European Midday Briefing: Shares Fall; The AI Trade Is Still In Trouble

Stocks

Summary:

European stocks fell as the U.S. selloff spread, with AI-valuation fears, weak consumer signals, and uncertain Fed rate-cut prospects weighing on sentiment. Oil, metals, and gas declined, while PMIs showed slowing momentum.

MARKET WRAPS

Stocks:

The broad market selloff that began in the U.S. hit European assets Thursday, with all indexes down.

Shares in semiconductor companies fell after Thursday's surge, along with mining and energy stocks were also lower on easing geopolitical tensions.

Ukrainian President Volodymyr Zelensky has agreed to work on a U.S.-drafted peace plan .

SEB said that the falls in U.S. markets Thursday were about more than AI bubble worries, and the labor market statistics drove pessimism, adding that the data suggested that the Federal Reserve won't be in any great hurry to cut interest rates.

"Yesterday's moves make it clear that investors who struggle to try to justify sky-high AI valuations not only need to have a solid belief in AI technology, but also need the backing of lower interest rates to make ends meet."

Wall Street is also growing wary that two of the S&P 500's key consumer sectors were languishing, hinting that American households may be finally pulling back on spending.

"Consumer spending accounts for roughly 70% of the U.S. economy, so as much as the market focuses on AI and earnings from Nvidia, from an economic perspective, consumer activity represents a much more significant variable," Bespoke said.

Stocks to Watch

H&M was starting to deliver a more sustainable investment proposition , Deutsche Bank said as it lowered its target price on the stock to 155 Swedish kronor from 160 kronor and retained the hold rating.

However, the bank said recent data, combined with weather patterns and peer commentary, suggests that October and even November might not be as strong as hoped, pointing to sequentially weaker fourth-quarter sales.

U.S. Markets:

Dow futures were inching up early, the VIX volatility index held above 25, while bitcoin skidded below $85,000.

On Friday investors will eye a consumer-confidence reading and Fed speakers.

A final November consumer-sentiment reading is due from the University of Michigan at 15:00 GMT.

A preliminary readout indicated sentiment has fallen toward record-low levels.

Also due are a Bureau of Labor Statistics delayed report on inflation-adjusted earnings, and the S&P Global flash purchasing managers index.

Forex:

The euro held its ground against the dollar, showing little reaction after mixed French and German purchasing managers' index surveys and the eurozone manufacturing and services data.

The dollar continued to trade softer after the delayed September nonfarm payrolls report.

The supply-driven increase in unemployment eased labor-market tightness, boosting rate-cut expectations with Treasury yields and the dollar slightly lower, Danske Bank said.

However, this trend was unlikely to persist as the figures aren't a strong signal for the Fed to cut rates, it added.

Sterling fell against the euro and trimmed gains versus the dollar, following weaker-than-expected U.K. retail sales data.

The prospects of a bleak U.K. budget next Wednesday and Black Friday discounts indicate consumers reined in spending in October, Wealth Club said, adding that the BOE might have to ride to the rescue with rate cuts.

Bonds:

European government bond yields were little moved after a key measure of eurozone manufacturing and services activity fell slightly in November.

The 10-year French OAT yield fell 1 basis point and its German equivalent fell 2 basis points after French and German PMI surveys .

Treasury yields declined, extending Thursday's moves in the wake of mixed signals from the delayed September jobs report.

"The September jobs data was better than expected, potentially reinforcing fears that the Fed is hawkish," Global X said.

"We continue to believe that is overdone, and the Fed is concerned about the labor market amid slowing inflation."

SEB Research continued to expect the 10-year Treasury yield to fall to 3.90% in the first quarter of 2026, but acknowledged that, for it to reach our 3.90% target in Q1, markets need to regain confidence in rate cuts.

TD Securities expects 10-year Treasury yields to finish 2026 at 3.50% , notably below consensus and forward expectations.

"In some respects, 2026 is shaping up as a continuation of 2025-we look for Treasurys to once again outperform."

Correlations between global rates and U.S. are still quite strong, so falling U.S. yields will help to keep a lid on term borrowing rates elsewhere, it said.

