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Financial Pulse: ECB Rate Cuts, Wall St Reactions, and Economic Outlook

Yesterday, the ECB's decision to cut rates by -25bp, bringing them to 2.75/2.90%, was largely uneventful. It met expectations and reiterated the message that future adjustments will hinge on incoming data—definitely not exciting!

In the U.S., the 4Q GDP reported a growth of +2.3%, which, although considered weak by its standards, was somewhat favorable for Wall St. Meanwhile, the Eurozone's GDP growth remained unchanged at +0.9%, falling short of the +1% forecast. Notably, Germany reported a decline of -0.2%, while France (+0.7%) and Italy (+0.5%) also underperformed. In contrast, Portugal (+2.7%) and Spain (+3.5%) excelled, reinforcing the belief that "SPA, PT, and IRL are the new GER."

Corporate results were generally positive, aside from UPS, which saw a -14% drop following disappointing guidance and a significant decline in business with Amazon. The 4Q EPS for the S&P500 is currently at +10%, exceeding the expected +7.5%. After the New York market closed, Visa (+1.2%), Apple (+3%), and Intel (+3.7%) all reported better-than-expected results. Samsung, however, announced a weak 2025 guidance, leading to a -2.2% decrease in the open market in Korea. Prior to this, the SOX index had risen by +2.3%, marking its first significant increase since the DeepSeek incident.

Looking ahead to Today's session, the tone appears optimistic. Key economic indicators will be released later in the European session: at 14h, German inflation is expected to remain stable but high at +2.6%, followed by the U.S. Consumption Deflator (PCE) at 14:30h, projected to rebound to +2.6% from +2.4%. However, this may cause some weakening in the latter part of the session.

Attention will soon shift to next week's U.S. employment data, which may show weakness due to the California fires, with Payrolls expected at +150k compared to +256k in December (to be released on Friday). Additionally, Eurozone inflation could rebound on Monday to +2.5% from +2.4%, and the Bank of England (BoE) is expected to cut rates on Thursday by -25bp, targeting 4.50%.

Wall St could see a slight rebound (possibly +0.3% to +0.5%), but there’s a tendency for this momentum to wane as the session progresses, potentially leading to a flattening trend. This could be influenced by the rise in bond yields due to German inflation and the U.S. PCE, while Europe remains relatively weaker.
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