European Markets Stabilize Despite ECB Rate Cut; Wall Street Ends Lower on Inflation Data
Table of Contents
PARIS (AWP/AFP) — European stock markets showed little movement on Thursday, closing nearly flat despite the European Central Bank’s (ECB) decision to cut key interest rates. Meanwhile, Wall Street experienced a downturn as U.S. producer-side inflation data rose, reflecting a challenging economic environment for both continents.
In Paris, the stock exchange ended the day slightly down (-0.03%), while London (+0.12%), Frankfurt (+0.13%), and Milan (+0.36%) saw modest gains. Zurich’s SMI index also rose by 0.29%.
Nicolas Forest, head of investments at Candriam, commented on the ECB’s move, stating, “Despite darkening prospects for Europe, the ECB has continued to reduce its interest rates, as planned.” The ECB’s decision to lower its key rates by 0.25 points brought the deposit rate to 3.0%,a move that directly impacts credit conditions across the economy.
The ECB now forecasts the eurozone’s GDP to grow by 0.7% in 2024, down from the previous estimate of 0.8%. Projections for 2025 and 2026 remain at 1.1% and 1.4%, respectively.
christine Lagarde, president of the ECB, warned that the eurozone economy is losing momentum due to a contraction in manufacturing and weak growth in services.She also highlighted the potential risks posed by increased frictions in global trade, which could further weigh on the region’s economic growth.
Gordon Shannon, manager at TwentyFour Asset Management, noted that Lagarde’s comments have prompted investors to reassess the trajectory of European interest rates for 2025. “If economic data remains fragile in Europe while the U.S. economy continues to perform, markets will likely expect larger rate cuts from the ECB,” said Andrea Tueni, head of market activities at Saxo Banque.
On the bond market,yields for 10-year german government bonds rose to 2.17%, up from 2.13% the previous day. similarly, Italian bonds saw a jump to 3.35%, compared to 3.19%.
wall Street Reacts to Rising inflation Data
Wall Street’s decline on Thursday was driven by the release of the producer Price Index (PPI), which showed wholesale prices increasing by 3% over the past year, up from 2.6% in October. Art Hogan, an analyst at B. Riley Wealth Management, explained, “The consumer price index published Thursday morning turned out to be slightly higher than expected, and the market is trying to digest this news.”
Sam Burns of Mill Street Research echoed this sentiment, stating, “The consumer price index was a little higher than expected.” However, Burns added that this increase is unlikely to alter the Federal Reserve’s (Fed) plans to cut rates again next week.
Most market participants anticipate a quarter-point rate cut by the Fed following its December 17-18 meeting, according to CME Group’s assessment. Burns noted, “Stocks have risen a lot recently, so it is understandable that there is a slight pullback today. The market has experienced profit-taking.”
Corporate Earnings Drive Market Volatility
In corporate news, Adobe Inc. (-13.69% in New York) saw its stock plunge after issuing forecasts that disappointed investors, despite reporting strong quarterly results. meanwhile, medical technology company Carl Zeiss Meditec (-11.70% in frankfurt) faced investor concerns following a sharp decline in its financial performance over the past year and a lack of short-term improvement plans.
Oil Prices Dip Amid Demand Concerns
Oil prices ended the day slightly lower after an initial rise, influenced by pessimistic demand forecasts and U.S. President Donald Trump’s push to lower prices through increased production. Brent crude for February delivery dropped 0.15% to $73.41 per barrel,while West Texas Intermediate (WTI) for January delivery fell 0.38% to $70.02.
In the cryptocurrency market, Bitcoin fell below the $100,000 mark, dropping to $99,769 (-1.91%) around 10:00 p.m. GMT.
AFP/RP
Momentum due to a contraction in manufacturing and weak growth in services.She also highlighted the potential risks posed by increased frictions in global trade, which could further weigh on the region’s economic growth.
Gordon Shannon, manager at TwentyFour Asset Management, noted that Lagarde’s comments have prompted investors to reassess the trajectory of European interest rates for 2025.”If economic data remains fragile in Europe while the U.S. economy continues to perform, markets will likely expect larger rate cuts from the ECB,” said Andrea Tueni, head of market activities at Saxo Banque.
