PETER’S BUSINESS & FINANCE BRIEFING – Thursday 12 December 2024, 06:00 Hong Kong
● US inflation rose to 2.7% in November ● India’s new central bank chief takes over ● Yuan slides on report China considering weaker currency in 2025
Thursday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 20,149 -6 points -0.0%
Nikkei 225 (Japan) Projected Open: 39,965 +593 points +1.5%
Quick Summary - 4 Things To Know Before Asian Markets Open
Progress on bringing down inflation stalled in November. The annual inflation rate in the US rose for a second consecutive month to 2.7% in November, up from 2.6% in October and 2.4% in September, and in line with economists’ expectations. On a monthly basis, the Consumer Price Index (CPI) rose by 0.3%, the most since April, slightly above October's 0.2%, also matching forecasts. Once food and energy prices were stripped out, the core CPI rose 0.3% for the month, the same pace as October and also in line with analysts’ expectations. The core CPI rose 3.3% on an annual basis, unchanged from October and September, and in line with forecasts. The data reinforced expectations that the Fed will make its third consecutive quarter-point cut to interest rates next week.
China started its annual economic work meeting on Wednesday to map out policies for next year, with top leaders hinting at more forceful stimulus amid the threat of a potential trade war with the US. The two-day Central Economic Work Conference will focus on setting the economic agenda for 2025, with economic growth targets likely to be announced only in March. It is widely expected that Beijing will keep next year’s GDP growth target at “around 5%”, the same level that was set for the current year, if not slightly lower.
India’s new central bank governor, Sanjay Malhotra, started his three-year tenure Wednesday. He is seen as more likely to cut rates than his hawkish predecessor, despite rising inflation. He promised “stability in policy”, rather than “a day-to-day kind of policy,” at his first briefing at the Reserve Bank of India in Mumbai yesterday.
China’s yuan slid the most in a week following a Reuters report that Beijing is considering allowing the currency to weaken next year in response to the threat of a trade war with the US. The offshore yuan dropped as much as 0.5% to Rmb 7.2924 per dollar after Reuters reported that policymakers are mulling letting the currency depreciate, possibly to around Rmb 7.5 per dollar. It later trimmed declines to Rmb 7.27. Pressure on the yuan has intensified since the re-election of Donald Trump, who has threatened to impose tariffs on China and other countries. Some investors have speculated Beijing will abandon its current policy of maintaining a stable currency to compensate for any impact this could have on its economy.
China Starts Annual Economic Meeting
China started its annual economic work meeting on Wednesday to map out policies for next year, with top leaders hinting at more forceful stimulus amid the threat of a potential trade war with the US. The two-day Central Economic Work Conference will focus on setting the economic agenda for 2025, with economic growth targets likely to be announced only in March. It is widely expected that Beijing will keep next year’s GDP growth target at “around 5%”, the same level that was set for the current year, if not slightly lower. The meeting will give investors their next insight into how policymakers plan to approach the coming year. Analysts are waiting eagerly for any signs of a more concerted push to revive household spending. The central administration will discuss its growth target and budget for 2025, partly to give local governments guidance on setting their own targets ahead of the annual parliament session early next year. The government may increase policy support in the next two years given the prospects for higher US tariffs, said Tao Wang, chief China economist at UBS. This includes setting more supportive policy tones for 2025 at the upcoming work conference, she added.
Investors will also pay close attention to which areas of the economy will be prioritized, particularly whether there will be an additional focus or new strategies aimed at supporting domestic demand and the property market. Beijing’s stimulus measures in the past few months have included monetary measures to boost the stock market, interest rate cuts for mortgage holders and an easing of restrictions on home buying. The central government also announced a Rmb10tn (US$1.4tn) debt swap plan that aims to enable local governments to catch up on salary and supplier payments that have fallen into arrears. But a growing number of economists and scholars in China are calling for greater efforts to lift household spending beyond the government’s existing programmes, which have focused on subsidising consumers to upgrade home appliances or buy new vehicles.
