Asia-Pacific Markets
APAC stocks exhibited mixed performance early in the session but largely ended lower as geopolitical tensions and domestic concerns weighed on sentiment. South Korean equities underperformed after the impeachment motion against President Yoon failed due to a boycott by ruling party MPs, deepening political uncertainty.
In Japan, the Nikkei 225 showed modest gains, buoyed by upward revisions to Q3 GDP data, while the ASX 200 in Australia traded flat for most of the session before edging lower, driven by a pullback in base metals and caution ahead of the RBA rate decision. Chinese markets also faced pressure, with the Hang Seng and Shanghai Composite turning negative. Subdued property sector sentiment and weak consumer inflation data (CPI at 0.2% YoY, below expectations) added to the cautious tone.
US equity futures remained flat following strong jobs data last Friday. Markets now await Wednesday's US CPI report to solidify expectations for a 25 basis point rate cut by the Federal Reserve next week.
European Markets
European equity futures indicated a subdued open, with Euro Stoxx 50 futures down 0.2% following Friday's 0.5% gain in cash markets. Attention in Europe remains on geopolitical developments and economic data, with a meeting of Eurozone finance ministers on the agenda.
US Markets
US stocks ended Friday mostly higher, with the S&P 500 and Nasdaq achieving fresh record highs, marking three consecutive weeks of gains. The Dow Jones closed slightly lower. Investors focused on the positive implications of November’s jobs report, which reinforced expectations for a rate cut at the Federal Reserve’s December 18 meeting.
In his weekend interview, President-elect Trump addressed tariffs, NATO, and the Federal Reserve:
- Trump acknowledged that tariffs might increase costs for Americans but maintained their necessity.
- He emphasized a willingness to reconsider NATO membership and reiterated no immediate plans to replace Federal Reserve Chair Jerome Powell.
Key Federal Reserve speakers, including Goolsbee and Daly, provided insights on monetary policy. Goolsbee advocated a gradual pace of rate cuts to reach a neutral position by 2025, while Daly noted a balanced labor market.
Geopolitical Developments
The overthrow of Bashar al-Assad's regime in Syria marked a significant shift in Middle Eastern geopolitics. Syrian rebels captured Damascus, leading to Assad's exile in Moscow. Israel extended its ground operations beyond the Golan Heights, advancing into Syrian territory, marking its most overt incursion since the 1973 October War. Israeli officials signaled plans to expand the buffer zone in Syria, while Hezbollah forces withdrew from the region.
The US conducted extensive airstrikes on Islamic State targets in central Syria and is engaging allies to manage the transitional period. President Biden pledged support to neighboring countries, emphasizing a stable transition. Meanwhile, heightened Chinese military activity around Taiwan and the Western Pacific further escalated tensions, with nearly 90 naval and coast guard ships deployed near Taiwan and Southern Japanese islands.
Commodities
- Crude Oil: Prices firmed slightly amid weekend geopolitical turmoil in Syria. Gains were capped by Saudi Arabia's decision to lower January Official Selling Prices (OSPs) for Asia and Northwest Europe.
- Gold: Spot gold rose briefly following reports of the PBoC resuming gold purchases in November, ending a six-month hiatus. However, further gains were limited by the strengthening dollar.
- Copper: Prices initially gained on better-than-expected Chinese PPI data but later turned negative as the dollar rallied.
Currencies
The US Dollar (DXY) extended gains, surpassing the 106.00 mark, supported by expectations of further Fed rate cuts.
- EUR/USD dipped below 1.0550 as traders focused on Thursday’s ECB meeting, where a 25bps deposit rate cut is expected.
- GBP/USD faced resistance at 1.2750 ahead of commentary from BoE Deputy Governor Ramsden on financial stability.
- USD/JPY traded near 150.00, showing volatility amid geopolitical concerns and Japanese GDP revisions.
- AUD/USD and NZD/USD tilted lower after early gains, dragged by a stronger dollar and cautious sentiment ahead of the RBA decision.
Cryptocurrency
Bitcoin surged past the $100,000 mark for the first time, buoyed by optimism after US President-elect Trump appointed crypto advocate Paul Atkins as SEC Chair.
Corporate Highlights
- Nvidia Probe: China initiated an antitrust investigation into Nvidia’s 2020 acquisition of Mellanox. Nvidia shares dropped 2% in premarket trading, though the stock has surged nearly 200% this year.
