European Midday Briefing: Shares Up as Investors Bet on Fed Rate Cut

Stocks

Summary:

European stocks rose as weak U.S. labor data boosted expectations of a Fed rate cut. Markets focused on upcoming jobless claims and PCE data, while commodities slipped and geopolitical tensions supported oil prices.

MARKET WRAPS Stocks:

European shares mostly rose as hopes for a Federal Reserve rate cut increased following weaker-than-expected labor market data.

The ADP private payrolls figures on Wednesday showed an unexpected decline in employment in November, fueling investors' rate-cut optimism.

Focus is now turning to the U.S. weekly jobless claims data due today and the PCE index due later this week as potentially important inputs ahead of the central bank's decision on Dec. 10.

"We expect Chair Powell will signal a cautious meeting-by-meeting approach to future rate cuts, to balance concerns about softness in hiring against elevated inflation and inflation uncertainty," ANZ said.

Investors continue to bet on an interest-rate cut, pricing in a 85% probability of a 25-basis-point cut, according to LSEG.

In Europe, eurozone October retail data and the Bank of England's Decision Maker Panel are expected later Thursday.

Shares on the Move

London and Johannesburg listed gold miners fell in morning trade as gold prices slid. Investors are looking ahead to the Federal Reserve's policy path.

U.S. Markets:

Stock futures held steady on Thursday after posting gains the previous session on the back of Fed rate cut hopes.

On the earnings front, the retailers Dollar General and Kroger are due to report before the open. Hewlett Packard Enterprise is among companies slated to issue results after the close.

Forex:

The euro traded steady. The currency could strengthen against the dollar by year-end as the Fed looks set to cut interest rates and negative dollar seasonality in December could provide further support, ING said.

The dollar remained weak after reaching a five-week low in the previous session as U.S. data and news about the next Fed Chair boosted interest-rate cut expectations ahead of next week's decision.

The dollar was expected to remain broadly stable in 2026 , though there are significant downside risks to the forecast, Nomura said. Dollar selling and hedging could become a powerful trade, it added.

Bonds:

Eurozone government bond yields edged higher after opening, tracking the direction of Treasury yields, though moves are contained.

"Bunds enter calmer waters while eurozone government bond spreads test new lows , " said Commerzbank Research.

Treasury yields rose in early trading hours, reversing Wednesday's falls but remaining in their recent range.

The 10-year Treasury could be in the 4%-4.10% trading range "for a bit" before breaking out, ING said.

"We'd view a break below as temporary (perhaps into the turn of the year), and a break above as more structural, certainly something for 2026," it added.

This year has been one of differentiation in bond markets , with very large divergences in yield moves, both between geographies and at different maturities of the curve, and this is expected to continue heading to 2026, Schroders said.

There was room for emerging market bond yields to fall further , Goldman Sachs said. This forecast runs against Goldman Sachs' long-run estimates across most major developed markets, where they see scope for yields to rise over the medium term.

Energy:

Oil prices rose as markets stayed focused on geopolitical tensions. Russia-Ukraine peace talks have yet to yield results and the Trump administration's friction with Venezuela's government continues.

Crude futures continued to be stuck in a narrow trading range, with further gains capped by prospects of an oversupplied market next year.

Metals:

Gold edged lower in early trading as investors book profit after Wednesday's gains and awaited more cues on the Fed's policy path.

Silver

Spot silver fell, but the precious metal's year-to-date rally is outpacing peers such as gold, OCBC said.

Silver prices could remain elevated next year thanks to the commodity's safe-haven appeal and industrial demand, it added.

Copper

Copper fell . The correction comes after the base metal's price rose to a fresh record Wednesday on supply worries .

Iron

Iron ore prices were lower in early trade, weighed by subdued demand and strong supply. Weak demand is leading to high inventories of iron ore , which have pressured prices, Everbright Futures said.