On Monday, the Politburo, the Communist Party’s top decision-making body, pledged a “moderately loose” monetary policy and “more proactive” fiscal tools to support the economy. The change in the country’s monetary policy stance from “prudent” to “moderately loose” is the first easing in 14 years. China last adopted a “moderately loose” stance in late 2008 after the global financial crisis and ended it in late 2010.
President Xi Jinping has pledged that China will meet its ambitious GDP growth target of 5% this year and remain the engine of global economic expansion. Xi also signalled that China is preparing for possible fallout from Donald Trump’s election victory last month, which has raised concerns of higher tariffs. “China is willing to maintain dialogue, expand cooperation, manage differences and promote the development of China-US relations in a stable, healthy and sustainable direction, hoping that the US side will meet China halfway,” Xi said. “Tariff wars, trade wars and technology wars go against the historic trends,” he added. “There will be no winners.”
China Car Sales Jump 11.7% In November
China's vehicle sales jumped by 11.7% year-on-year to 3.316 million units in November, accelerating sharply from a 7% rise in the previous month, according to data from the China Association of Automobile Manufacturers (CAAM). This marked the second straight month of increase in vehicle sales, following the launch of government policy measures aimed at boosting the auto market. Sales of new energy vehicles surged by 47.4% in November to a fresh record peak of 1.512 million units, surpassing the previous record of 1.43 million units in October. For the first eleven months of 2024, total vehicle sales grew by 3.7% to 27.94 million units, with new energy vehicles soaring by 35.6%. On a monthly basis, car sales rose by 8.6%.
India’s New Central Bank Chief Takes Over
India’s government has appointed a new central bank governor. Shaktikanta Das, the head of the Reserve Bank of India, has been replaced by revenue secretary Sanjay Malhotra, who started his three-year tenure Wednesday, according to a government notification released on Monday. Some economists said the departure of the relatively hawkish Das could pave the way for interest rate cuts early next year. Malhotra is seen as more likely to cut rates despite rising inflation. Analysts say the RBI’s decision to hold interest rates last month may well have cost Das his job. He had recently told the Financial Times that the central bank was “rightly” focused on inflation. But his successor could set a new direction.
On Thursday, India’s new central bank governor promised “stability in policy”, after his appointment provoked suggestions that the bank’s rate setters would pursue a more dovish approach as the Indian economy shows signs of stress. “All businesses, all people, they do need this continuity and stability rather than a day-to-day kind of policy,” Malhotra said at his first briefing at the Reserve Bank of India in Mumbai.
Last week, India kept its interest rate unchanged at 6.5% as it seeks to tame inflation after it surged to a 14-month high in October. India’s consumer prices inflation surged 6.21% in October, significantly higher than the RBI’s target of 4% and also above its tolerance ceiling of 6%. A Reuters poll indicated that headline inflation in India is likely to ease to a three-month low of 5.53% in November, primarily due to a slowdown in vegetable prices. The RBI on Friday sharply cut its growth forecast for this year, confirming a slowing trend in what has been one of the world’s fastest-growing economies. The RBI said it now estimated growth for the 2024-25 financial year would be 6.6%, compared with a previous estimate of 7.2%.
Bank Of Canada Cuts Rates By 50 Bps To Boost Growth
The Bank of Canada (BoC) has cut interest rates by half a percentage point for the second consecutive meeting, lowering its benchmark rate to 3.25% in a bid to boost growth. That marks 175 bps of cumulative rate cuts from this cycle’s peak of 5%. Policymakers said they would assess “the need for further reductions in the policy rate one decision at a time”. “Our decisions will be guided by incoming information and our assessment of the implications for the inflation outlook,” the central bank said on Wednesday following the decision. The BoC suggested that there will not be any more aggressive rate cuts next year, and officials dropped the statement that borrowing costs are due to be lowered should their base case hold. The BoC has cut borrowing costs five times so far this year to combat a rise in unemployment and other economic weaknesses. The sharp interest rate cut followed data showing that Canadian GDP grew by an annualized 1% in the third quarter, below the central bank’s projections, and growth in the fourth quarter poses the risk of also missing forecasts.
