Key Takeaways
- The European Commission remains committed to signing the EU-Mercosur trade agreement by the end of 2025, despite significant opposition from France and other member states concerned about agricultural impacts.
- The EU has imposed new sanctions on individuals, including Murtaza Lakhani and Etibar Eyyub, for their alleged involvement in the illicit Russia oil trade, targeting those using "shadow fleet" tactics to circumvent price caps.
- Market participants are re-evaluating the potential influence of likely Federal Reserve Chair nominee Kevin Hassett, with doubts about the credibility of his dovish stance contributing to 2026 rate cuts being priced out.
EU-Mercosur Trade Deal Nears Finish Line Amidst Opposition
The European Commission is pushing forward with its plan to sign the long-negotiated EU-Mercosur trade agreement by the close of 2025, with European Commission chief Ursula von der Leyen expected in Brazil on December 20 for the signing. This landmark deal, two decades in the making, aims to establish the world's largest free-trade area, opening a market of 270 million people to European companies and potentially saving exporters over €4 billion annually through duty cuts on goods like car parts and machinery.
However, the agreement faces substantial hurdles, primarily from France, which has voiced "frontal opposition" and requested a delay, citing concerns over the impact on its agricultural sector. Other nations, including Poland, Ireland, Hungary, the Netherlands, and Austria, also oppose the pact, fearing unfair competition from South American imports. Despite this, the Commission asserts the deal's crucial importance "economically, diplomatically and geopolitically". While powerhouse countries like Germany, Spain, and the Nordic nations are strong proponents, the final approval from EU member states requires a weighted majority, and the European Parliament's vote, expected in early 2026, is anticipated to be close.
EU Sanctions Target Russia's "Shadow Fleet" Oil Trade
In a move to tighten restrictions on Russia's oil trade, the European Union has imposed a new round of sanctions, blacklisting several individuals for their roles in circumventing existing price caps. Among those targeted are Pakistani businessman Murtaza Ali Lakhani and Etibar Eyyub, accused of controlling vessels that transport Russian crude and petroleum products using "irregular and high-risk maritime transport practices". These practices reportedly include operating ships without proper insurance and disabling marine tracking devices.
The sanctions, decided by EU ambassadors on December 10, are part of a broader effort to hit Russia's global oil business, particularly as it trades below the G7-imposed oil price cap of $47.6 per barrel. The measures also extend to a "shadow fleet" of tankers, with 43 additional vessels expected to be added to a list of over 500 ships already barred from receiving services in EU ports. The move underscores the EU's ongoing commitment to disrupting Russia's revenue streams following its invasion of Ukraine.
Markets Rethink Hassett's Fed Influence, 2026 Rate Cuts
Speculation surrounding the next Federal Reserve Chair continues to shape market expectations, with Kevin Hassett emerging as the likely nominee to succeed Jerome Powell when his term concludes in May 2026. Betting markets, such as Kalshi and Polymarket, show Hassett with odds as high as 85%, following hints from President Trump. Hassett is widely considered a dovish candidate, having previously stated he would advocate for "cutting rates right now" and even suggesting a 50-basis-point cut.
Despite Hassett's perceived dovish stance, market sentiment suggests that investors may be overestimating his individual influence on monetary policy. The Federal Open Market Committee (FOMC), comprising multiple members, ultimately sets interest rates, meaning the Chair is only one vote. This skepticism, coupled with concerns that Hassett's alignment with Trump's economic agenda could undermine the Fed's independence, is contributing to 2026 rate cuts being priced out of the market. Investors are now balancing the short-term benefits of potentially accommodative policy against the long-term risks of a destabilized financial landscape and challenges to the Fed's institutional credibility.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.