EMEA HEADLINES

Rio Tinto's New CEO Targets Cost Cuts, Asset Sales in Streamlining Push

Rio Tinto's new chief executive officer said he would target cost reductions and sell assets in a bid to simplify the business.

Simon Trott, who took the helm of the Anglo-Australian miner in August, said Thursday that Rio Tinto would target up to $10 billion in cash proceeds from the sale of assets, or minority stakes to partners.

EU Seeks to Remove Barriers to Single Financial Markets

The European Union on Thursday presented a plan to remove national barriers that stand in the way of a single market for financial services, which it sees as a key step to reviving the bloc's faltering economy.

The European Commission, the bloc's executive arm, said the package of measures would eliminate barriers to trading and asset management. It also seeks to remove regulatory barriers to distributed ledger technology, and centralize supervision of market infrastructure, such as central counterparties.

U.K. Approves $37 Billion in Funding for Energy Grid

U.K. energy-markets regulator Ofgem approved 28 billion pounds ($37.39 billion) in funding for the country's grid via a price-control framework, a move it says will lessen volatility in customers' power bills.

"Energy network companies have been given the green light for multibillion-pound funding to strengthen the stability, security and resilience of our energy networks," Ofgem said Thursday.

GLOBAL NEWS

Kevin Hassett, Trump's Likely Pick for Next Fed Chair, Divides Markets

President Donald Trump has said he has narrowed down his search for the next Federal Reserve chair to one candidate, and nearly all signs point to his longtime economic advisor Kevin Hassett as that person.

While the president has said he won't make the official announcement until early next year, Trump smirked when reporters asked if it would be Hassett, which many have taken as a positive signal. Prediction site Polymarket is pricing about an 80% chance Kevin Hassett is the president's pick.

BOJ's Ueda Says Unsure How Many More Rate Hikes He Will Make

TOKYO-The timing of Japan's next shift in monetary policy appears to hinge on a hard-to-pin-down detail that fascinates economists: the so-called neutral level of interest rates.

Bank of Japan Gov. Kazuo Ueda on Thursday said officials at the central bank are working to narrow a range for the neutral rate-the level viewed as consistent with economic stability. Such a decision will help inform the bank whether it needs to tighten policy more as it assesses economic data.

EU Seeks to Remove Barriers to Single Financial Markets

Hegseth Asked Top Admiral to Resign After Months of Discord

Defense Secretary Pete Hegseth shocked official Washington in mid-October when he announced that the four-star head of U.S. military operations in the Caribbean was retiring less than a year into his tenure.

But according to two Pentagon officials, Hegseth asked Adm. Alvin Holsey to step down, a de facto ouster that was the culmination of months of discord between Hegseth and the officer. It began days after President Trump's inauguration in January and intensified months later when Holsey had initial concerns about the legality of lethal strikes on alleged drug boats in the Caribbean, according to former officials aware of the discussions.

Survivors of Boat Strike Were Actively Continuing Drug Mission, Admiral to Tell Lawmakers

WASHINGTON-Two survivors of a Sept. 2 U.S. strike on a boat in the Caribbean were killed in follow-up attacks after they were seen still aboard the damaged vessel alongside packages of illegal narcotics, a senior commander is expected to tell lawmakers Thursday.

Adm. Frank "Mitch" Bradley plans to say he and his legal adviser concluded the two survivors were attempting to continue their drug run, making them and the already-damaged vessel legitimate targets for another attack, two defense officials said.

Putin and Modi Deepen Relationship That Has Drawn Trump's Anger

NEW DELHI-Russian President Vladimir Putin is embarking on a high-profile visit to India, aiming to protect a partnership that is a crucial economic and diplomatic lifeline for Moscow but one that has drawn the ire of the Trump administration.

Putin is set to arrive in New Delhi Thursday evening for a two-day summit with Indian Prime Minister Narendra Modi, during which the Russian president is expected to offer cheap oil and Russia's latest arms in an effort to bolster the longstanding relationship between the two powers.