Federated Hermes said it was too early to be confident about the Fed's path in 2026 and while some amount of easing is expected, money market funds were likely to cope with that well.

Energy:

Oil prices extended losses after the Ukrainian President agreed to work on a U.S.-drafted peace plan, easing geopolitical concerns.

Benchmarks were headed for a weekly loss of around 3% as prospects of an oversupplied market continued to weigh on sentiment.

Meanwhile, market watchers continue to closely monitor Russian flows as U.S. sanctions on Russia's Rosneft and Lukoil come into effect.

"Any peace deal could have broader implications for the oil market," ANZ said.

"If accompanied by the elimination of U.S. sanctions on Russian oil, it could release more oil onto the global market."

Gas

European natural-gas prices were lower.

Prices have been broadly rangebound in recent weeks, hovering between 30 and 32 euros a megawatt hour.

"Recent temperatures have dropped, boosting heating demand," ANZ said.

"However, the latest weather models are signalling a slower return to milder conditions next month."

According to industry group Gas Infrastructure Europe, EU gas storage is currently 80.7% full.

Metals:

Gold prices were on track for a weekly loss after the U.S. job report fed uncertainty over the Fed's next policy move.

"U.S. jobs growth topped expectations in September, but the employment rate continued to rise," ANZ said.

"This underscores the lingering fragility of the labor market."

Prices were also pressured by an easing geopolitical risk premium on news that Ukraine will work on a U.S.-drafted plan to end the war.

Base Metals

Base metal prices were on track for weekly losses as uncertainty over rate cuts in the U.S. weighed on sentiment.

EMEA HEADLINES

Eurozone Business Activity Continues Growth Despite Manufacturing Hit

Business activity continued to grow in the eurozone in November, albeit at a slightly slower pace, hurt by lingering weakness in the manufacturing sector.

The eurozone's composite purchasing managers index-based on survey responses from around 5,000 manufacturers and service providers-fell to 52.4 from 52.5 in October, data firm S&P Global and Hamburg Commercial Bank said Friday.

Europe Must Look Inward to Drive Growth, ECB's Lagarde Says

Europe must break down its internal barriers to move away from a growth model that is driven by exports, European Central Bank President Christine Lagarde said.

In a speech to bankers Friday, Lagarde also highlighted Europe's vulnerability to the "weaponization" of key raw materials and technologies.

U.K. Government Borrowing Runs Ahead of Plan as Budget Looms

The U.K. government's borrowing continued to run ahead of projections in October, a deterioration in its finances that it will aim to correct with tax rises and some spending cuts in its annual budget statement next week.

The Office for National Statistics on Friday said the government borrowed 17.4 billion pounds ($22.75 billion) in October, bringing the total for the first seven months of the fiscal year to 116.8 billion pounds, 9.9 billion pounds above the amount projected by the Office for Budget Responsibility in its March forecasts.

Ubisoft Requests Stock Trading Resumption as It Logs Higher Sales

Ubisoft Entertainment said it asked Euronext to resume trading of its shares and bonds after the videogame maker posted higher sales for its fiscal second quarter due to stronger-than-expected partnerships and a robust back catalog.

The French company last week postponed the release of results at the last minute and requested that Euronext halt trading of its shares and bonds as it finalized its accounts. It said an analysis of revenue recognition from a partnership led it to restate its accounts for fiscal 2025.

Veolia to Buy U.S. Hazardous-Waste Specialist Clean Earth in $3 Billion Deal

French waste-management company Veolia Environnement said it agreed to buy U.S. hazardous-waste specialist Clean Earth from Enviri for around $3 billion including debt.

Veolia said Friday that the deal would allow it to expand in the growing U.S. hazardous waste sector.

GLOBAL NEWS

U.S. Banks Shelve $20 Billion Bailout Plan for Argentina

A planned $20 billion bailout to Argentina from JPMorgan Chase, Bank of America and Citigroup has been shelved as bankers pivot instead to a smaller, short-term loan package to support the financially distressed government, people familiar with the matter said.

