to break down Belgian resistance to the EU plan.

Merz, who has been a strong advocate of using the Russian assets to aid Ukraine, told reporters that he takes the Belgian premier's concerns "very seriously" and that he would try to address them at Friday's meeting.

"I don't want to persuade him, but rather convince him," he said at a news conference Thursday evening in Berlin after talks with German regional leaders. "If we take this path, we will do so to help Ukraine, possibly for the next two to three years."

Belgium argues that it has yet to receive sufficient guarantees that it won't be left on the hook alone to foot any future bill should Moscow win any future claims on recovering the assets. It also says that using the frozen funds would open Europe, and it's companies, to Russian retaliation.

Belgium's national budget has received hundreds of millions of euros in tax revenue from the immobilized funds, though it argues that the money is being used to provide aid to Ukraine.

Belgium's current rejection of the plan remains the main stumbling block to its approval ahead of an EU leaders' summit later this month, where the bloc will be aiming to sign off on the proposals.

The EU has proposed backing the loan using the bloc's budget or through bilateral guarantees from member states. The assets would remain frozen and Kyiv would only have to pay the loan back if Russia agrees to finance the country's reconstruction and compensate it for the damage the war has inflicted.

In addition to Belgium, Hungary is against the plans and Slovakia has said it will not back proposals that provide Ukraine with military support. Approval would only require a qualified majority of member states.

The commission has also floated the option of issuing joint debt in the event they can't reach an agreement to use the immobilized assets. But member states including Germany reject that idea, and the fact that it requires unanimity makes it improbable.

Source: Bloomberg Europe

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Winkelmann

Forex

Technical Analysis

Key Points:

· The US Dollar holds near a five-week low as traders prioritize Fed rate-cut expectations over strong labor data.

· Markets price an 85–86% chance of a December Fed cut, keeping downward pressure on the dollar despite resilient jobs numbers.

· A delayed flow of key economic reports from the shutdown leaves dollar traders navigating incomplete macro signals.

US Dollar Price Forecast: Drops Amid 85% Fed Cut Probability – GBP/USD And EUR/USD_1

Market Overview

The US dollar remained soft against major peers during European trading, holding near a five-week low. Even with solid labor data released Thursday, the greenback failed to gain traction as investors continued to price in a more accommodative Federal Reserve.

Labor Strength Offers Limited Support

Initial jobless claims fell to their lowest level in more than three years, underscoring resilience in the US labor market. The reaction in currency markets, however, was muted.

Traders focused less on weekly improvements and more on the Fed's policy direction. Some analysts also noted that the Thanksgiving period may have distorted the data.

Fed Cut Expectations Keep Pressure on the Dollar

Markets now assign roughly an 85–86% probability of a quarter-point rate cut at the December 9–10 FOMC meeting, with expectations for several additional cuts next year. Anticipation of easier policy continues to weigh on the dollar, reducing its appeal even as economic indicators remain firm.

Data Gaps Add to Market Uncertainty

The extended government shutdown has delayed several key economic releases, including monthly payroll figures. With incomplete data, investors have been forced to navigate the outlook with limited visibility, increasing uncertainty around near-term dollar direction.

While the dollar still offers defensive appeal during periods of risk aversion, Fed communication in December and upcoming employment updates will likely determine its next move.

US Dollar Index (DXY) – Technical Analysis

Dollar Index Price Chart – Source: Tradingview

The Dollar Index (DXY) trades near $98.92, moving inside a well-defined descending channel that has guided price lower since late November. Recent candles show rejection at the mid-channel trendline near $99.06, signaling persistent selling pressure. The index remains below both the 50-EMA and 200-EMA, reinforcing a bearish structure.

Immediate support sits at $98.76, followed by $98.56 and $98.38 if downside momentum continues.

A break below these levels would extend the channel toward the lower boundary. On the upside, resistance stands at $99.22, and a close above that level would be required to challenge the broader downtrend.

GBP/USD Technical Analysis

GBP/USD Price Chart – Source: Tradingview

GBP/USD trades near $1.3353, holding inside a rising channel that has guided the pair higher since mid-November. Recent candles show buyers defending the mid-channel support at $1.3326, keeping the short-term structure intact. Immediate resistance sits at $1.3375, where multiple rejection wicks indicate supply.

Below current levels, support stands at $1.3287, followed by $1.3248 and $1.3190 if sellers extend pressure. Price remains above the 50-EMA, while the 200-EMA below confirms broader bullish momentum.

RSI is recovering toward 55 after easing from overbought, suggesting stabilizing momentum. A breakout above $1.3375 could open $1.3424, while losing the channel floor risks a deeper pullback toward $1.3287.

EUR/USD Technical Forecast

EUR/USD Price Chart – Source: Tradingview

EUR/USD trades near $1.1659, holding inside a rising channel that has guided price higher since late November. Recent candles show buyers defending the mid-channel trendline around $1.1653, keeping the short-term bias constructive. Immediate resistance stands at $1.1688, where multiple rejection wicks show supply.

On the downside, support sits at $1.1623, followed by stronger levels at $1.1591 and $1.1566 if sellers pressure the trend. The pair remains above the 50-EMA and 200-EMA, reinforcing broader bullish structure.

RSI is recovering from mid-range toward 55, indicating improving momentum but not stretched conditions. A close above $1.1688 could open $1.1716, while losing the channel floor risks a deeper pullback toward $1.1591.