Audit Finds Palestinian Inmates Face Starvation and Beatings in Israeli Prisons

An audit by Israel's Public Defender's Office found conditions for Palestinian security prisoners deteriorated severely after the attacks on Oct. 7, 2023, including extreme overcrowding, hunger and near-daily beatings for many.

Source: morningstar

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Michelle

Forex

Economic

Layoffs announced by U.S. employers fell sharply in November, but hiring intentions continued to lag as businesses navigated an uncertain economic environment against the backdrop of tariffs on imports and slowing demand.

Global outplacement firm Challenger, Gray & Christmas said on Thursday planned job cuts declined 53% to 71,321 last month from October. They were, however, 24% higher compared to the same period last year, and November's tally was the largest for the month since 2022.

So far this year, employers have announced about 1.171 million job cuts, up 54% versus the first 11 months of 2024. In contrast, planned hires totaled only 497,151, the lowest year-to-date total since 2010, and down 35% compared to the same period in 2024.

But the jump in planned layoffs so far this year has not translated into a surge in first-time applications for state unemployment benefits, keeping the labor market in what policymakers and economists call a "no fire, no hire" state.

Labor market stagnation has been blamed on reduced labor supply amid a reduction in immigration that started during the final year of former President Joe Biden's term and accelerated under President Donald Trump's administration.

The integration of artificial intelligence into some job roles is also eroding demand for labor, with most of the hit landing on entry-level positions.

Economists also said Trump's trade policy had created an uncertain economic environment that has hamstrung the ability of businesses, especially small enterprises, to hire.

"Layoff plans fell last month, certainly a positive sign," said Andrew Challenger, senior vice president at Challenger, Gray & Christmas.

Telecommunications providers, primarily Verizon, led planned job cuts last month. They were followed by technology companies and meat processing firms. Restructuring was cited as the main reason for planned job cuts in November.

AI was blamed for only 6,280 announced layoffs. So far this year, AI has accounted for 54,694 planned layoffs.

Companies also attributed planned job cuts to market and economic conditions, with tariffs also cited. Government spending cuts, which saw thousands of federal workers losing their jobs, have also contributed to a rise in planned layoffs among contractors and non-profit entities.

Source: TradingView

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Gerik

Political

Russia-Ukraine Conflict

Political Overview

Tensions between Russia and the European Union have escalated following the European Commission’s proposal to unlock $105 billion (€90 billion) in frozen Russian assets to help finance Ukraine’s war recovery. These funds, primarily held in Euroclear accounts in Belgium, have been frozen since Russia’s full-scale invasion in 2022. The EU’s dual-option plan includes issuing a “Reparations Loan” or borrowing from international markets, though it favors the former to avoid direct budgetary burdens on member states.

This funding represents roughly two-thirds of Ukraine’s estimated $136.5 billion financing gap from 2026 to 2029, as calculated by the IMF. The Commission argues that the loan would only be repaid by Ukraine if Russia were to pay reparations, thus framing it as a conditional mechanism rather than an act of asset seizure.

Russian Reaction

Dmitry Medvedev, Deputy Chairman of Russia’s Security Council, sharply criticized the EU’s proposal on Telegram, describing it as “tantamount to casus belli” an act that could justify war under international law. He specifically targeted the idea of using frozen central bank funds to issue a reparations loan, labeling it as theft disguised in legality. Russia has long warned of retaliation if such assets are used, and this latest escalation reinforces the potential for retaliatory financial or cyber actions.

While Russia's rhetoric may be intended to deter European action, it underscores how financial warfare through sanctions and asset freezes has become a central front in the geopolitical conflict.

Legal and Political Risks for the EU

The legal implications of using frozen assets for funding a third-party war effort remain a grey zone in international law. Belgium, home to Euroclear, has voiced caution and is advocating for burden-sharing among EU member states to mitigate legal risk if Russia seeks legal recourse post-conflict.

