Global Market Highlights: December 18, 2024

Global Market Highlights: December 18, 2024

APAC markets


Asian markets traded with mixed sentiment, as a cautious tone followed Wall Street's subdued performance. Key factors include the focus on the FOMC announcement and Chair Powell's press conference later today.


- ASX 200: Flat performance, with gains in Real Estate, Tech, and Healthcare offset by losses in Financials.
- Nikkei 225: Held in narrow ranges ahead of Thursday's BoJ decision, with Nissan surging 22% on merger talks with Honda, whose shares dropped 3%.
- Hang Seng & Shanghai Composite: Outperformed despite limited newsflow, bolstered by optimism ahead of China's PBoC rate decision on Friday.

US pre-market


US stocks experienced risk aversion on Tuesday, with the Dow Jones underperforming compared to the S&P 500 and Nasdaq. Sectors leading losses included Industrials, Energy, and Financials, while Consumer Staples and Healthcare provided relative support.


Fixed income markets


US Treasuries: Treasury yields saw muted action ahead of the FOMC meeting:


- 10-Year Yield: Closed marginally higher, with the benchmark 20-year bond auction seeing weaker demand compared to averages:
- Bid-to-Cover Ratio: 2.50x (vs. 2.57x average).
- High Yield: 4.686% (vs. 4.671% expected).

German Bunds: Bund futures remained subdued, trading below 135.00, awaiting further economic and geopolitical developments.


Commodities


- Oil: Crude oil prices dropped, weighed by broader risk-off sentiment. Inventory data showed a larger-than-expected draw
- Private Crude Inventories: -4.7M barrels (vs. -1.6M expected).
- Gold: Gold traded flat around $2,650/oz, as markets held steady ahead of the FOMC's decision.
- Copper: Copper prices slipped below $9,000/ton, reflecting cautious market sentiment.

Currencies


USD Performance: The US Dollar posted marginal gains, largely unaffected by the retail sales data, as markets awaited the FOMC's interest rate decision and updated projections.


Key Movers:


- Safe-haven currencies: JPY and CHF strengthened due to the broader risk-off sentiment.
- Antipodeans (AUD, CAD, NZD): Declined on weak risk appetite, with the CAD also influenced by cooler Canadian CPI.
- EUR: Weakened following mixed German economic data, particularly softer Ifo Business Climate and Expectations indices.

Crypto


Bitcoin saw significant losses overnight, falling below $104,000 despite no major headlines.


Fixed Income Markets


- US 10-Year Treasuries: Traded sideways ahead of the Fed's decision.
- German Bunds: Held below 135.00, showing minimal movement in anticipation of economic updates.

Economic Highlights


- Federal Reserve Decision: The Federal Reserve is expected to announce a 0.25% rate cut today, bringing rates to 4.3%, while signaling fewer cuts in 2025 due to persistent inflation above the 2% target. Source: AP.
- Mortgage Applications Decline: Mortgage applications dropped 0.7% last week as 30-year fixed rates rose to 6.75%. Refinancing demand decreased by 3%, though purchase applications rose 1%, up 6% YoY, fueled by increased inventory and economic optimism. Source: CNBC.
- U.K. Inflation Rises: U.K. inflation increased to 2.6% in November, in line with forecasts, driven by higher energy costs and wage growth. Core inflation reached 3.5%, slightly below estimates. Source: CNBC.
- Brazil Tax Reform:Brazil's Congress is advancing on tax and fiscal reform votes this week.
- US Congress: Congressional leaders struck a bipartisan agreement to extend the government funding deadline to March 14, 2025, while allocating over $100 billion for emergency disaster aid.

World News & Politics


- Stopgap Government Funding Bill: Congress proposed a temporary funding bill extending through March 14, allocating $100.4 billion for disaster relief and $10 billion for farmers. Source: AP.
- Ban on Junk Fees: The FTC banned hidden fees for tickets, hotels, and vacation rentals, requiring upfront disclosure of total prices. The policy may face reversal under the incoming administration. Source: CNBC.
- Murder Indictment: Luigi Mangione was indicted for the murder of UnitedHealthcare CEO Brian Thompson, with charges including first-degree murder in furtherance of terrorism. Source: CNBC.

Geopolitical Updates


Middle East:


- Reports indicate that the IDF is preparing for significant strikes in Yemen, pending Israeli government approval.
- Israeli PM Netanyahu is reportedly traveling to Cairo to finalize a Gaza ceasefire agreement, though significant gaps remain between Israel and Hamas.