US Inflation Rose To 2.7% In November
Progress on bringing down US inflation stalled in November. The annual inflation rate in the US rose for a second consecutive month to 2.7% in November, up from 2.6% in October and 2.4% in September, and in line with economists’ expectations. The rise is partly influenced by low base effects from the previous year. Energy prices declined -3.2% (versus -4.9% in October) and food costs increased 2.4% (vs 2.1%). On a monthly basis, the Consumer Price Index (CPI) rose by 0.3%, the most since April, slightly above October's 0.2%, also matching forecasts. The index for shelter rose 0.3%, accounting for nearly 40% of the monthly all items increase. The food index also increased over the month, rising 0.4% as the food at home index increased 0.5% and the food away from home index rose 0.3%. The energy index rose 0.2%.
Once food and energy prices were stripped out, the core CPI rose 0.3% for the month, the same pace as October and also in line with analysts’ expectations. The core CPI rose 3.3% on an annual basis, unchanged from October and September, and in line with forecasts. A similar gauge for producer prices is due later today before US markets open.
The data from the Bureau of Labor Statistics on Wednesday underlines concerns about sticky inflation following a previous increase in October. The report follows other data that suggest US consumers are feeling relatively upbeat, buoyed by a strong jobs market. Spending rose at a steady clip in October, according to recent data from the Commerce Department. Consumers have become more optimistic following the US presidential election, according to measures from the University of Michigan and the Conference Board. Business confidence also has improved on hopes of more business-friendly tax and regulatory policies under the incoming Republican administration.
The Fed is widely expected next week to make its third consecutive quarter-point cut to interest rates, but the trajectory next year is less certain, as the central bank wrestles with its dual mandate to keep inflation close to 2% and maintain a healthy labour market. Market pricing on Wednesday indicated that investors were placing 97% odds on a quarter-point cut by the Fed next week, which would take interest rates to a new target range of 4.25-4.5%. Officials have discussed slowing the pace of cuts as rates reach a more “neutral” setting that is high enough to keep inflation in check but sufficiently low to safeguard the labour market. They argue that if they move too quickly, inflation may get stuck above their 2% target, but moving too slowly could risk a sharp rise in the unemployment rate.
Japan’s Wholesale Inflation Rate Rises For Third Straight Month
Producer prices in Japan rose at the fastest pace in 16 months in November. Japan’s wholesale inflation rate for November beat expectations, rising for a third straight month. The producer price index rose 3.7% year-on-year, a faster clip than the revised 3.6% climb in October and above the 3.4% expected by Reuters. Monthly, producer prices rose by 0.3%, holding steady for the third month running and topping forecasts of 0.2%. The stronger than expected inflation reading could strengthen the case for the Bank of Japan to raise interest rates at its next meeting, ending December 19.
Japan Manufacturers' Mood Turns Negative In December
Japan's manufacturing sentiment took a sharp downturn in December, with the Reuters Tankan index falling to -1, down from +5 in November. This marks the first negative reading in ten months, reflecting growing concerns over US protectionist policies and the struggling Chinese economy. Business confidence deteriorated across a broad range of manufacturing sectors, with pessimism significantly outweighing optimism, particularly among electronics, machinery, steel, and nonferrous metal manufacturers. Several respondents expressed worries over the potential impact of new tariffs proposed by Donald Trump, fearing that these measures could disrupt global trade. One respondent noted, "we are seeing many investment projects delayed as a 'wait-and-see' approach has taken hold since Trump's election victory." Another cited weak sales in China, where a combination of a prolonged property crisis, high local-government debt, and sluggish consumption continues to strain the economy.
South Korea Unemployment Unchanged
South Korea reported a seasonally adjusted unemployment rate of 2.7% in November, according to Statistics Korea, unchanged from the previous month and at its highest level since June. The number of unemployed individuals decreased by 21,000, or 3.1% year-on-year, bringing the total to 656,000. Meanwhile, employment grew by 123,000, or 0.4% year-on-year, reaching 28.821 million people. The seasonally adjusted labour force participation rate remained steady at 64.6% in October, unchanged from the same period last year.
