Short overview of 5 things on November 17

ECB Rate Hike

European Central Bank policy makers may slow down interest-rate hiking with only a 50 basis-point increase next month, according to people with knowledge of the matter. Initial discussions suggest a lack of momentum for another 75 basis-point move at present. Barring another surprise surge in inflation, the consensus might well favor the less aggressive step. Among reasons cited are mounting recession risks, the possibility that consumer-price pressures will weaken and the prospect that a half-point move in the deposit rate to 2% will reach close to a so-called neutral level that no longer stimulates the economy.

Task for Hunt

UK Chancellor of the Exchequer Jeremy Hunt faces a clear yet far from straightforward task Thursday: reassure markets he can stabilize public finances, but without inflicting devastating damage on public services. He is expected to set out plans achieving the aim of lowering Britain’s debt as a share of the economy by 2027-28. If he gets it wrong during his statement to the House of Commons, Hunt risks putting the Conservatives on course for a seismic loss at the next general election, which is due in about two years at the latest. Britons facing a record squeeze on living standards and seeing the National Health Service in crisis would be unlikely to forgive the Tories, who have been in power since 2010.

Tencent’s Stake Cut 

Tencent’s plan to dole out $20 billion of stock in meal delivery giant Meituan triggered a broad selloff of Chinese internet stocks on Thursday as investors fear more divestments by the online gaming company are in the offing. Tencent pledged Wednesday to distribute the majority of its Meituan shares to investors, ramping up plans to reduce its extensive holdings across the world’s largest internet industry. The decision marks a milestone in Tencent’s evolution from a sprawling internet empire with investments across much of China’s tech sphere to a more focused gaming and social media operator. 

Errant Missile

The White House said it hadn’t seen any evidence so far to contradict Polish President Andrzej Duda’s preliminary assessment that an errant Ukrainian air defense missile was behind a strike on a village near the country’s border. Still, the White House emphasized that Russia was ultimately to blame. The missile blast sparked worries about a significant escalation of Russia’s war in Ukraine, now in its ninth month. But those concerns eased after leaders from NATO and Poland said there was no indication that the blast, which killed two people late Tuesday, was an intentional Russian attack.

Coming Up…

European equity futures may face a rough open after declines in Asia and the US following remarks from Fed officials had investors recalibrating bets on the central bank’s course ahead. Investors will have more clues to assess as a flurry of BOE and Fed policymakers speak today. UK Chancellor Jeremy Hunt is expected to unveil measures. Expected data include Dutch unemployment and Italy trade. Applied Materials reports amid concerns over weakening demand trends for the semiconductor capital equipment company. Siemens and Bouygues also serve up results.

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(Source: Bloomberg, Nov. 17-2022)

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