Market Report: European markets set for muted open, US inflation data paves way for December cut
Matt Britzman, senior equity analyst, Hargreaves Lansdown: “European equity markets are expected to open steady as investors brace for earnings from some major European names. The FTSE 100 is following suit, with futures down 0.1%, as the index struggles to find a platform to accelerate from, hovering around 3-month lows. Alongside results in the UK from big names like Burberry and Aviva, investors will also have one eye on UK GDP data out tomorrow where 0.2% growth is expected.
Aviva has come out with a very confident tone in its third-quarter trading update, with strong performance across all business lines. Aviva is a diversified player with fingers in basically all the pies, and, for now, that’s working to its advantage. The insurance business is starting to reap the rewards of pricing actions taken over the past year or so, momentum in the wealth management division continues to be impressive, and Aviva’s capitalising on the resurgence of activity in the bulk annuity market to bring on more retirement business at decent margins.
With post-election clarity and seasonal optimism fuelling markets, investors are looking to Fed Chair Powell to don his best Santa outfit and deliver a rate cut next month, with markets giving odds of a cut at around 83%. CPI data came in as expected, easing inflation concerns that had nudged yields higher, though core inflation remains somewhat persistent. While semiconductors faced pressure, nearing a 10-month low relative to the S&P, stronger odds for a December lifted the broader index as markets wait eagerly for a gift from the Fed to cap off the year.
The US dollar index held strong above 106.5 on Thursday, its highest in a year, as investors digested recent inflation data and commentary from Federal Reserve officials. The dollar’s resilience has continued with Fed officials confident about reaching inflation targets and anticipation building for new economic data, including producer inflation and retail sales. This is further supported by ‘Trump trades’ betting on higher growth and inflation under a second Trump administration.
Brent crude oil futures dipped to around $72 in early trading this morning, pressured by a weak demand outlook and higher output forecasts from the EIA (Energy Information Administration), which raised 2024 and 2025 global production estimates. Additionally, hopes for de-escalation in the Middle East and a strengthening US dollar further impacted prices, making oil less attractive to global buyers. However, US crude inventory data, showing an unexpected draw of 0.8 million barrels, provided some support amidst the ongoing bearish trend.”
