📆 Thursday, December 19
► European stock futures mirrored the global risk-off sentiment, sliding 1.5% (Euro Stoxx 600) after the Federal Reserve hinted at fewer rate cuts in 2025. This weakness followed Wall Street’s sharp selloff, with the S&P 500 recording its steepest Fed-decision-day decline since 2001. Investors are bracing for key central bank decisions from the UK, Norway, and Sweden, while the hawkish Fed stance prompted a reassessment of global equity valuations. The Bank of England kept rates unchanged but three MPC members voted for another cut. Analysts only expected only a single MPC vote for another rate cut – we thus see a rather dovish rate pause (=according to SmartTrader chief analyst Robert Lindner) with the decision for the pause being split.
► US markets show signs of stabilization after a sharp selloff on Wednesday that was caused by investors falling into panic even as the Fed delivered what was widely expected. Futures point to a rebound, with the S&P 500 rising 0.3%, and Nasdaq futures increasing 0.3%. Treasury yields edged further up, with the 10-year yield trading above 4.5%, reflecting ongoing concerns about inflationary pressures and reduced rate-cut expectations. The Federal Reserve cut rates by 25 basis points but signaled a slower path of reductions next year, prompting cautious remarks from Chair Jerome Powell, who emphasized the need to see more progress on inflation. Swap markets show that investors reduced rate cut expectations for 2025 to below two rate cuts – which will only be true if the US economy will remain in strong growth. The US economy is no need for Fed stimulus.
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