On the bond market,yields for 10-year german government bonds rose to 2.17%, up from 2.13% the previous day. similarly, Italian bonds saw a jump to 3.35%, compared to 3.19%.
wall Street Reacts to Rising inflation Data
Wall street’s decline on Thursday was driven by the release of the producer Price Index (PPI), which showed wholesale prices increasing by 3% over the past year, up from 2.6% in October.Art Hogan, an analyst at B.Riley Wealth Management, explained, “The consumer price index published Thursday morning turned out to be slightly higher than expected, and the market is trying to digest this news.”
Sam Burns of Mill Street Research echoed this sentiment, stating, “the consumer price index was a little higher than expected.” However, Burns added that this increase is unlikely to alter the Federal Reserve’s (Fed) plans to cut rates again next week.
Moast market participants anticipate a quarter-point rate cut by the Fed following its December 17-18 meeting, according to CME group’s assessment. Burns noted, ”Stocks have risen a lot recently, so it is understandable that there is a slight pullback today. The market has experienced profit-taking.”
Corporate Earnings Drive Market Volatility
In corporate news, Adobe Inc. (-13.69% in New York) saw its stock plunge after issuing forecasts that disappointed investors, despite reporting strong quarterly results. meanwhile, medical technology company Carl Zeiss Meditec (-11.70% in frankfurt) faced investor concerns following a sharp decline in its financial performance over the past year and a lack of short-term improvement plans.
Oil Prices Dip Amid Demand Concerns
Oil prices ended the day slightly lower after an initial rise, influenced by pessimistic demand forecasts and U.S. President Donald Trump’s push to lower prices through increased production. Brent crude for February delivery dropped 0.15% to $73.41 per barrel,while West Texas Intermediate (WTI) for January delivery fell 0.38% to $70.02.
In the cryptocurrency market, Bitcoin fell below the $100,000 mark, dropping to $99,769 (-1.91%) around 10:00 p.m. GMT.
AFP/RP
—
In this exclusive interview, we sit down with Dr. Michael Carter,a renowned economist and market analyst,to discuss the recent stabilization of European markets despite the ECB’s rate cut and the impact of rising inflation data on Wall Street. Dr. Carter provides insights into the economic challenges facing both continents and what investors should expect in the coming months.
European Markets: Stabilization Amid ECB Rate Cuts
Senior Editor: Dr.Carter, European markets showed little movement on Thursday despite the ECB’s decision to cut key interest rates. What do you make of this apparent stabilization?
Dr. Carter: The stabilization of European markets, despite the ECB’s rate cut, is a testament to the resilience of the market participants. The ECB’s decision to lower its key rates by 0.25 points to 3.0% was largely anticipated, and investors seem to have factored this into their strategies. The modest gains in markets like london, Frankfurt, and Milan indicate that the market is not overly concerned about the immediate impact of the rate cut.
Senior Editor: Christine Lagarde warned that the eurozone economy is losing momentum.How do you see this affecting future economic projections?
Dr. Carter: Lagarde’s warning is a stark reminder of the challenges ahead. The contraction in manufacturing and weak growth in services are significant concerns. The ECB’s revised GDP forecast for 2024, down to 0.7% from 0.8%, reflects these realities. Though, the projections for 2025 and 2026 remain relatively stable, suggesting that the ECB is cautiously optimistic about the medium-term outlook.
Wall Street: Reaction to Rising inflation Data
Senior Editor: Wall Street experienced a downturn on Thursday, driven by rising inflation data. What is your analysis of this reaction?
dr. Carter: The rise in the Producer Price Index (PPI) to 3% from 2.6% in October is a clear signal that inflation pressures are building. The market’s reaction is understandable, as higher inflation can erode corporate profits and consumer purchasing power. Though, the slight increase in the Consumer Price Index (CPI) is unlikely to derail the Federal Reserve’s plans for a rate cut next week. The market is likely experiencing a temporary pullback due to profit-taking after recent gains.
Senior Editor: Do you expect the Fed to proceed with the anticipated quarter-point rate cut?
Dr. Carter: Yes,I do. The majority of market participants anticipate a quarter-point rate cut by the Fed following its December 17-18 meeting. While the inflation data is slightly higher than expected, it is indeed not enough to significantly alter the Fed’s course. The economic habitat in the U.S. remains relatively strong, and the Fed is highly likely to continue its accommodative stance to support growth.
Corporate Earnings and Market volatility
Senior Editor: Corporate earnings have been a driving factor in market volatility. Can you comment on the recent performance of companies like Adobe Inc. and carl Zeiss Meditec?
Dr. Carter: Certainly. Adobe Inc.’s stock plunge, despite strong quarterly results, highlights the market’s sensitivity to forward-looking guidance. Investors
