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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.
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TASI |
12,149 |
-0.4% (YTD: +1.5%) |
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MSCI Tadawul 30 |
1,526 |
-0.4% (YTD: -1.6%) |
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NomuC |
31,279 |
-0.9% (YTD: +27.5%) |
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USD : SAR (SAMA) |
USD 3.75 Sell |
USD 3.75 Buy |
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Interest rates |
5.25% repo |
4.75% reverse repo |
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EGX30 |
30,739 |
+0.4% (YTD: +23.5%) |
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ADX |
9,271 |
+0.2% (YTD: -3.2%) |
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DFM |
4,795 |
0.0% (YTD: +18.1%) |
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S&P 500 |
6084 |
+0.8% (YTD: +27.6%) |
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FTSE 100 |
8302 |
+0.3% (YTD: +7.4%) |
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Euro Stoxx 50 |
4959 |
+0.2% (YTD: +9.7%) |
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Brent crude |
USD 73.52 |
+1.8% |
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Natural gas (Nymex) |
USD 3.35 |
-0.8% |
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Gold |
USD 2753.70 |
+1.3% |
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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%)