The EU’s ability to act is further constrained by political division. Unanimity is required for borrowing decisions, and Hungary remains opposed to providing further aid to Ukraine, potentially blocking this route. However, asset usage could proceed under qualified majority voting, sidestepping Hungary’s veto.

Diplomatic Backdrop: Parallel Peace Talks

The funding debate coincides with a renewed push for peace. U.S. special envoy Steve Witkoff is holding talks with Ukraine’s national security chief Rustem Umerov in Miami, while French President Emmanuel Macron has traveled to Beijing to urge President Xi Jinping to support a diplomatic resolution. Meanwhile, former U.S. President Donald Trump revealed ongoing dialogue between his envoy and Moscow, describing the talks as “reasonably good,” though no concrete peace plan has emerged.

An earlier, secret 28-point peace proposal crafted jointly by the U.S. and Russia and later presented to Ukraine appears to remain under consideration. However, the lack of clear consensus among the involved parties continues to stall progress toward a resolution.

Market and Geopolitical Implications

If the EU proceeds with the asset usage plan, retaliation from Russia could manifest in multiple forms asset seizures in response, retaliatory cyberattacks, or escalated hybrid warfare. Investors may also see increased geopolitical risk pricing in European financial markets, particularly in Belgium, where the assets are concentrated.

Should peace talks falter, the EU may feel increasing pressure to financially support Ukraine unilaterally, raising both budgetary and political costs. Conversely, if the EU fails to act decisively, Ukraine’s economic stability could deteriorate further, undermining its defense capabilities and regional stability.

Source: CNBC

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Gerik

Economic

Market Overview and Key Developments

BOJ Governor Kazuo Ueda appears to have successfully won political support for a December quarter-point rate hike, likely lifting Japan’s benchmark rate to 0.75% its highest in three decades. This pre-signaled move, coupled with the yen's persistent weakness and elevated inflation concerns, has calmed market fears of political resistance.

Finance Minister Satsuki Katayama and even Takaichi’s traditionally dovish economic aides have expressed conditional support, particularly if yen depreciation continues. Behind the scenes, the BOJ has worked to align its messaging with government priorities, highlighting a gradual approach that emphasizes economic stability and long-term growth.

Political and Strategic Dynamics

Governor Ueda's strategy has been rooted in diplomacy and cautious signaling. His carefully crafted December 1 speech praised “Abenomics,” connecting the legacy of fiscal stimulus with the current need for normalization. Takaichi, who previously opposed early tightening, now shows signs of alignment likely driven by concerns over yen weakness and inflation’s impact on public support.

The central bank’s independence, while protected by law, remains politically fragile. The BOJ governor and board members require government nomination and parliamentary approval, making the institution attuned to political sentiment.

Market Sentiment and Policy Trajectory

Markets have priced in an 80% probability of a December hike, but the outlook beyond that remains less defined. The challenge now lies in how the BOJ communicates its path forward amid wide disagreement over Japan’s “neutral rate” estimated loosely between 1% and 2.5%.

Swap market projections imply a terminal rate around 1.5% by mid-2027. However, economic adviser Takuji Aida advocates holding steady at 0.75% until 2027, which could restrain Ueda’s ability to tighten further.

Analysis: A Calculated Shift Toward Normalization

This policy move reflects a delicate balance between maintaining credibility and navigating Japan’s unique macroeconomic environment. Ueda’s gradualist, data-driven approach seems designed to avoid the risk of choking off growth while cautiously escaping from a decade-long ultra-loose stance.

The yen’s response will be critical. If Ueda’s communication on future hikes is too vague, the currency may resume its decline. Yet, a strong hawkish signal risks political backlash, especially if inflation eases or economic activity falters.