North Korea Condemns ‘Chaos’ Over Yoon’s Martial Law Bid In Seoul
North Korea has criticised South Korean President Yoon Suk Yeol in Pyongyang’s first official comments on the political crisis after Yoon’s failed attempt to impose martial law last week. “Puppet Yoon Suk Yeol, facing a serious crisis of governance and impeachment, has shocked the nation by suddenly declaring martial law and brazenly turning fascist dictatorial weapons against the citizens, throwing all of South Korea into chaos and pandemonium,” reported the Korean Central News Agency, the official mouthpiece of Kim Jong Un’s regime, according to a translation by NK News, a Seoul-based service. The report did not mention that Yoon sought to justify his martial law declaration by accusing South Korea’s leftwing majority in the National Assembly of plotting rebellion and harbouring North Korean sympathies.
On Wednesday, South Korea’s corruption investigation office for high-ranking officials reportedly said it would seek the detention and arrest of Yoon if conditions are met. This comes after media reports emerged that police had raided the presidential office as part of an investigation into Yoon’s brief imposition of martial law. Yoon has been banned from leaving the country and is under formal investigation for treason in the wake of last week’s failed martial law gambit. But he remains in his post, baffling analysts and diplomats who wonder who is running the country. Analysts said Yoon and the ruling conservative People Power party (PPP) leaders appeared to have reached a deal whereby the president would hand over the political direction of the country to his party and agree to stand down at a time of the party’s choosing, in return for support in last Saturday’s impeachment vote, which failed to secure a quorum to remove him from office. Yoon’s presidential term is due to run until 2027.
Biden Hits China With Cleantech Tariffs
The Biden administration is poised to unveil steep new tariffs on imports of critical materials from China in its final effort to protect US manufacturing from the Asian superpower’s dominant cleantech industry, the Financial Times reported Wednesday. The US trade representative’s office is expected to announce a doubling to 50% of the tariff on Chinese solar wafers and polysilicon, and hit tungsten products with a 25% levy, according to the FT. The new tariffs, which will take effect on January 1, just weeks before Donald Trump replaces Joe Biden in the White House, mark an effort to shelter the US’s fast-growing solar energy sector from cheap Chinese suppliers.
Solar wafers and polysilicon are essential in solar cell manufacturing, and tungsten is used in goods ranging from weapons to computer chips. The new tariffs underscore Washington’s anxiety about US over-reliance on China for materials crucial to its energy security and tech sector.
Qatar’s $500bn Wealth Fund Targets Bigger Deals From LNG Windfall
The new chief executive of Qatar’s US$500bn sovereign wealth fund has told the Financial Times he plans to deploy funds more “aggressively” and “do bigger-ticket deals” ahead of a petrodollar windfall that could ultimately double the fund’s size. Mohammed Al-Sowaidi also said the Qatar Investment Authority would invest with “more frequency” as it embarks on a review of its investment strategy. Sowaidi said he was bullish on the US, where the fund has increased its exposure significantly over the past decade, as well as on the UK and Asia, with a focus on technology, artificial intelligence, healthcare, real estate and infrastructure. “You can see the US is spending time on creating more efficient fiscal policies, regulation and regulatory environment. The market perceives that it will be accelerated under the Trump administration,” Sowaidi said.
Qatar is one of the world’s top liquefied natural gas producers and wealthiest nations in per capita terms. The IMF estimated in a 2022 report that the Gulf state’s real GDP would grow by 5.7% by 2027. The main recipient of the LNG revenues will be the QIA and Sowaidi said the inflows had the potential to double its size over five years.