Treasury Secretary Scott Bessent and the Trump administration had been seeking to bolster Argentine President Javier Milei's pro-reform party when they announced a pair of financial lifelines this fall. The package included a $20 billion currency swap with the U.S. Treasury Department and plans for a separate $20 billion bank-led debt facility.

The Middle Class Is Buckling Under Almost Five Years of Persistent Inflation

America's middle class is weary.

After nearly five years of high prices, many middle-class earners thought life would be more affordable by now. Costs for goods and services are 25% above where they were in 2020. Even though the inflation rate is below its recent 2022 high, certain essentials like coffee, ground beef and car repairs are up markedly this year.

The Web of Venezuelan Generals Accused of Fueling the Cocaine Trade

Source: morningstar

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Michelle

Forex

Economic

Federal Reserve Bank of New York President John Williams said on Friday that the U.S. central bank can still cut interest rates "in the near term" without endangering its inflation goal.

Speaking at a Central Bank of Chile event, Williams acknowledged that progress on inflation has "temporarily stalled" and emphasized it was "imperative to restore inflation to our 2% longer-run goal on a sustained basis." He estimates current inflation is around 2.75%.

Will the Fed cut rates in December? See what Wall Street analysts think by upgrading to InvestingPro - get 55% off today

Despite the pause in inflation progress, Williams expressed confidence that price pressures would ease as tariff impacts work through the economy without creating persistent inflation. He also pointed to signs of softening in the labor market, noting September's unemployment rate rose to 4.4%, comparable to pre-pandemic levels "when the labor market was not overheated."

Williams described current monetary policy as "modestly restrictive" and said he sees "room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral." This approach would maintain balance between the Fed's dual goals of price stability and maximum employment.

His comments come amid ongoing debate among Fed officials about whether to cut rates at the upcoming December 9-10 meeting. Some policymakers have opposed further rate cuts until there is clear evidence inflation will drop to the 2% target.

As president of the New York Fed, Williams holds a permanent voting position on the rate-setting Federal Open Market Committee, giving his views significant weight in monetary policy decisions.

Source: Investing

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Warren Takunda

Economic

A series of official data prints and economic surveys confirm the UK economy lost steam in the lead up to the November budget, raising the odds of a faster rate of interest rate cuts at the Bank of England.

S&P Global's monthly PMI survey of the economy showed a drop in private sector momentum as the Composite PMI declined from 51.8 to 50.5, due to a softer rise in service sector activity.

"Some of this malaise has been blamed on paused spending decisions ahead of the Autumn Budget, but there’s a real chance this pause may turn into a downturn," says Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

UK Economy: "Real Chance of a Downturn"_1

A subcomponent of the report showed a welcome deceleration in inflationary pressures facing firms as S&P Global said average output prices rose at their slowest rate in nearly five years.

This will advance the view that underlying inflation in the economy is rapidly slowing and opens the door to a series of interest rate cuts at the Bank of England.

"We expect the MPC to cut rates by 25bp in December, and then another four times next year, taking the bank rate to 2.75%, a level we judge to be broadly neutral. In contrast, financial markets are pricing a 70% chance of a rate cut in December, and for the bank rate to end next year at 3.4%," says Daniel Vernazza, Chief International Economist at UniCredit bank in London.

Earlier in the day it was reported that the UK Consumer Confidence Index fell by two points to -19 in November.

"This is a bleak set of results as we head towards next week’s Budget," says Neil Bellamy, Consumer Insights Director at GfK. Particularly concerning was a drop in confidence over the economic outlook for the coming 12 months, which contributed to a drop in big-ticket purchase intentions.

Corroborating a potential retracement in consumer activity was the official ONS retail sales report, which read at -1.1% year-on-year in October, undershooting the 0% expected.

"Weakness was relatively broad-based: food store sales were down by 1.1% and clothing and footwear store sales fell by 3.3%," says Sandra Horsfield, an economist at Investec.

The ONS blamed the retail sales slowdown on consumers holding back spending in anticipation of Black Friday sales.