Technical Implications and Trade Ideas

If the BOJ confirms the hike and signals a moderate tightening path, expect yen stabilization or even mild appreciation particularly if U.S. Fed begins cutting rates in 2026. Long-term Japanese government bonds (JGBs) may face volatility due to uncertainty around terminal rates.

The December rate hike marks a potential policy inflection for Japan, but the future path is entangled in political and economic ambiguity. The BOJ’s next challenge will be to guide markets with greater clarity without triggering turbulence in either the bond market or political sphere

Source: Bloomberg

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Warren Takunda

Economic

Sentiment is set to be the overarching theme into year-end, and it's worth understanding who the winning and losing currencies will be under this setup.

Stocks are rising as confidence grows that the Federal Reserve is going to make everyone's life a lot easier by cutting interest rates next week.

"The resilience of risk assets is becoming impossible to ignore, most notably underscored by the S&P 500's seven-month winning streak, a milestone achieved only sixteen times since World War II," says Antonio Ruggiero, analyst at Convera.

The Real Big Story

But, perhaps, far more important than a mere 25 basis point rate cut, and it's likely to be the big story that is receiving very little attention, is that the Fed is already actively working away to turn up the mood music.

The Fed has officially ended its latest cycle of Quantitative Tightening (QT) as of 1 December 2025, which would traditionally dry liquidity from the system as the Fed stops exchanging bonds for reserves as it runs down its bloated post-crisis holdings of government bonds

But it's also injecting $13.5BN via overnight repos into the banking system, meaning it is actively no longer draining liquidity, reversing the prior trend. That’s significant because this is reportedly the second-largest such injection since the COVID-19 crisis.

In plain terms: the Fed is telling banks, "we won’t keep draining cash from the system, in fact, here’s more cash now."

Ruggiero says the S&P's remarkable rally is being fueled by a distinct shift in liquidity dynamics at the Fed.

"This operation, the second largest since the pandemic and surpassing peaks seen during the Dot-Com bubble, suggests that the financial 'plumbing' is now primed to support further risk-taking," he says.

The Currency Winners and Losers to Watch Out For

The liquidity injection is supportive of investor risk-taking and presents the prospect of fresh advances by global equity markets.

For currencies, there's a relatively simple rule of thumb in that those with a high beta to equity movements will benefit, i.e. those currencies that have a strong correlation with global sentiment.

Those currencies seen as a safe harbour during market setbacks are likely to come under pressure.

These are the higher-beta, in descending order of strength, pro-cyclical or commodity-linked currencies that usually strengthen when global risk appetite improves:

AUD - Australian dollarHigh-beta, commodity-linked, strongly correlated with global growth and equity sentiment.

NZD - New Zealand dollarVery similar risk profile to AUD, tends to outperform when markets turn optimistic.

NOK - Norwegian kroneHigh-beta and heavily oil-linked; one of the most sensitive currencies to risk sentiment.

CAD - Canadian dollarCommodity-linked and tends to appreciate when equities and global demand rise.

SEK - Swedish kronaA higher-beta European currency; often behaves pro-cyclically and benefits from improved global sentiment.

GBP - British poundModerate beneficiary. Not a pure high-beta currency, but usually strengthens when USD and JPY weaken in risk-on phases.7.

EUR - EuroMild beneficiary. Not high-beta, but tends to rise when USD softens in broad risk-on conditions.

(GBP/EUR tends to benefit on account of GBP being higher in the 'risk-on' hierarchy.

G10 currencies that typically do not benefit (or underperform) in a risk-on setup

These are the classic safe havens that tend to weaken when investors rotate out of defensive assets:

JPY - Japanese yenPure safe-haven; usually weakens when global risk sentiment improves.CHF - Swiss franc

Another classic safe-haven; underperforms when markets move into risk-taking mode.

USD - US dollarNot a traditional safe-haven in the same way as JPY & CHF, but the USD usually underperforms in broad risk-on phases as capital rotates to higher-yielding currencies.