India’s Second-Largest Renewables Company Plans Nasdaq Delisting
India’s second-largest renewable energy company ReNew is planning to leave the Nasdaq after losing more than 30% of its market value since listing in 2021, the Financial Times has reported. ReNew, which has a market capitalization of just over US$2.4bn, was founded in 2011 and now has more than 10 gigawatts of renewable capacity, split roughly half between wind and solar. It is part of a group of companies led by Adani Green Energy that are pursuing India’s target to more than double its non-fossil fuel power generation capacity to 500GW by 2030 as the coal power-dependent country attempts to meet growing energy demand.
India’s renewable industry is reeling after US prosecutors last month accused Gautam Adani and seven others of orchestrating a US$265mn bribery scheme to secure green energy deals with Indian officials. Adani’s conglomerate has rejected the charges, with the billionaire telling an audience last month that “every attack makes us stronger”.
Adani Drops US Financing For Strategic Sri Lanka Port
Following the accusations of bribery, Gautam Adani’s conglomerate has said it will no longer tap US$500mn in US development financing for a Sri Lankan port project, showing how the Adani Group may be hit by funding constraints in the wake of criminal and civil charges. Backing from the US International Development Finance Corporation (DFC) for the project was announced in November 2023, months after the Adani Group had been accused of “brazen” corporate fraud and stock price manipulation by short seller Hindenburg Research. At the time, the conglomerate described the funding for the Colombo West International Terminal, the DFC’s largest infrastructure investment in Asia, as “a ringing endorsement” of the company. Karan Adani, the billionaire’s son who heads the ports business, said the loan was “a reaffirmation by the international community of our vision, our capabilities and our governance”. But the conglomerate has now pulled out of the loan deal as it wrestles with the allegations of bribery brought by the US in November. The terminal “will be financed through the company’s internal accruals and capital management plan”, Adani Group’s ports business said in a statement. “We have withdrawn our request for financing from the DFC.”
Biden Administration Reportedly Split Over US Steel Deal
The Pentagon, US Treasury and state department have all concluded that Nippon Steel’s US$15bn acquisition of US Steel poses no national security risks, even though President Joe Biden is expected to block the deal, the Financial Times reported Monday citing unnamed sources familiar with the matter. The conclusions come despite Biden’s insistence that the purchase of the Pittsburgh-based steelmaker poses economic and national security risks. The conclusions by the Pentagon, state department and Treasury are part of a review by the Committee on Foreign Investment in the US (CFIUS), an inter-agency panel chaired by the Treasury that vets inbound investments for security risks. Deputy cabinet secretaries and top officials from the CFIUS agencies will meet on Wednesday to debate the issue as the panel prepares to make a recommendation to the president ahead of a December 23 deadline. “There is no credible analysis in the inter-agency that supports Biden,” said one former US official familiar with the internal debate. Several people close to the process said Biden would almost certainly block the deal regardless of CFIUS. But a CFIUS conclusion that it posed no risks would force him to find an alternative mechanism to block the transaction. Four people familiar with the situation said US trade representative Katherine Tai opposed the deal. One person said the US commerce department and energy department also had reservations.
The acquisition, which was unveiled in late 2023, has become ensnared in US politics. United Steelworkers, a powerful union that opposes the deal and whose president David McCall is close to Biden, on Tuesday called on the president to formally reject the deal. “President Biden understands the stakes, and he promised to have workers’ backs,” McCall wrote to members. “Now it’s time for him to formally block the deal.”
Nippon Steel is making a last-gasp effort to rescue the deal. Takahiro Mori, its vice-president and lead negotiator, visited Washington this week and is heading to Pennsylvania. On Monday, Nippon Steel told workers at US Steel that it would give each employee a US$5,000 closing bonus if the deal went through. People close to Nippon Steel have warned that a clearly political decision would increase the odds of Nippon Steel taking legal action. Japanese Prime Minister Shigeru Ishiba has urged Biden to approve the deal, taking a more assertive public stance than his predecessor Fumio Kishida.
Some close observers said one reason Biden would be very unlikely to reverse course was that he was aware that Trump had vowed to block the deal and could overturn any approval. But others suggested that Trump might try to extract a better result for the union workers and then claim credit for a deal.
