Global Market Highlights: December 16, 2024

European Markets

European equities began the day on mixed footing, oscillating between gains and losses as traders digested PMI data and geopolitical uncertainties. Sentiment weakened further as the session progressed, leaving most major indices in negative territory. The Eurozone’s latest PMI readings highlighted ongoing challenges, particularly in manufacturing, reinforcing the case for additional ECB easing measures. However, the data failed to spark significant market moves.

Sector performance reflected a defensive bias, with healthcare leading gains, buoyed by Novo Nordisk's (+1.9%) approval for its Catalent acquisition. Autos were among the weakest performers, with Porsche SE (-1.7%) pulling the sector lower after withdrawing its full-year guidance. Meanwhile, US equity futures edged higher, indicating a slightly firmer start for Wall Street compared to Europe.

US pre-market

The final full week of 2024 began with US equities displaying remarkable resilience, outpacing declines in Asian and European markets. S&P 500 and Nasdaq futures surged to record highs, fueled by optimism surrounding upcoming Federal Reserve policy decisions. Bitcoin also reached a fresh all-time high of $106,000, bolstered by growing interest in cryptocurrency investments.

As of 8:00 AM ET, S&P futures were up 0.3%, and Nasdaq futures gained 0.5%. This momentum was led by stocks such as MicroStrategy (+6% premarket), benefitting from its imminent inclusion in the Nasdaq 100. On the other hand, Super Micro Computer tumbled 15% following its removal from the same index during its annual reconstitution.

Key Drivers
- Anticipation of a Federal Reserve rate cut (expected 25 bps) on Wednesday.
- Strong earnings expectations under a Trump administration economic agenda.
- Resilient demand for US technology and cryptocurrency-linked stocks.

Fixed income markets

European government bonds (EGBs) faced selling pressure, with Bunds trading in a narrow range and slightly softer overall. Sentiment was influenced by mixed PMI data, with better-than-expected German services readings offset by persistent weakness in manufacturing.

- French OATs underperformed following Moody’s unexpected downgrade of France's credit rating to "Aa3," citing political fragmentation and fiscal challenges.
- Gilts saw minimal changes after the UK PMI release, with mixed data showing resilience in services but continued weakness in manufacturing.

US Treasuries remained rangebound, with the focus shifting to this week’s FOMC meeting. Yields were marginally lower, with the curve flattening slightly.

Commodities

Crude Oil: Oil prices softened amid a risk-off tone, with Brent futures dipping below $74/bbl. The pullback reflected subdued sentiment in European markets and a lack of significant catalysts during the session.

Gold: Gold prices climbed, finding support near $2,662/oz after an earlier dip to $2,643/oz. The rebound was aided by safe-haven demand amidst geopolitical tensions and mixed economic data.

Base Metals: Copper and other industrial metals traded lower, weighed down by lackluster risk sentiment despite slightly positive industrial production data out of China.

Key developments in commodities:

- Marathon's Detroit refinery workers ratified a pay deal, ending a three-month strike.
- Oil spills were reported in both Nigeria's Delta region and the Black Sea, adding to supply chain concerns.

Currencies

The US Dollar Index (DXY) remained steady within a narrow range, trading at the lower end of Friday’s levels as investors awaited US Flash PMI data and the upcoming FOMC meeting on Wednesday.

- EUR/USD hovered near the 1.05 level, seeing choppy trade following mixed Eurozone PMI results. ECB President Christine Lagarde reiterated the central bank’s cautious stance, with her remarks offering little new insight.
- GBP/USD strengthened, buoyed by better-than-expected UK Services PMI data, which pushed the pair to the top of its daily range around 1.2670.
- JPY underperformed slightly, with USD/JPY trading above Friday’s levels at 153.79 as Japan’s PMI showed improvements in both manufacturing and services.
- Antipodeans saw modest gains, led by NZD/USD, which outperformed AUD/USD after breaking Friday's highs. The Norwegian Krone also strengthened following Norges Bank's announcement to sell foreign currency and purchase NOK to fund government transfers.

