Fed and ECB interest rates, dollar and bond growth, company stock market news and geopolitics
Stock market news
• The dollar rose on Wednesday as Treasury yields rose after strong U.S. data revived fears of a resurgence in inflation, sending European shares to a weaker open as traders braced for a divergence in policy options.
• Strong economic data dealt a blow to Fed rate cut expectations and weighed on growth stocks, bringing attention back to value stocks. Market emotions have swung from yesterday's optimism to today's pessimism.
It looks like we'll soon see a test of the lower boundary of key support for the S&P 500.
The beginning of the year, inflated valuations, a tough Fed and Trump - not a combination for the faint of heart.
• While traders are getting used to the idea of the US Federal Reserve cutting interest rates gradually, they are expecting a bigger rate cut from the European Central Bank even after data on Tuesday showed euro zone inflation accelerated in December.
Markets are pricing in 99 basis points of ECB easing this year, while the Fed expects borrowing costs to fall by 37.5 basis points by the end of 2025, with the first cut not fully priced in until July.
• The yield on 10-year Treasury notes hit an eight-month high on Tuesday after data pointed to the strength of the U.S. economy and a stable labor market but showed signs of a resurgence in inflation risks, sending the euro close to the two-year low it hit on the first trading day of 2025. The single currency has fallen 6% in the past year, weighed down by weak economic conditions in the region and political turmoil in France and Germany.
• Speculators are taking bearish positions on the euro worth $9 billion, down from the four-year high of $10 billion they were sitting on in early December, weekly data from the U.S. markets watchdog showed.
• A Reuters poll of market strategists last month suggested the euro would remain weak in the short term but was unlikely to catch up with the dollar in coming months, although the threat of U.S. tariffs remains looming. Europe's main index is likely to emerge from a subdued open with a strong start to 2025 after rising 6% in 2024. But bond yields could weigh on tech stocks after they hit a more than five-month high on Tuesday.
• In corporate news, Meta Platforms on Tuesday canceled its fact-checking program in the U.S. and scaled back restrictions on controversial topics in its biggest overhaul of how it manages political content in a while. The change comes after CEO Mark Zuckerberg signaled a desire to mend political fences ahead of President-elect Donald Trump’s administration. The changes will affect Facebook, Instagram and Threads — the world’s three largest social media platforms with more than 3 billion users worldwide.
• Nvidia CEO Jensen Huang on robotaxis and self-driving: “I predict this will be the first multi-trillion dollar robotics industry.” NVIDIA (NVDA) unveiled the RTX 5090, RTX 5080, RTX 5070 Ti, and RTX 5070 graphics cards
DLSS 4 will be three times more efficient than its predecessors, increasing the base frame rate in games by up to eight times. This was made possible by innovative multi-generation technology, which allows the upscaler to create three frames at once instead of one.
• McDonald's (MCD) is scaling back some of the inclusion and equality programs it launched four years ago.
The company has scrapped an initiative to increase minority representation in management and to include LGBT employees in performance surveys.
• Sony and Honda have unveiled their first joint electric vehicle, the Afeela 1. The car will feature advanced driver assistance systems, the Afeela Intelligent Drive, an interactive personal agent that will allow you to communicate with the car, a digital panel between the headlights, and dozens of sensors to prevent accidents.
The Afeela 1 will be manufactured in the United States at a plant in Ohio. Official sales in California are expected in 2025, with deliveries in mid-2026.
• Western investors 'foolishly' avoiding arms industry, says alliance military committee chief Admiral Rob Bauer
Western rating agencies, banks and pension funds are being "foolishly" avoiding defence investments, Bauer has warned, calling on financial institutions to adapt to growing security threats.
• The unexpected departure of Fed Vice Chairman for Supervision Michael Barr is putting renewed focus on Michelle Bowman
, who analysts have called the most likely candidate for the job of top US "bank cop."
• After complaints, Apple (AAPL) will 'further clarify' when Short Messages use artificial intelligence
Apple said Monday it will release an update that will better indicate that its Short Messages are generated by artificial intelligence.
• Aurora (AUR) shares jump more than 30% on partnership with Nvidia and Continental to develop self-driving trucks.
• Traders lose faith in Fed rate cut before July amid US resilience - Bloomberg. Bond traders have abandoned all hope of a Fed rate cut before July after stronger-than-expected service sector activity and job openings, even as Trump has said interest rates are too high.
• Bridgewater is cutting 7% of its workforce in an effort to remain 'agile' - Bloomberg. The layoffs will affect about 90 employees, according to the person, who asked not to be identified because the information has not been released publicly. The firm, whose headcount has returned to 2023 levels, will continue to make selective hires, the person said.
• McDonald's (MCD) Launches McValue Program, Series of New Promotions McDonald's is launching a new series of value-based offers on Tuesday, continuing the push it began last year with the $5 Meal Deal.
• Japan's Renesas Electronics to cut jobs amid weak chip demand - Nikkei. The company has told workers it plans to cut less than 5% of its 21,000-strong workforce in Japan and overseas, the Nikkei report said. Renesas also announced that a regular wage increase that was scheduled for this spring has been postponed.
• Mercedes revises profit forecast lower on weak auto market - Reuters Mercedes will cut its medium-term profit guidance for its passenger car business due to continued market weakness and the shift to electric vehicles.
• Uber (UBER) teams up with Nvidia to develop AI technology for autonomous vehicles
Rising U.S. Treasury yields could lead to a crisis, says Apollo's Slock
• Treasury yields are rising so fast that there is a risk of a bond market turmoil reminiscent of the turmoil that led to the resignation of then-UK Prime Minister Major and his team.