Nippon Life To Acquire Resolution Life For $8.2bn
Japanese life insurer Nippon Life announced a US$8.2 billion bid for US counterpart Resolution Life on Tuesday. The transaction is expected to be completed in the second half of 2025. Bermuda-based Resolution, founded by entrepreneur Clive Cowdery, specialises in buying up books of life insurance business around the world from other insurers. Nippon Life already owns a stake in the company and will pay US$8.2bn for the shares it does not already own. Blackstone, which is also a shareholder in Resolution, will stay on as investment manager for some of the company’s assets. Nippon Life had said that its goal by 2035 is to double its “core operating profit” and increase policyholder dividends. Cowdery will remain in charge of Resolution Life after the deal. He said, “combining Resolution Life’s strengths, the investment management expertise of our partners at Blackstone and a well-funded parent gives us the opportunity to accelerate our growth and serve the needs of policyholders into the decades ahead.”
Asian Markets Mixed
Asia-Pacific markets closed mixed ahead of a key economic policy meeting in China to outline its economic policies and growth targets for next year. In South Korea, the blue-chip Kospi jumped 1.0% leading gains in Asia. The country’s corruption investigation office for high-ranking officials reportedly said it would seek the detention and arrest of President Yoon Suk Yeol if conditions are met. Japan’s Nikkei 225 rose marginally to 39,372. Australia’s S&P/ASX 200 was 0.5% lower. In India, the BSE Sensex was marginally higher at 81,526, as new Central bank governor, Sanjay Malhotra, started his three-year tenure Wednesday promising “stability in policy”.
Shares of IT company Fuji Soft rose 1.4% in Tokyo on Wednesday in anticipation of a bidding war between two rival private equity groups for the company. Bain Capital is launching an unexpected US$4.3bn counterbid for Fuji Soft, reigniting Japan’s most fiercely contested takeover battle of the year. Bain plans to raise its offer price for Fuji Soft to ¥9,600 ($63) a share, according to the FT, topping KKR’s most recent price of ¥9,451. The deal’s progress is being closely watched by companies across the Tokyo Stock Exchange.
China Stocks Lower
Stocks in Hong Kong and mainland China were lower on Wednesday as investors awaited US inflation data that might offer clues to the Federal Reserve’s intentions on interest rates and as China starts its two-day annual Central Economic Work Conference to discuss economic policy for 2025. The mainland’s CSI 300 index fell 0.2% to 3,989. It rallied as much as 3.3% at the open of the previous session before erasing most of its gains.
In Hong Kong, the Hang Seng closed down 156 points, or 0.8% at 20,155. The Tech Index dropped 1.3%. The Asian Development Bank lowered its GDP growth forecasts for Hong Kong this year and the next, citing a slowdown in private consumption, fixed investment, and exports. The city's GDP growth for 2024 was cut to 2.5% from an earlier estimate of 2.8%, while growth is expected to slow to 2.3% from 3.0% in 2025.
The Politburo’s statement Monday pledging a “moderately loose” monetary policy and promising to “forcefully lift consumption,” initially triggered sharp gains in Chinese shares, including those in Hong Kong and the US, but the momentum weakened quickly after the mainland market had its first chance to react on Tuesday. “At this point investors probably would need some concrete details and these would probably not be forthcoming after the CEWC,” said Wong Kok Hoong, head of institutional equities sales trading at Maybank Securities. “For a sustained rally in the Hong Kong stock market, we want to see forceful measures, effective execution and clear signs of China breaking through the deflation-debt spiral,” said Edith Qian, an analyst at China Galaxy Securities International in Hong Kong.
Shares of Chinese battery maker CATL rose 1.3% Wednesday in Shenzhen, a day after the company announced a €4.1 billion (US$4.3bn) joint venture with Netherlands-headquartered carmaker Stellantis. The joint venture will build a large-scale electric vehicle battery factory in Zaragoza in northeastern Spain, which is scheduled to start production by the end of 2026, according to CATL’s statement on Tuesday.
