A look at the day ahead in European and global markets from

Wayne Cole.

It's been a muted session in Asia with investors still

nursing a grudge over China's latest policy package, which was

heavy on debt swapping but again light on direct stimulus.

Analysts assume Beijing wants to keep its powder dry should

President-elect Trump really go ahead with his proposed 60%

tariffs, but that just extends the wait for a few weeks or

months.

The need for action was underlined by inflation data on the

weekend that showed Chinese consumer prices grew just 0.3% in

the year to October, while producer prices dropped 2.9% y/y as

China continued to export deflation.

Eyes are now on retail sales and industrial output this

Friday for any hint that Beijing's policies are gaining

traction. A 1.3% fall in Chinese blue chips suggested hopes were

not particularly high.

Over in Japan, investors are waiting to see if Prime

Minister Ishiba will still be in power after a parliamentary

vote today. The general assumption is that he will survive,

though that leaves him with the tricky task of running a

minority government.

An added twist came when Yuichiro Tamaki, the head of a

Japanese opposition party that has emerged as a potential king

maker in parliament, said a tabloid report about his

extra-marital affair with a model was "basically true".

Such political uncertainty complicates life for the Bank of

Japan as it ponders whether to hike rates next month. Opinions

from its last meeting showed some members were already wary of

market volatility, and that was before Trump's win.

At the same time, markets see less scope for further

aggressive easing by the Federal Reserve given that Trump's

stated policies, if followed in full, would likely put upward

pressure on inflation and bond yields.

The implied chance of a December rate cut has come back to

66%, from atop 80% before the election, and a move in January is

now seen as an outside bet. JPMorgan, for one, sees the Fed

easing cycle terminating at 3.5%, rather than 3.0%.

U.S. consumer prices are due Wednesday and a core reading

above the 0.3% forecast would be a further blow to hopes for a

December easing.

All of which helped to nudge the dollar up 0.5% on the yen

to 153.40, while the euro stayed stuck at $1.0725.

The political outlook was no clearer in Europe as German

Chancellor Scholz said he would be willing to bring forward a

vote of confidence in parliament to before Christmas, which

would pave the way for snap elections.

Key developments that could influence markets on Monday:

- Speech by ECB board member Elizabeth McCaul