The European Central Bank (ECB) could move to slash interest rates to “emergency levels” to mitigate the impact of a US-led trade war, the Financial Times reports. These potential cuts would come just two years after the ECB ended eight years of negative rates aimed at combating post-pandemic inflation.

The trade war in a nutshell: Donald Trump’s “America First” trade policies are shaking up global markets. Trump floated a 60% tariff on Chinese goods — and later, promised an additional 10% tariff — and a 10% tariff on imports from other countries, and promised separate tariffs on Canadian and Mexican goods.

The EUR’s not loving this: Since late September, the EUR has dropped more than 5%, now trading around USD 1.06. Investors are already pricing in potential ECB moves, with swaps markets predicting the deposit rate could fall to 1.75% from 3.25%. If things get worse, Pimco’s chief investment officer for global fixed income Andrew Balls expects even steeper cuts, warning of a dive into “emergency levels of policy rates.”

Across the Channel: The UK isn’t immune to trade war effects. Investors anticipate the Bank of England will slash rates by three-quarters of a point by the end of 2025, bringing interest rates to 4%.

US financial moderation isn’t completely off the table: Trump’s nomination of hedge fund manager Scott Bessent as Treasury secretary could signal a shift toward more measured economic policies. Bessent has advocated for gradual implementation of policy changes, which has eased some market concerns. This perception of moderation has contributed to a slight retreat in the USD from its post-election high.

MEANWHILE- A positive US inflation report showing no significant movement is the latest economic data to indicate a rate cut from the Federal Reserve is likely when it meets next week, Reuters reports.

MARKETS THIS MORNING-

Asian markets are mostly in the green, with Japan’s Nikkei, South Korea’s Kospi, and Hong Kong’s Hang Seng all up, tracking a rally on Wall Street that saw the Nasdaq close at a record high. Futures, however, slipped slightly following the news.

TASI

12,149

-0.4% (YTD: +1.5%)

MSCI Tadawul 30

1,526

-0.4% (YTD: -1.6%)

NomuC

31,279

-0.9% (YTD: +27.5%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

5.25% repo

4.75% reverse repo

EGX30

30,739

+0.4% (YTD: +23.5%)

ADX

9,271

+0.2% (YTD: -3.2%)

DFM

4,795

0.0% (YTD: +18.1%)

S&P 500

6084

+0.8% (YTD: +27.6%)

FTSE 100

8302

+0.3% (YTD: +7.4%)

Euro Stoxx 50

4959

+0.2% (YTD: +9.7%)

Brent crude

USD 73.52

+1.8%

Natural gas (Nymex)

USD 3.35

-0.8%

Gold

USD 2753.70

+1.3%

BTC

USD 101,784.30

+5.1% (YTD: +138.8%)

THE CLOSING BELL: TADAWUL-

The TASI fell 0.4% yesterday on turnover of SAR 6.1 bn. The index is up 1.5% YTD.

In the green: Go Telecom (+3.4%), Sumou (+3.3%), and Dallah Health (+3.3%).

In the red: Jahez (-7.2%), Anaam Holding (-7.0%), and Banan (-4.9%).

THE CLOSING BELL: NOMU-

The NomuC fell 0.9% yesterday on turnover of SAR 66.1 mn. The index is up 27.5% YTD.

In the green: Enma AlRawabi (+12.2%), Molan (+11.0%), and Purity (+8.6%).

In the red: Leen Alkhair (-9.8%), AlWasail Industrial (-7.3%), and Gas (-7.1%)

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