- TikTok Ban: A U.S. federal appeals court upheld a ban on TikTok, set to take effect on January 19, 2025, citing national security concerns linked to its China-based parent company, ByteDance. TikTok plans to appeal to the Supreme Court.
- Omnicom-Interpublic Deal: Omnicom is in advanced talks to acquire Interpublic Group in an all-stock deal valued at $13–$14 billion, potentially creating the world’s largest advertising firm.
- Volkswagen Strikes: Strikes have escalated at nine Volkswagen plants in Germany, with union leaders warning of unprecedented actions in 2025 unless an agreement is reached.
- Google Developments:
- CEO Sundar Pichai announced major AI-driven updates for Google Search in 2025, focusing on complex queries and capabilities like Gemini.
- Google filed a lawsuit against the CFPB, challenging its decision to place Google Payments under federal supervision.
- Macy’s Activist Push: Barington Capital is urging Macy’s to form a $5–$9 billion real estate subsidiary, divest assets like Bloomingdale’s, and execute $2–$3 billion in stock buybacks.
- Dow Inc. Asset Sale: Dow will sell a 40% stake in its U.S. Gulf Coast infrastructure assets to Macquarie Asset Management for $2.4 billion, with the potential for further proceeds if Macquarie increases its stake.
- Arthur J. Gallagher Acquisition: AJG will acquire AssuredPartners for $13.45 billion in a deal expected to boost earnings by 10–12%.
- Xiaomi SUV Launch: Xiaomi announced plans to launch its YU7 SUV in mid-2025, continuing its expansion into the EV market.
- CFPB Lawsuit Against Comerica Bank: The CFPB alleges Comerica mishandled the Direct Express federal benefits program, disconnecting millions of calls and improperly charging ATM fees.
Economic Highlights
- US Inflation: Consumer Price Index data later this week is expected to show a 2.7% YoY increase, ahead of the Federal Reserve’s policy meeting. Stronger-than-expected data could shape the Fed's interest rate decisions.
- UK Business Confidence: Business confidence in the UK dropped to its lowest level since January 2023, with concerns over rising costs, inflation, and declining job vacancies.
- Chinese Inflation: China’s consumer inflation hit a 5-month low of 0.2% YoY in November, reflecting weak domestic demand despite stimulus efforts. Producer prices declined for the 26th consecutive month.
- Chinese Fiscal Policy: The Politburo announced plans for "appropriately loose" monetary policy and proactive fiscal measures in 2025 to counter U.S. tariffs and stabilize the housing and stock markets.
World News
- Syria: Syrian rebels overthrew Bashar al-Assad’s regime after a brief offensive, ending 50 years of Assad family rule. Assad has fled to Moscow with his family.
- France: Marine Le Pen’s National Rally lost a parliamentary by-election just days after orchestrating the French government’s collapse. President Macron is working to form a new government amid ongoing political uncertainty.
- South Korea: President Yoon Suk Yeol has been barred from traveling abroad as authorities investigate his imposition of martial law last week, which is being examined as a potential act of insurrection.
- Taiwan: Taiwan raised its alert level as China deployed 90 naval and coast guard ships near its waters, suggesting a large-scale military drill.
- US President-elect Trump: In his first interview since the election, Trump reiterated plans for heavy tariffs on China, Canada, and Mexico while announcing new tax cuts. He also stated he would retain Federal Reserve Chair Jerome Powell.
- Taylor Swift’s Eras Tour: Swift’s record-breaking Eras Tour generated $2.08 billion in ticket sales, drawing over 10 million attendees and boosting local economies.
Upcoming Earnings
Key earnings reports include Oracle, MongoDB, Casey’s General Stores, Toll Brothers, HealthEquity, and Vail Resorts today, and AutoZone, Ferguson Enterprises, and GameStop tomorrow. Highlights later this week include Adobe, Broadcom, and Costco.
IPO Activity
This week’s IPOs include Fast Track Group, ServiceTitan, New Century Logistics, and Metros Development. ServiceTitan, in particular, is a notable entrant in the cloud business software sector, with significant revenue growth.
Conclusion
Markets remain cautiously optimistic amid a mix of positive economic data and geopolitical uncertainties. With major central bank decisions and inflation reports on the horizon, traders are likely to focus on macroeconomic signals and their implications for monetary policy.
The markets continue to exhibit strong momentum, particularly in technology and consumer discretionary sectors, despite geopolitical uncertainties and upcoming inflation data. The focus remains on US inflation readings, the Fed’s monetary policy, and developments from the OPEC+ meeting. https://bit.ly/3ZHsXps
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