European stock futures dipped on Friday, tracking declines across Asia, as investors reacted to a lackluster readout from China’s economic conference and growing concerns over next week’s Federal Reserve meeting. Risk appetite also waned as traders recalibrated their expectations for economic policy in the coming weeks.
Futures for the Euro Stoxx 50 slid 0.2%, and global stock indexes were on track for their worst week in nearly a month. The S&P 500 futures edged up slightly, following a downturn on Wall Street the previous day triggered by disappointing US jobless claims and producer price data.
The largest drag came from Asia, where Chinese and Hong Kong markets led regional declines. The Central Economic Work Conference (CEWC) wrapped up without providing concrete policy measures to stimulate fiscal growth, despite pledges to boost consumption. While the Chinese government hinted at rate cuts and reduced reserve requirements for banks, investors were left wanting more detailed fiscal measures. This uncertainty caused the Chinese 10-year government bond yield to dip below 1.8%, marking a historic low.
Jason Chan, senior investment strategist at Bank of East Asia, noted that the market had hoped for clearer stimulus actions, particularly concerning consumption and property sector support. “The turnout was a bit disappointing,” Chan said, suggesting that more detailed fiscal policies might not emerge until the first quarter of next year.
Meanwhile, the dollar index held steady, maintaining the momentum gained over the past five days, buoyed by higher Treasury yields.
In Japan, corporate confidence remained strong, consistent with the Bank of Japan’s outlook ahead of its own policy meeting next week. Analysts are divided on whether the central bank will raise interest rates amid an improving economic environment.
South Korea’s equity markets saw a brief recovery after the previous week’s turmoil, which had been sparked by President Yoon Suk Yeol’s failed attempt to impose martial law. A report in the Munhwa Ilbo newspaper revealed that over eight members of South Korea’s ruling party now support impeachment proceedings against the president.
In the Australian market, shares of DigiCo Infrastructure REIT, a data center operator, fell sharply by 10% on its debut in Sydney, following concerns over its high valuation. The company raised A$2 billion ($1.3 billion) through the initial public offering.
India’s inflation data provided some relief to the new central bank governor, as prices eased last month, signaling potential for more favorable monetary policy conditions in the future.
The European Central Bank (ECB) delivered a widely expected 25 basis point rate cut, signaling that further reductions may follow in future meetings. Similarly, the Swiss National Bank surprised markets with a larger-than-expected 50 basis point cut.
In the US, economic data released Thursday painted a mixed picture. Jobless claims exceeded expectations, and while producer price inflation showed signs of cooling, a sharp rise in egg prices pushed wholesale inflation higher in November. Despite these signals, markets largely maintain expectations for a 25 basis point rate cut from the Federal Reserve next week, with swaps pricing in a 95% chance of the move.
On the commodities front, oil prices were poised to finish the week higher, supported by growing speculation that the US may tighten sanctions on Iran and Russia. This potential supply constraint balanced out ongoing fears of a global oil glut in the coming year.
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