Corporate Highlights


- Honda and Nissan Merger Discussions: Honda (HMC) and Nissan (TYO:7201) are exploring a merger to strengthen investments in EVs and tackle declining sales in the U.S. and China. Honda's shares dropped 3%, while Nissan surged nearly 24%, its largest single-day gain in 40 years. Foxconn (TPE:2317) is reportedly pursuing a stake in the new venture. Sources: WSJ, CNBC, Bloomberg.
- General Mills Slashes Forecast: General Mills (GIS) reduced its annual profit outlook, expecting a 1-3% decline due to increased promotions and reduced prices. Despite the forecast cut, Q2 revenue of $5.24B beat estimates, driven by a 3% increase in volumes. Shares were down 4% premarket. Source: Reuters.
- Salesforce Expands AI Focus: Salesforce (CRM) plans to hire 2,000 additional sales staff to focus on its AI products, doubling its earlier commitment. The second generation of its AI Agentforce software will launch in February 2025. Shares rose 1% following the announcement. Source: CNBC.
- Meta’s Ad Revenue Growth: Instagram is projected to account for over 50% of Meta's (META) U.S. ad revenue by 2025, driven by Reels and video monetization. A potential TikTok ban could further boost Instagram's growth. Source: Reuters.
- Amazon Workers Threaten Strike: Amazon (AMZN) may face strikes from Teamsters union members during the holiday season, citing unsafe working conditions and a demand for union recognition. Source: BBC.
- Starbucks Union Strike: Starbucks (SBUX) union members authorized a potential strike, with 98% support, ahead of final negotiations for the year. Starbucks expressed a commitment to productive talks. Source: CNBC.
- Federal Probes into SpaceX: SpaceX and Elon Musk are under investigation for failing to report foreign meetings and other violations of security rules. Musk was recently denied high-level security clearance by the Air Force. Source: NY Times.
- Databricks Raises $10B: AI Startup Databricks secured $10 billion in funding, valuing the company at $62 billion, surpassing rival Snowflake's market cap. Thrive Capital led the funding round. Source: NY Times.
- Grubhub Settles with FTC: Grubhub (AMS:TKWY) agreed to a $25 million settlement over deceptive practices, including hidden fees and unauthorized restaurant listings. Refunds will be issued to affected customers. Source: CNBC.

Recent Earnings Recap


- General Mills (GIS): Revenue: $5.24B (+1.97% YoY, beats by $100M); EPS: $1.40 (+12.00% YoY, beats by $0.18).
- HEICO (HEI): Revenue: $1.01B (+8.28% YoY, misses by $16M); EPS: $0.99 (+33.78% YoY, beats by $0.01).
- Jabil (JBL): Revenue: $6.99B (-16.61% YoY, beats by $384M); EPS: $2.00 (-23.08% YoY, beats by $0.12).
- Birkenstock (BIRK): Revenue: $500.93M (+22.88% YoY, beats by $61.64M); EPS: $0.32 (+128.57% YoY, beats by $0.06).
- ABM Industries (ABM): Revenue: $2.18B (+4.01% YoY, beats by $97M); EPS: $0.90 (-10.89% YoY, beats by $0.03).

Upcoming Earnings


- Today: Micron Technology (MU), Lennar (LEN).
- Tomorrow: Accenture (ACN), Nike (NKE), Cintas (CTAS), FedEx (FDX).
- Friday: Carnival Corporation (CCL).

IPO Activity


Confirmed Today:


- YSX Tech. Co., Ltd (YSXT): Revenue: $54.56M, growth: 63.28% YoY.
- New Century Logistics (BVI) Limited (NCEW): Revenue: $52.15M, growth: -4.69% YoY.

Estimated Upcoming:


- Thursday: Health In Tech, Inc. (HIT); Range Capital Acquisition Corp. (RANG); Leishen Energy Holding Co., Ltd. (LSE).
- Friday: Park Ha Biological Technology Co., Ltd. (PHH); Fast Track Group (FTRK).

Market Outlook and Future Events


The focus will remain on the Fed’s policy stance and market reaction to Chair Powell's guidance for 2025. Additionally, geopolitical developments and corporate earnings will influence sentiment heading into the end of the week.

https://arfa.capital/markets/market-update/global-market-highlights-december-18-2024/

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