Morning Bid Europe

A look at the day ahead in European and global markets

By Rae Wee, Correspondent

Live market data showing changes in the US 10-Year Bond Yield, S&P 500 Futures, STOXX Europe 600 and Brent crude oil. For more European market news click here: https://www.reuters.com/markets/europe/.

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(Yesterday’s Morning Bid Europe newsletter incorrectly stated that the next U.S. PCE deflator would be released on Thursday; the November PCE will be released on Friday.)

Asian shares stalled on Thursday after a late sharp selloff on Wall Street that left traders scratching their heads.

Perhaps investors are shutting up shop for the year, or taking some of their profits off the table before Friday’s U.S. inflation data. The Nasdaq 100 is up 51% for the year, despite Wednesday’s 1.5% slide.

Today’s Market News

A trader works at Frankfurt’s stock exchange in Frankfurt, Germany, March 12, 2020. REUTERS/Ralph Orlowski

Red Sea security

Oil slipped a fraction, but the market remains skittish as shippers scramble to avoid the Red Sea after a wave of attacks. Washington has launched an initiative to improve security at the maritime bottleneck but few practical details have emerged so far.

Toyota Motor shares slumped as Japan’s transport ministry inspected a subsidiary over safety concerns dating back decades.

The juggernaut of market euphoria from last week’s dovish shift in the Federal Reserve outlook, meanwhile, rolled on in the rates market, bolstered by a rapid cooling of British inflation.

The benchmark 10-year U.S. Treasury yield was last at 3.8622%, near the previous session’s five-month low of 3.8470% and down 116 basis points from October’s high.

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Market euphoria

The two-year yield , which typically reflects near-term interest rate expectations, was similarly pinned near a seven-month trough. Two-year gilt yields dived more than 18 bps on Wednesday after data showed a far steeper decline in British inflation last month than anticipated.

Fed funds futures point to more than 150 basis points of cuts next year, and similar expectations are now emerging around the Bank of England, with more than 100 bps of cuts similarly priced in for that central bank in 2024.

The last big piece of data before Christmas is Friday’s U.S. core PCE price index reading – the Fed’s preferred measure of underlying inflation, where another slowdown is expected.

Graphics are produced by Reuters.

Key developments that could influence markets on Thursday:

U.S. weekly jobless claims
UK CBI distributive trades (December)

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.