Here’s What to Watch in European Stocks This Morning

(Bloomberg) -- Good morning. Here’s what we’re watching ahead of the market open in Europe.

Not the Right Kind of Dovish

U.S. stocks dropped after the Federal Reserve hiked interest rates and Chairman Jerome Powell failed to quell concerns that tightening policy will hit economic growth. Powell defied calls from President Donald Trump to stop the cycle of rate increases, though he said he would be more cautious on the path for hikes in 2019. That wasn’t enough for stock or bond investors, with some analysts suggesting disappointment there was no signal that raising rates was over for now. Asian stocks dropped too and futures indicate Europe will follow.

Not Just the Fed

The Federal Reserve isn’t the only central bank game in town. For Europe, eyes will  turn first to Sweden, where the Riksbank is facing its toughest decision since the last time it raised interest rates in 2011. Economists are more split than normal on what the bank will do, so anticipate some volatility in the krona and Swedish stocks. Then over to London and the Bank of England. Rates are very likely to remain on hold and some pressure may have been eased after the slowdown in inflation to a 20-month low in November. Still, keep an eye on U.K. banks after Carney and Co.’s announcement.

Car Collaboration

German auto giants BMW AG and Daimler AG are considering working together on making key automotive components, a clear sign of where the industry is likely headed. After a year in which auto stocks have been battered by trade tensions across the globe but where car makers need to invest heavily in the next generation of electric and automated vehicles, cutting costs is going to become increasingly key. It’s possible this won’t be the last deal of this type to emerge, so the investor reaction to the partnership will be key.

Beer and Weed

After multiple beverage companies had started eyeing the booming pot industry, the biggest brewer has now entered the fray. Anheuser-Busch InBev SA, maker of Budweiser, has signed a research partnership with Tilray Inc., one of the early leaders in the nascent Canadian marijuana industry. The pair will investigate making non-alcoholic, cannabis-infused drinks ahead of the legalization of marijuana edibles and beverages in Canada next year. AB InBev is contending with a high debt pile and shifting beer tastes around the world, so this new direction could be taken well.

Thrift Shop

After the devastation wrought on the retail sector by Asos Plc this week, U.K. retail sales will be more closely watched than normal. An indication of how much appetite Brexit-fatigued Brits have for spending their money on local high streets and online could either provide some salve that the problems raised this week are company specific or increase jitters about the state of the U.K. consumer sector.

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