European markets head for mixed open as traders focus on Fed meeting this week

German bond yields were slightly lower ahead of a vote of confidence expected to take place in the German parliament on Monday.

The 10-year and 2-year yields were both two basis points lower at midday in London.

Chancellor Olaf Scholz is expected to call on the German parliament during the session to declare it has no confidence in him in order for snap polls to take place in February. His governing coalition collapsed last month.

Investors are also still taking in last week’s interest rate cut and messaging from the European Central Bank. While ECB officials struck their most dovish tone in the current cycle, markets pulled back their 2025 rate cut bets slightly on Monday. They are now fully pricing in a reduction in the key rate to 1.75% from the current 3% by October, rather than by September previously.

French bond yields were flat after the country’s credit rating was downgraded by credit rating agency Moody’s.

— Jenni Reid

International Distribution Services, parent company of the U.K.’s main postal service Royal Mail, is set to be sold to Czech billionaire Daniel Kretinsky’s EP Group after the U.K. government approved the £3.57 billion ($4.51 billion) deal.

The companies had agreed to a cash offer takeover in May.

The U.K. government said Monday it had reached a legally binding agreement with EP Group to grant it a “Golden Share,” which means that the Royal Mail headquarters cannot be moved abroad, and the company cannot change where it pays its taxes without the British government approval “with very limited exception,” Business Secretary Jonathan Reynolds said.

EP Group will also have to maintain a “Universal Service Obligation,” requiring Royal Mail to charge a uniform price to deliver letters and parcels to every U.K. address over six and five days a week, respectively.

Kretinsky said in a statement that EP Group was a “long term and committed investor with a mission to make Royal Mail a successful modern postal operator with high quality service and products for its customers.”

Royal Mail has reported persistent annual losses since it was privatized a decade ago and has been rapped by regulators for failing to meet delivery targets.

EP Group has reached agreements in principle with unions representing Royal Mail workers. Union Unite on Monday said that the agreement “opens the door to a better future for Royal Mail and its workforce.”

— Jenni Reid

Shares in French broadcaster Canal+ were trading around 243 British pence ($3.07) at 10:13 a.m. London time, down 15.7% from the session’s open marking their London stock market debut.

Media holding company Vivendi’s shareholders last week agreed to spin off Canal+, a pay TV and production company known for its live sports broadcasting and Studiocanal, which makes the Paddington film franchise.

“Vivendi was suffering from a conglomerate discount. So when you looked at the value of Vivendi, it was less than 10 billion euros [$10.52 billion], and the estimate of the sum of the parts was much greater than that. So to unlock that value potential of each of these assets, hence the split,” Maxime Saada, CEO of Canal+, told CNBC’s “Squawk Box Europe” Monday.

On the share price moves, AJ Bell Investment Director Russ Mould said: “Volatility was expected as certain investment funds which held Vivendi may be restricted to French-listed stocks and so they are forced sellers of Canal+. It’s common for demerged stocks to experience share price wobbles in the first few days as a standalone listed company as investors who inherited the stock decide if they want to stay or go.”

“Vivendi needs to prove to investors that it was right to break up the business, based on the principle that its component parts could, in time, be worth more individually than together.”

Canal+ share price.

European stock markets opened mixed on Monday, with the Stoxx 600 index moving between slight losses and gains in early deals.

The index closed 0.77% lower last week, ending a run of three weeks in the green.

Stoxx 600 index.

Confidence among U.K. manufacturers fell to its lowest level for a year in the fourth quarter amid intensifying cost pressures, according to a survey from trade group Make UK and advisory BDO.

Output and orders “remain positive” but sentiment “darkened markedly” from the third quarter, a period in which business confidence had jumped because of optimism about the new Labour government, Make UK and BDO found.

Since then, the announcement of Labour’s flagship budget in late October is set to “add substantial extra business costs to those that companies were already facing,” the survey authors wrote.

Among the key measures in the budget was an increase to the National Insurance payroll tax paid by employers, a move which has already sparked concern among wider British businesses. That brought the improvement in manufacturing confidence to a “shuddering halt,” said Make UK senior economist, Fhaheen Khan.

The survey found 70% of manufacturers have seen their costs already increase by up to a fifth in the last year.

“An overlay of a turbulent geo-political landscape and talk of potential tariffs adds to future uncertainty in the short to medium term,” said Richard Austin, head of manufacturing at BDO.

— Jenni Reid

The Federal Reserve is widely expected to cut rates by 0.25 percentage points on Wednesday, but traders will be paying close attention to the updated policy statement and Fed Chair Jerome Powell’s press conference for clues about what comes next.

As of Sunday night, pricing in the Fed funds futures market pointed to a 95.3% likelihood of a rate cut this week, according to the CME FedWatch tool. However, traders are also betting that the Fed will pause its rate cutting cycle in January.

That could be a welcome move for investors who are still uneasy with the path of inflation.

Logan Moulton, portfolio manager at Intelligent Wealth Solutions, said inflation appears to be “stickier” than Fed officials previously thought and that there are risks to upward pressure on inflation when the Trump administration takes office.

“Heading into 2025, I think they should at least pause,” Moulton said.

— Jesse Pound

Morgan Stanley has identified the companies that are set to benefit from Amazon‘s launch of its new artificial intelligence chip.

The Big Tech giant’s cloud computing division Amazon Web Services launched its Trainium 2 AI chip earlier this month. AWS hopes these chips will help it diversify away from Nvidia, its primary AI chip supplier.

The investment bank said seven Taiwanese companies are set to benefit from AWS’s new Trainium 2 AI chip.

CNBC Pro subscribers can read more here.

— Ganesh Rao

European markets are expected to open in mixed territory Monday.

The U.K.’s FTSE 100 index is expected to open 4 points lower at 8,292, Germany’s DAX up 36 points at 20,443, France’s CAC down 1 point at 7,401 and Italy’s FTSE MIB up 16 points at 34,876, according to data from IG.

Data releases include flash services and manufacturing purchasing managers’ index data from France and Germany.

— Holly Ellyatt