EMEA Morning Briefing : Fed Increasingly Torn Over December Cut

MARKET WRAPS

Watch For:

Germany CPI, trading updates for ABN Amro, Harmony Gold Mining, Flutter Entertainment, Taylor Wimpey, RWE, Bayer

Opening Call:

European stock futures were mixed after Asia stocks also traded mixed. The dollar strengthened. Gold and oil weakened.

Equities:

European equity futures were mixed, after Big Tech stocks on Wall Street took a turn as the market's laggards a day after powering indexes higher, with investors shifting money to other parts of the market.

"It makes sense just to have some digestion of a really strong day yesterday," said Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management. "You have more of a defensive profile in terms of leadership."

In addition, the path for interest-rate cuts has been clouded by an emerging split within the central bank with little precedent during Federal Reserve Chair Jerome Powell's nearly eight-year tenure.

Fed officials are fractured over which poses the greater threat-persistent inflation or a sluggish labor market-and even a resumption of official economic data may not bridge the differences.

The rupture has complicated what looked like a workable plan less than two months ago, though investors think a rate cut at the Fed's next meeting is still more likely than not.

Forex:

The U.S. dollar edged higher after U.S. lawmakers moved closer to ending the longest-ever government shutdown, while private-sector data indicates further cooling in labor markets.

Wall Street braced for a large flow of data reports that went unpublished during the shutdown, although it may be difficult to understand whether the numbers will reflect the shutdown's impact or some lasting trend.

Meanwhile, ADP estimated U.S. private employers were shedding 11,250 jobs a week in the four weeks through Oct. 25.

Bonds:

Investors are expected to continue looking for alternatives to U.S. Treasurys, but they need to pick with care due to debt challenges in specific countries, said Insight Investment's Brendan Murphy.

A potentially developing fiscal crisis in France could justify an underweight position, the head of fixed income, North America said.

Similar political challenges in Japan probably warrant an underweight in short-dated Japanese bonds, although their longer-dated peers may offer some value, Murphy added.

"Global bonds will continue to offer welcome diversification to passive investors, but those able to take informed, active positions across the globe will find more pockets of value."

Energy:

Oil edged lower, potentially reflecting a technical correction after futures rose for a third straight session overnight.

Oil prices have been steadier so far this week after falling for two consecutive weeks, Fawad Razaqzada at forex.com said in an email.

"Sentiment towards oil has been quite bearish thanks to expectations that crude oil supply will exceed demand growth in the months ahead," the analyst said.

But countering this, we have seen China fill up its strategic reserves significantly," the analyst added.

Metals:

Gold fell despite prospects of Fed rate cuts, which would enhance the appeal of the non-interest-bearing precious metal.

The recent weaker U.S. economic data make a Fed rate cut in December more likely, Commerzbank Research's Carsten Fritsch said in a note.

"It is obviously expected that a significant slowdown in the U.S. economy will become apparent once data publication resumes," the commodity analyst added.

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Copper was flat as investors mulled possible tariffs on the base metal.

The U.S. Commerce Department is scheduled to decide next June on phased tariffs of 15%, then 30%, on refined copper, noted ANZ Research analysts.

There are also renewed concerns that arbitrage forces will pull metal into the U.S. ahead of these potential levy hikes, they noted.

TODAY'S TOP HEADLINES

Government Shutdown Nears End, Lifting Investors' Spirits-and Stocks

U.S. stocks climbed Tuesday after Congress moved closer to ending the government shutdown, promising investors less commercial disruption and better insight into the state of the economy.

A day after tech shares powered indexes higher, investors shifted money to other parts of the market, leading to sizable gains in the healthcare, energy and materials sectors. On Tuesday, Big Tech stocks took a turn as the market's laggards.

America's Chip Restrictions Are Biting in China

Beijing is taking an aggressive approach to help its technology giants squeezed by America's chip restrictions.

Shortages of advanced semiconductors are so acute that the government has begun intervening in how the output of China's largest contract chip maker, Semiconductor Manufacturing International, is distributed, according to people familiar with the matter. Chinese authorities are trying to give priority to the needs of tech conglomerate and national champion Huawei Technologies, which uses SMIC technology to make artificial-intelligence chips, the people said.

The Fed Is Increasingly Torn Over a December Rate Cut

The path for interest-rate cuts has been clouded by an emerging split within the central bank with little precedent during Federal Reserve Chair Jerome Powell's nearly eight-year tenure.

Officials are fractured over which poses the greater threat-persistent inflation or a sluggish labor market-and even a resumption of official economic data may not bridge the differences.

Microsoft, Google to Invest Over $16 Billion to Expand AI Infrastructure in Europe

Microsoft and Alphabet's Google said they would invest more than $16 billion to expand artificial-intelligence infrastructure in Europe, the latest spending commitment from U.S. tech giants in their bid to bolster AI capacity overseas.

Microsoft said more than $10 billion in funding would go toward a data-center hub in Sines in south-west Portugal, starting early next year. Microsoft is building out the facility with Nvidia, U.K. AI infrastructure startup Nscale Global Holdings and data-center builder Start Campus. The companies plan to deploy about 12,600 Nvidia GB300 graphics processing units at the site.

Meta AI Pioneer Has Discussed Leaving to Launch a Startup

Yann LeCun, the artificial-intelligence pioneer who led Meta Platforms's AI efforts for more than a decade, has talked to associates about leaving Meta and launching a startup, according to people familiar with his plans.

As part of those efforts, LeCun has recruited colleagues and spoken to investors, the people said. The startup would focus on developing so-called world models, a different path from the large language models that Meta is now pursuing as an avenue to superintelligence, or AI that is smarter than humans.

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Expected Major Events for Wednesday

06:00/FIN: Sep Balance of Payments

07:00/GER: Oct CPI

07:00/ROM: Oct CPI

07:00/TUR: Sep Balance of Payments

07:00/GER: Oct WPI

08:00/SVK: Sep Employment and average monthly wage in selected branches

08:00/SVK: Sep Turnover in selected branches of economy, incl Industry & Construction

09:00/ITA: Sep Industrial Production

09:00/EU: Oct Long term interest rates statistics

11:00/POR: Oct CPI

16:59/GER: Sep Balance of Payments

16:59/AUT: Nov OPEC Monthly Oil Market Report

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

11-12-25 0012ET