Source: Poundsterlinglive

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Gerik

Economic

Market Overview: A Rally Fueled by Fed Speculation

U.S. stock markets surged for a second consecutive day on Wednesday, buoyed by investor bets that the Federal Reserve may cut interest rates in its upcoming December 9–10 meeting. The Dow Jones Industrial Average led the gains with a jump of 0.86%, followed by the S&P 500 with a 0.30% rise and the Nasdaq Composite with a more modest 0.17% uptick. This rebound came despite or perhaps because of a surprisingly poor U.S. jobs report from payroll firm ADP, which showed the private sector lost 32,000 jobs in November. This was in stark contrast to the 40,000 job gain expected by analysts.

The disappointing employment figure paradoxically reinforced the idea that the Fed might pivot to easing monetary policy sooner than previously anticipated. With the CME FedWatch tool indicating nearly 89% probability of a December rate cut, markets are pricing in relief rather than reacting to the underlying economic fragility the job losses represent.

European and Asian Markets Track Global Sentiment

European markets opened higher on Thursday, echoing the upbeat sentiment. The pan-European Stoxx 600 rose by 0.34%, with Germany’s DAX surging 0.87% and France’s CAC 40 up 0.49%. While sector performance was mixed, standout individual performances came from Inditex, which climbed on the back of strong earnings, and Stellantis, whose stock rose after a UBS upgrade.

Meanwhile, Asian markets largely followed suit, with Japanese equities leading regional gains. Investors across the Asia-Pacific region are also preparing for the U.S. Fed decision, while digesting local policy dilemmas such as Japan’s central bank facing increasing pressure from surging bond yields.

Macro Risks: Labor Market Strains and Policy Dilemmas

Despite market euphoria, the job data reveals a structural concern. Continued labor market weakness could signal the start of a broader economic downturn. Moreover, while short-term rate cuts might boost portfolios, they also underscore economic softness posing risks to consumer spending and corporate investment.

In Japan, the Bank of Japan finds itself in a policy dilemma as bond yields soar to their highest level since 2007. The 10-year Japanese government bond yield touched 1.917% on Thursday, intensifying the challenge of balancing growth support with inflation control.

Geopolitical and Tech Developments

Geopolitical tensions remain a background influence. Ukrainian peace talks are under renewed focus, with meetings in Miami and pressure from European leaders such as Emmanuel Macron urging China's cooperation. Meanwhile, Putin’s visit to India signals deeper Russia-India ties amid global shifts.

On the tech front, Nvidia CEO Jensen Huang’s discussion with Donald Trump over chip export restrictions highlights the escalating strategic importance of AI hardware. In Asia, Singapore's Horizon Quantum announced it is the first private firm to commercially run a quantum computer in the country, with an eye toward a U.S. public listing.

Analyst Insight: Cash and Caution Prevail

Despite the equity rally, some investors remain cautious. Dan Niles of Niles Investment Management emphasized that "cash is king" in the current uncertain climate, although he sees select opportunities in resilient sectors. His view reflects a broader sentiment among market veterans who warn that premature celebrations could be masking latent macro risks.

Markets are enjoying a sugar rush from the possibility of looser monetary policy, but the underlying fundamentals particularly labor market weakness and geopolitical instability suggest that volatility may return swiftly. The rally may persist in the near term, but its durability depends heavily on December's Fed actions and subsequent macroeconomic indicators. Investors should temper optimism with prudence.

Source: CNBC

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Glendon

Russia-Ukraine Conflict

Russia is preparing a strong response to any "illegal action" by the European Union regarding frozen Russian assets, according to statements made Thursday by Russian Foreign Ministry spokeswoman Maria Zakharova.

Zakharova warned that such actions by the EU would "elicit the harshest reaction" from Moscow, emphasizing that Russia is already formulating its response to potential EU moves.

"Any illegal action in relation to our assets will lead to the harshest reaction," the Russian Foreign Ministry stated.