"Nevertheless, with GfK November consumer confidence falling 2pts to -19 and the press release describing fears of a ‘difficult’ Budget, there looks to be more to it than just a pre-sales lull," says Sam Hill, Head of Markets Analysis at Lloyds Bank. UK Economy: "Real Chance of a Downturn"_2

UK Economy: "Real Chance of a Downturn"_2

Image courtesy of Pantheon Macroeconomics.

The government's budget, due to be set out next week, is expected to detail significant tax rises, which risk squeezing the economy further.

The scale of the tax increases rest with a significant borrowing requirement by the government, with the ONS confirming on Friday the government borrowed £17.43BN in October, versus £15.2BN expected and head of the OBR's projections by £3.1BN.

"October borrowing illustrates the difficult backdrop to the upcoming Budget. Borrowing has now overshot the fiscal watchdog’s projections in four of the seven months," says Elliott Jordan-Doak, Senior U.K. Economist at Pantheon Macroeconomics.

Source: Poundsterlinglive

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Glendon

Forex

Economic

Sterling was little changed on Friday as investors awaited Britain's upcoming budget, with data showing the economy struggled before next week's major test for the currency and bond market.

The pound was last down less than 0.1% against the dollar at $1.3063. It was set to lose 0.8% for the week.

The last major economic releases before the budget next Wednesday painted a sombre picture, with borrowing hitting the highest on record outside of the COVID-19 pandemic in the first seven months of the year.

Business growth almost ground to a halt this month, retail sales tumbled in October, and a closely watched gauge of household sentiment fell.

"The data highlights the challenging position that the government is currently in ahead of the budget," Lee Hardman, senior currency economist at MUFG, said.

"The government borrowing figure is obviously worse than anticipated, but that won't feed into the government's budget proposals. It is too late for that."

British finance minister Rachel Reeves is expected to need to raise tens of billions of pounds to stay on track to meet her self-imposed fiscal targets.

Media reports last week that she would not raise income tax roiled British assets. Just days before she had appeared to prime the market that tax hikes were coming.

MUFG's Hardman said the timing of the budget will dampen the growth outlook heading into next year, putting pressure on the Bank of England to keep lowering interest rates.

"We think they'll cut rates in December and then deliver two more cuts by the summer," Hardman added.

The BoE kept interest rates unchanged in November in a tight 5-4 vote, but markets expect the central bank will resume its rate-cutting cycle when it convenes next month.

Money market traders are currently pricing in a more than 80% chance of a rate cut from the BoE in December.

Elsewhere, the pound was flat at 88.21 pence per euro, but declined against a strengthening yen after the Japanese currency found some support as officials stepped up their verbal intervention to stem the currency's decline.

Sterling was last down 0.5% at 204.71 yen, after rising to its highest since July last year on Thursday.

Source: TradingView

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Winkelmann

Forex

Political

Economic

Britain is set to borrow billions more than expected this year, demonstrating the precarious state of public finances ahead of the bud.

Government borrowing in October was above expectations at £17.4 billion, contributing to a deficit overshoot for the first seven months of the fiscal year.

It's just one of the signs that Rachel Reeves has plenty of work to do to boost economic activity and fill a huge black hole in next week's budget.

In separate data this morning, retail sales plunged in October as jittery shoppers hibernated, and waited for Black Friday sales. Meanwhile, GfK found consumer confidence to be down across every measure - from views on the economy to personal finance - with middle-earners particularly anxious as Britons prepare for tax hikes.

The Chancellor faces a tricky task. She still needs to raise as much as £30 billion and, having U-turned on income tax, is likely to lean on a smorgasbord of smaller levers.

That, plus a triple balancing act of placating bond investors, respecting party pledges and appeasing the back bench.

What's your take? Ping me on X, LinkedIn or drop me an email at lmoon13@bloomberg.net. Oh, and do subscribe to Bloomberg.com for unlimited access to trusted business journalism on the UK, and beyond.

Energy bills will tick up slightly in the New Year, despite wholesale prices falling. The rise in the energy price cap is being driven by the need to fund government plans such as Sizewell C, Ofgem said.

