► As the US markets remain closed today for the holiday, the cautious stance remains in place with reduced trading volumes overall
► In Europe, stock futures saw a decrease, with the Stoxx 600 index decreasing by 0.25%. ECB Chief Economist Philip Lane’s remarks suggested reluctance for rapid rate cuts, tempering market expectations. Traders still anticipate significant rate reductions this year, though slightly less than previously expected. ECB Governing Council member Robert Holtzmann's upcoming speech at Davos could provide further insights. Bond yields across Europe, including Germany's 10-year yield, increased, indicating heightened market caution as well. Banks and carmakers leading the decline after data showed Germany’s economy contracted. German GDP shrank 0.3% over the full 12 months the first such downturn since the pandemic. It’s a stark contrast to peers around the globe and one that’s raising questions about the country’s future as an industrial powerhouse.
► US equity contracts remained steady, reflecting a cautious yet still optimistic market sentiment. USD shows little change, with overall muted trading due to the US public holiday. Swap traders now estimate an 80% likelihood of the Fed initiating an easing cycle by March, a significant increase from earlier predictions.
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