By Kevin Buckland

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

Kevin Buckland

The state of German politics should become clearer on

Thursday after Friedrich Merz, leader of the opposition

conservatives, gives a morning news conference to respond to

Chancellor Olaf Scholz's request for support to pass the budget

and boost military spending.

It comes a day after Scholz sacked Finance Minister

Christian Lindner of the Free Democrats (FDP) party after

long-running budget disputes, causing the three-party ruling

coalition to collapse and setting the stage for a snap election

early next year.

Political uncertainty in Europe's biggest economy couldn't

come at a much worse time for the bloc, which woke up on

Wednesday to the real possibility of a Donald Trump-led

Republican sweep, which could imminently usher in a threatened

10% blanket tariff on European goods.

Germany, whose main export market is the United States,

would be particularly vulnerable, especially as Trump has

floated much bigger levies on cars.

Equity markets reacted swiftly, with the pan-European STOXX

600 dropping 0.54% and Germany's DAX sliding

by 1.13%.

Politics will need to share the spotlight with monetary

policy on Thursday, with the U.S. Federal Reserve, Bank of

England, Sweden's Riksbank and Norway's central bank all

announcing rates decisions.

The Fed is still widely seen as cutting by a quarter point at

this meeting, but investors will be keen to hear what Chair

Jerome Powell says about the risks of higher inflation under

Trump's proposed tariffs and immigration policies.

The BoE is also set to cut by a quarter point, but again,

markets are looking for clues on the extent to which policy

makers expect the government's new budget to stoke price

pressures.

Most analysts expect the Riksbank to cut by a half point,

while the Norges Bank is seen on hold.

Plenty of European Central Bank officials are on speaking

duty today as well, including outspoken policy hawk Isabel

Schnabel, who advocated not rushing with further rate cuts in

recent comments.

ECB chief economist Philip Lane talks in Athens, and

Dutch central bank governor Klaas Knot will be interviewed by

students at the University of Amsterdam. ECB board member Frank

Elderson participates in a panel discussion in Brussels.

The health of the German economy will be on display with

trade and industrial output data today, while euro zone retail

sales figures are due along with UK Halifax house price data.

Key developments that could influence markets on Thursday:

-CDU leader Friedrich Merz news conference

-Policy decisions from Fed, BOE, Riksbank, Norges Bank

-German trade, industrial output data (all Sep)

-Euro zone retail sales (Sep)

-UK Halifax house prices (Oct)

(Writing by Kevin Buckland; Editing by Muralikumar

Anantharaman)