ASOS recorded a larger-than-expected loss for the full year. The retailer, which brought Topshop back to the high street in that period, is in the middle of a turnaround and says the most difficult part is done. Shares slumped 9.7%.

In other company news, Babcock profit continued to grow in the first half as the defence firm benefits from a rise in military spending, particularly in nuclear. It's got a contract backlog of almost £10 billion, which it says reflects "significant" orders in the remainder of its financial year. Shares dropped 6.7%.

PPHE Hotel Group, the real estate firm behind Park Plaza Hotels in Europe, has started a strategic review to mull options including piling more capital into the business or selling up. Shares rose.

Meanwhile, Nashville-based IT firm Asurion is in advanced talks to buy Domestic & General, in a deal valuing it at £2.1 billion. The UK warranty and repair firm is currently backed by CVC Capital Partners.

Here's your daily snap analysis from Bloomberg UK's Markets Today blog:

The retail sales and borrowing data Louise ran through above don't a pretty picture paint ahead of the budget. That big risk event will arrive against a backdrop of tetchiness in the market.

We spent a large part of yesterday talking about how Nvidia had soothed nerves about frothy tech valuations and AI demand. But we also made clear that Nvidia isn't the place to look for solace for the specific worries that have gripped the stock market. Those are centred around the enormous AI-related spending by cloud giants and whether it will ultimately pay off.

A sizeable chunk of that money is going to Nvidia, so its revenue and profit is booming. That ultimately doesn't answer the question that's vexing investors.

And so, by the end of yesterday, the jitters were back with bells on. US stocks slid and global equities are now on track for their worst week since the tariff chaos that engulfed markets back in April. It's filtering into other risky areas of the market, particularly cryptocurrencies, where Bitcoin has been slammed. Despite its lack of tech stocks, UK equities haven't been spared.

This kind of twitchy mood among investors will make Rachel Reeves' task next week of keeping the bond market on side even more precarious than it already was.

The big thing on everyone's minds next week is the budget, at midday on Wednesday. It's expected to be a tax-raising event as Rachel Reeves attempts to shore up Britain's finances.

Aside from that, company updates are also due through the week. Those include caterer Compass Group, pub owners Marston's and Mitchells & Butlers, pork producer Cranswick, easyJet, Kingfisher and Pets At Home.

Hi, I'm David. I cover the money behind sport — and I was in Birmingham yesterday for the unveiling of Birmingham City FC's new stadium design. It's the brainchild of co-owner Tom Wagner who is on a mission to transform the club.

The co-founder of Knighthead Capital Management said the 62,000-seater would be "steeper, closer and louder" than any other. It would be a "mad house" on match days, and otherwise host music concerts, NFL games and more.

Still five years from completion, the stadium will be constructed with 12 chimney-form towers to reflect Birmingham's industrial history. UK-based Heatherwick Studio, the architects behind Google's new London headquarters, secured the design commission with Manica Architecture, from Kansas and behind the Inter Miami FC stadium.

It comes at an estimated price tag of £1.2 billion, according to Wagner, as part of a sports-quarter development set to cost up to £3 billion - financed with a mixture of debt and equity.

While the project is shiny - with former Birmingham City academy star Jude Bellingham featuring in the promotional video - there's more to do on the field. "We had a little blip with the club," he noted, reflecting on the team's relegation the season before last. But it was evident Wagner has no doubt fans will fill the stadium and his ambitions will pay off.

Source: Bloomberg Europe

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Michelle

Forex

Economic

Private-sector activity in the euro area stayed strong in November, feeding hopes that economic growth can pick up in the last months of the year.

The Composite Purchasing Managers' Index compiled by S&P Global came in at 52.4, almost matching October's 52.5 and still comfortably above the 50 threshold separating growth from contraction. Analysts had predicted an unchanged reading.

Services recorded their best month in a year and a half, helping to offset unexpected weakness in manufacturing. Germany remained a driving force, despite slowing expansion that left its composite reading of 52.1 short of estimates. France, meanwhile – where persistent struggles over the budget are weighing – exceeded expectations, reaching just below 50.