Cryptocurrencies

Bitcoin soared to a record $106,000, driven by institutional adoption and increasing interest in crypto-related equities.

Political and World News

- South Korea’s President Impeached: South Korea’s parliament impeached President Yoon Suk Yeol, with 12 members of his party supporting the motion following his controversial martial law declaration. Prime Minister Han Duck-soo has assumed the role of acting leader as the Constitutional Court deliberates the decision.
- Cyclone Ravages Mayotte: The French overseas territory of Mayotte suffered catastrophic damage from the strongest cyclone in over 90 years. Thousands are feared dead, with limited access to the affected islands hampering rescue efforts.
- Israel-Ireland Diplomatic Rift: Israel announced the closure of its embassy in Ireland amidst escalating tensions over Ireland’s pro-Palestinian stance, which Israeli officials have condemned as biased.
- ABC Settles Trump Defamation Case: ABC News (DIS) has agreed to a $15 million settlement over a defamation lawsuit filed by President-elect Trump. The network will also issue a public apology.
- The Great Wealth Transfer: A staggering $124 trillion is expected to be passed down through inheritance in the U.S. by 2048. This unprecedented wealth transfer includes $62 trillion from the wealthiest 2% and is poised to reshape wealth management and luxury markets.

Economic Highlights

- Fed Rate Cut Expected: The Federal Reserve is widely expected to announce a 0.25% rate cut at its meeting this Wednesday. However, officials have signaled caution on further cuts due to persistent inflation and a robust labor market.
- France's Downgraded Credit Rating: Moody’s downgraded France’s credit rating to Aa3, citing political instability and a ballooning budget deficit of 6.1%—double the Eurozone average. New Prime Minister François Bayrou faces challenges in addressing the country's $3.36 trillion national debt amid rising borrowing costs.
- European Business Activity Stabilizes: The contraction in Eurozone business activity eased in December, with the services PMI rising to 51.4 and the composite PMI improving to 49.5, signaling slight stabilization despite weak demand for goods.
- China’s Economic Indicators: China’s property market showed signs of stabilizing, with home prices declining just 0.1% in November, the slowest rate in 17 months. However, retail sales growth slowed to 3% from 4.8% in October, while factory output rose modestly.
- India’s Private Sector Growth: India’s private sector output hit a four-month high in December, with its PMI rising to 60.7, reflecting robust demand across both services and manufacturing sectors.
- Moody’s Downgrades France: Moody’s lowered France’s credit rating from Aa2 to Aa3, citing heightened political uncertainty and fiscal pressures. The outlook remains stable.
- ECB Commentary: President Lagarde suggested further rate cuts are forthcoming, emphasizing that inflationary risks are now balanced. ECB’s Holzmann, however, cautioned against cutting rates purely to support growth.

Geopolitical Updates

Middle East:

- Israeli Prime Minister Benjamin Netanyahu announced plans to expand settlements in the Golan Heights, citing strategic concerns amid the ongoing war. Meanwhile, Syrian media reported strong explosions near Tartous and Latakia, attributed to Israeli airstrikes.
- The US reportedly conducted strikes against Houthi sites in Yemen, adding to regional tensions.

US-China Relations:

- Treasury Secretary Janet Yellen warned Chinese banks of potential sanctions over aiding Russia and discussed lowering the Russian oil price cap.

South Korea:
South Korean President Yoon Suk Yeol was impeached over his controversial martial law declaration, with Prime Minister Han Duck-soo assuming the role of acting president.

