The European Central Bank (ECB) cut interest rates again at last week’s monetary policy meeting, the fourth such move in 2024[1]. The decision to drop its base rate by 25 basis points (bps) to 3.0% reflected lower economic growth projections over the coming years as well as a more mundane expected inflation backdrop. The Bank now expects to see GDP growth of just +1.1% in 2025 and +1.4% in 2026, down from previous forecasts of +1.3% and +1.5% respectively. As for inflation, the ECB remains confident that it will settle around its target 2.0% level over the coming years[2]. Policy rates now stand at their lowest since March 2023 and the door remains firmly open for further easing over the first half of next year. The MSCI Europe ex UK index concluded the week -0.9% lower (local currency).
Moving to the US, the NASDAQ maintained its strong upwards momentum after a +1.4% weekly rise (in dollars) took the index to yet another record level having moved above the 20,000 mark for the first time. The S&P 500 meanwhile declined by -0.6%. Coming back to Europe, the FTSE 100 and FTSE 250 fell by -0.1% and -0.8% respectively, partially reflecting a weaker than expected monthly GDP figure for October. Regarding Asia, the Nikkei 225 in Japan advanced by +1.0% (in yen) with currency weakness on growing expectations that the Bank of Japan (BoJ) may delay hiking interest rates at this week’s policy meeting somewhat supportive[3]. Chinese equities retreated, the Shanghai Composite shedding -0.4% (local currency) after additional policy announcements from the Government underwhelmed investors.
In commodity markets, oil bucked its recent downwards trend to record a weekly gain. Brent crude rose by +2.7% to $74.16 a barrel on growing expectations of additional sanctions on both Iran and Russia, two major oil producing nations. Gold climbed by +1.0% to $2,663 an ounce having briefly climbed above the $2,700 mark which was the highest level it had reached since the US presidential election.
Week Ahead
| Day | Country | Measure | Period | Forecast | Previous |
| Monday | Europe | Flash Composite PMI | December | 48.20 | 48.30 |
| UK | Flash Composite PMI | December | 50.70 | 50.50 | |
| Tuesday | UK | Average Wages YoY | November | 4.60% | 4.30% |
| UK | Unemployment Rate | November | 4.30% | 4.30% | |
| US | Retail Sales YoY | November | - | 2.90% | |
| US | Industrial Production YoY | November | - | -0.30% | |
| Wednesday | Europe | Final CPI Inflation YoY | November | 2.30% | 2.30% |
| UK | CPI Inflation YoY | November | 2.60% | 2.30% | |
| US | Federal Reserve Policy Meeting | December | - | - | |
| US | Building Permits Seasonally Annually Adjusted Units | November | 1.43m | 1.42m | |
| US | Housing Starts Seasonally Annually Adjusted Units | November | 1.34m | 1.31m | |
| Thursday | Japan | Nationwide Core CPI Inflation YoY | November | 2.60% | 2.30% |
| UK | Bank of England Policy Meeting | December | - | - | |
| Friday | UK | Retail Sales YoY | November | 0.10% | 2.40% |
Source: Workspace DataStream, 16/12/24
[1] ECB – Monetary Policy Statement 12/12/2024
[2] ING – “Another rate cut from the ECB and the next stop is ‘neutral’, Carsten Brzeski, 12/12/2024
[3] T. Rowe Price – Global Markets Weekly Update 13/12/2024
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