"The euro zone is more or less maintaining its relatively robust expansion rate," Hamburg Commercial Bank economist Cyrus de la Rubia said Nov 21 in a statement. "Although the manufacturing sector is dampening growth performance, the high weight of the service sector in the overall economy means that the euro zone as a whole should grow faster in the final quarter than in the third."

Europe's economy has held up better than anticipated during the US trade storm and is expected to almost maintain 2025's pace of growth in 2026 as a wave of new investments in infrastructure and the military start to be felt. The headline number masks disparities among the euro area's 20 members, however, with about half of the bloc by output failing to grow in the third quarter.

For the European Central Bank, the situation doesn't currently warrant further reductions in interest rates, which have been halved from their 4 per cent peak. Inflation has been brought back to near the 2 per cent target and most officials see it remaining around there for the foreseeable future.

Mr De la Rubia said November's surveys show faster cost inflation in the closely watched services industry is being tempered by a slowdown in the pace of sales-price increases.

"On balance, the headaches for monetary policymakers, who are paying particular attention to the rate of inflation among service providers, should be limited," he said. "We expect interest rates to remain unchanged in December."

PMIs are closely watched by markets as they arrive early in the month and are good at revealing trends and turning points in an economy. A measure of breadth of changes in output rather than depth, business surveys can sometimes be difficult to map directly to quarterly GDP. BLOOMBERG

Source: Straitstimes

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Blue River

Forex

Economic

In a stunning development that's sending shockwaves through financial markets, UBS has dramatically revised its EUR/USD forecast downward to 1.20 for 2026. This bold prediction comes as political instability across Europe creates unprecedented uncertainty for currency traders and investors worldwide.

What's Driving UBS's EUR/USD Forecast Revision?

UBS analysts point to multiple political factors reshaping their EUR/USD forecast outlook. The growing influence of far-right parties in key European economies, combined with fiscal policy uncertainties and potential trade disruptions, has created a perfect storm for the euro. This comprehensive UBS analysis suggests the traditional euro-dollar relationship faces fundamental challenges.

Understanding the Political Risks Impacting Currency Trends

The European political landscape is undergoing significant transformation, directly affecting currency trends. Key concerns identified in the UBS analysis include:

Fragmentation risk within the European Union
Budget disputes among member states
Geopolitical tensions affecting trade flows
Policy uncertainty surrounding key elections

How UBS Analysis Compares to Market Expectations

Institution	EUR/USD 2026 Forecast	Key Rationale
UBS	1.20	Political risks and structural challenges
Market Consensus	1.25-1.30	Gradual euro recovery post-crisis
Previous UBS Forecast	1.28	More optimistic political outlook

The Broader Impact on European Economy Projections

This revised EUR/USD forecast signals deeper concerns about the European economy's trajectory. UBS analysts highlight several critical areas where political decisions could significantly impact economic performance:

Investment climate deterioration
Trade relationship uncertainties
Fiscal policy coordination challenges
Monetary policy divergence risks

Actionable Insights from the UBS Currency Analysis

For investors navigating these turbulent currency trends, the UBS analysis provides crucial guidance. Consider diversifying exposure away from euro-denominated assets and monitoring political developments closely. The 1.20 EUR/USD forecast suggests significant downside risk that requires careful portfolio management.

Frequently Asked Questions

What specific political events influenced UBS's forecast?UBS cites upcoming elections in France and Germany, along with ongoing budget negotiations, as primary factors in their revised EUR/USD forecast.

How does this compare to other major banks' predictions?UBS's 1.20 target for 2026 is among the most bearish in the market, reflecting their unique assessment of political risks to the European economy.

What timeframe should investors focus on?The UBS analysis suggests monitoring political developments through 2024-2025, as these will likely determine whether their 2026 EUR/USD forecast proves accurate.

The UBS EUR/USD forecast revision to 1.20 for 2026 represents a stark warning about the intersection of politics and currency markets. As political risks continue to reshape the European landscape, investors must remain vigilant and adapt their strategies accordingly. This analysis underscores the critical importance of monitoring political developments alongside traditional economic indicators when assessing currency trends.