Corporate Highlights

- Broadcom Hits $1 Trillion Market Cap: Broadcom (AVGO) achieved a $1 trillion market capitalization, driven by a strong demand for artificial intelligence-related products. The company reported AI revenue growth of 150% year-over-year, reaching $3.7 billion in Q4. Broadcom’s stock has surged by an astonishing 760% since 2018.
- MicroStrategy Joins Nasdaq 100: MicroStrategy (MSTR), known for its extensive Bitcoin holdings now valued at $45 billion, has been added to the Nasdaq 100 index. The company's shares have risen 550% year-to-date, closely tied to Bitcoin's performance, which hit a new record high of $106,509 over the weekend.
- Novo Nordisk’s Expansion: Novo Nordisk (NVO) announced plans to invest $1.2 billion in a new facility in Denmark dedicated to producing treatments for rare diseases, including hemophilia. Shares rose 2% in premarket trading following the news.
- Big Oil’s Pivot to AI Data Centers: Exxon Mobil (XOM) and Chevron (CVX) are set to use natural gas paired with carbon-capture technology to power AI-focused data centers. Meanwhile, tech giants like Microsoft (MSFT) and Google (GOOGL) are exploring nuclear energy options to meet the energy-intensive demands of AI.
- T-Mobile’s Shareholder Returns: T-Mobile (TMUS) unveiled a $14 billion share buyback program through 2025, part of a larger $50 billion capital return initiative over three years. The company plans to allocate $80 billion toward shareholder returns and investments through 2027.
- U.S. DOE Loan for EV Battery Factories: The Department of Energy finalized a $9.63 billion loan to Ford (F) and South Korean partner SK On to establish three electric vehicle battery manufacturing plants in Kentucky and Tennessee, advancing EV adoption in the U.S.
- Amazon’s Warehouse Controversy: A Senate investigation found that Amazon (AMZN) ignored warnings linking its stringent productivity quotas to elevated workplace injury rates, which are nearly double the industry average.
- Box Office Highlights: Disney's (DIS) "Moana 2" topped the box office over the weekend, grossing $26.6 million domestically, bringing its global total to $717 million. Meanwhile, Universal’s "Wicked" reached $500 million worldwide, but Sony's (SONY) "Kraven the Hunter" underperformed with a disappointing $11 million debut.
- TikTok Legal Battle: A U.S. appeals court dismissed TikTok’s attempt to pause legislation requiring its parent company, ByteDance, to divest from the app by January 19 or face a ban. TikTok plans to escalate the case to the Supreme Court.

Recent Earnings Recap

There were no significant earnings reported today, but the full earnings calendar remains available.

Upcoming Earnings

Scheduled for Wednesday:

- Micron Technology (MU): Expected revenue of $8.55 billion (+80.91% YoY) and EPS of $1.76.
- Lennar (LEN): Projected revenue of $10.08 billion (-8.1% YoY) and EPS of $4.26 (-17.6% YoY).
- General Mills (GIS): Anticipated revenue of $5.13 billion (-0.18% YoY) and EPS of $1.22 (-2.4% YoY).

Scheduled for Thursday:

- Accenture (ACN): Estimated revenue of $17.17 billion (+5.83% YoY) and EPS of $3.42 (+4.59% YoY).
- Nike (NKE): Projected revenue of $12.47 billion (-6.86% YoY) and EPS of $0.83 (-19.42% YoY).
- FedEx (FDX): Anticipated revenue of $22.14 billion (-0.27% YoY) and EPS of $3.95 (-1% YoY).

IPO Activity

- Health In Tech (HIT): A stop-loss health insurance marketplace with 231.93% YoY revenue growth, scheduled for Tuesday.
- Leishen Energy Holding (LSE): A Chinese oilfield services company reporting 56.44% YoY revenue growth, slated for Wednesday.
- Fast Track Group (FTRK): A Singaporean event-management firm with 2,589.48% YoY revenue growth, scheduled for Friday.

Market Outlook and Future Events

Markets are entering a pivotal week, with central bank decisions likely to shape the near-term trajectory for equities, bonds, and currencies. While US exceptionalism continues to dominate, weak Chinese data and European instability serve as reminders of the challenges facing global growth. Investors remain cautiously optimistic, betting on resilient earnings and accommodative monetary policies to sustain the rally into 2025.

https://arfa.capital/markets/market-update/global-market-highlights-december-16-2024/