Mark Zuckerberg is copying Elon Musk’s idea: he is bringing back free speech to Instagram and replacing the “fact-checking” feature with “Community Notes”
Community Notes is a Twitter/X feature designed to combat misinformation and provide context to controversial or controversial tweets. It allows users to add clarifications to posts to clarify, correct or supplement their information.
• Microsoft to invest $3 billion in India to expand AI and cloud capabilities
• Meta ends US fact-checking program, adopts X-shaped "Community Notes" model.
• Carmakers to pool CO2 emissions with Tesla and Mercedes to meet 2025 EU rules
• Oil services provider Flowco is seeking a valuation of up to $2 billion in a U.S. IPO.
• Southwest Airlines enters sale/leaseback deal for 36 aircraft.
• Getty Images and Shutterstock are preparing for a $3.7 billion AI merger.
• Israeli cyber companies to raise $4 billion in 2024 on rising demand for cloud and AI security
• Airbus faced financial problems due to a supply crisis at the end of the year.
• Portugal's Novo Banco fires chief risk officer, refers case to regulator
• Indian banks' profitability to decline in FY2026, according to India Ratings.
• Deutsche Bank and Citi are eyeing a rally in European stocks.
• UK lender Close Brothers appoints Mike Morgan as new group chief executive.
• Scotiabank transfers part of its Latin American assets to Colombian Davivienda for 20% of shares.
• HSBC appoints Lisa McGeough as US CEO.
• Indian private equity lender HDFC Bank says deposit growth outpaced lending in the third quarter.
• Fannie Mae and Freddie Mac shares surge after federal agencies unveiled privatization path.
• Goldman Sachs appoints Alex Golten as chief risk officer.
• Brookfield is delaying the sale of its Citypoint office tower in London, a source says.
• Philips is selling a small chip manufacturing subsidiary, Telegraaf reports.
• AI startups drive venture capital growth, attracting record investment in the US in 2024.
• Aurora shares jump after deal with Nvidia and Continental to deploy self-driving trucks.
• Microsoft to invest $3 billion in India to expand AI and cloud capabilities
• Indonesia and Apple discuss investment proposal linked to iPhone ban
• The UK's antitrust regulator will launch two investigations under new powers into digital markets.
• Chip maker NXP to buy Austria's TTTech Auto for $625 million.
Key events that could impact markets on Wednesday:
- German retail sales for November
- Eurozone producer prices for November
- Eurozone sentiment surveys for December
Fundamental news
• Eurozone Unemployment 6.3% (expected 6.3%, same as previous)
Eurozone CPI: +2.4% y/y (expected +2.4%), prev. +2.2%.
Eurozone CPI Core (YoY): +2.7% y/y (expected +2.7%), prev. +2.7%.
US Job Openings Surprise to Six-Month High in November
Employers posted more job postings than economists expected in November as the labour market unexpectedly recovered.
However, hiring slowed.
US Services Sector Growth Accelerates as Input Costs Hit Highest in Nearly Two Years
Input prices surge to a nearly two-year high, pointing to elevated inflation, consistent with the Fed’s forecast for fewer interest rate cuts this year.
U.S. trade deficit widens amid biggest jump in imports since 2022 - Bloomberg
The U.S. trade deficit widened in November, reflecting the biggest jump in imports since March 2022, as companies accelerated shipments ahead of a possible dockworkers strike and in anticipation of potential tariffs announced by Trump.
• Musk's biographer Abramson believes that the billionaire is going crazy and is dangerous for the United States.
• Trump: We need Panama and Greenland for economic security. He refused to promise not to use military force to seize control of Greenland and the Panama Canal.
After Canadian Prime Minister Trudeau resigned, Polymarket predicts that crypto-friendly Pierre Pouleuvre will be Canada's next prime minister.
Many people in Canada want to be the 51st state - Trump.
The US can no longer tolerate the huge trade deficits and subsidies that Canada needs to stay afloat. Trump reiterated his desire for Canada to join the United States after the Canadian PM resigned.
• Peacekeepers from Germany in Ukraine are a challenge for German politicians, says DW columnist Dirk Emmerich. The election campaign has already begun in Germany, with early elections to the Bundestag taking place on February 23. In addition to the economy and migration, the focus is also on the war in Ukraine. Will Bundeswehr soldiers be among the peacekeepers if a ceasefire is reached? The answer may determine which party voters will vote for - in particular, young men of draft age.
• NATO will send about ten ships to the Baltic Sea at the end of the week, where they will remain until April - Yle. They will allegedly act as a "deterrent" by protecting critical installations, including undersea cables.
Jean-Marie Le Pen, co-founder of France's far-right National Rally party, has died at the age of 96.
The man led the party from 1972 to 2011. During this time, he ran for president five times, reaching the second round in 2002.
• Israel must prepare for possible war with Turkey, threat could 'surpass even Iran's challenge' - The Jerusalem Post.
The Israeli government's Nagel Committee says Ankara is seeking to restore its Ottoman-era influence, which could lead to conflict with Israel. In this, Ankara could join forces with forces in Syria.
• Our goal is the withdrawal of Russian peacekeepers and the reintegration of Transnistria, - Moldovan Prime Minister Dorin Recean. "Our goal is the reintegration of the country, which should begin with Russia withdrawing its troops, which will allow us to administer the region accordingly. The energy and humanitarian crisis in Transnistria is being driven by the Russian government, which wants to use this lever to put pressure on Ukraine."