European Markets Rise After US Inflation In Line With Expectations
European stocks were marginally higher following the US inflation report and ahead of today’s interest rate decision from the European Central Bank. The region-wide Stoxx Europe 600 rose 0.3%, having closed down 0.5% in the previous session, snapping an eight-session winning streak. Media stocks led the gains up 1.4%, while retail stocks fell 1.7%. London’s FTSE 100 was up 0.3%.
Shares in UK lenders rose after the UK’s highest court was set to hear an appeal brought by motor finance companies in a landmark mis-selling case that has put the country’s financial services industry on the hook for billions of pounds in compensation. The UK Supreme Court has granted lenders permission to challenge an earlier ruling from the Court of Appeal, which sided with consumers who complained about “secret” commissions on car loans. Shares in Close Brothers, one of the lenders involved, rose 3.5% on the news. Shares in Lloyds rose 2.4%.
Shares in the Danish vaccine maker Bavarian Nordic rose 3.1%, after it announced a DKr150mn (US$21.1mn) share buyback programme commencing in the first quarter of next year. Shares of Spanish clothing giant Inditex fell 6.5% after the Zara owner posted interim nine-month and quarterly results. German online retailer Zalando, meanwhile, tumbled as much as 10% after it agreed to acquire the fashion group About You for €1.1 billion (US$1.2bn), before rebounding to close 1.6% higher.
Technology Stocks Send Nasdaq To Record High
US stocks rose Wednesday, buoyed by an inflation report which showed consumer prices rose 2.7% in the 12 months through November. That was right in line with consensus expectations, and up from a 2.6% rate in October. It clears the way for the Federal Reserve to cut interest rates again at its December meeting next week.
Technology stocks roared higher, helping push the Nasdaq Composite through 20,000 points for the first time. The tech-focused gauge was up 1.8% at a record close of 20,035. It is up by more than one-third in 2024. The S&P 500 rose 0.8% to 6,084. It was also propelled higher by technology stocks. The Dow closed 99 points lower, or 0.2%, at 44,149, dragged down by healthcare stocks. UnitedHealth dropped 5.6%. Pfizer (-1.3%) and Johnson & Johnson (-1.7%) also fell as federal lawmakers debate whether to make health insurers sell off their pharmacies.
Every single ‘Magnificent 7’ tech stock, except Apple, advanced. Tesla surged 5.9% to close at a record high, surpassing its previous peak reached in 2021. It is up 68% in 2024, with almost all of those gains coming since Donald Trump’s election victory last month. Musk poured US$277 million into a pro-Trump campaign effort, according to Federal Election Commission filings. Alphabet, the parent company of Google, was up 5.5% as it launched new AI technology. The search giant on Wednesday opened access to the newest version of its AI technology, called Gemini 2.0 Flash Experimental, which can generate text, images and audio from a single application. Nvidia rose 3.1%, taking its 2024 gains to about 181%.
Broadcom was the S&P 500’s top-performing stock, up 6.6% on media reports that Apple is working with the company to develop an artificial intelligence server chip. Bets on AI and big tech stocks have supercharged the stock market in 2024, pushing the S&P 500 to year-to-date gains of 27.6%. The index is on pace for back-to-back annual jumps of more than 20% for the first time since a four-year stretch that ended in 1998.
Treasury Yields Rise After Inflation Data
Treasury yields closed near the highs of the day following the US inflation data. The 10-year Treasury yield rose 5 bps to 4.27%. The yield on the more interest rate sensitive 2-year note rose 1 bp to 4.16%.
Yuan Slides On Report China Considering Weaker Currency In 2025
The US Dollar Index posted a fourth straight day of gains. It ended 0.3% higher at 106.70.
China’s yuan slid the most in a week following a Reuters report that Beijing is considering allowing the currency to weaken next year in response to the threat of a trade war with the US. The offshore yuan dropped as much as 0.5% to Rmb 7.2924 per dollar after Reuters reported that policymakers are mulling letting the currency depreciate, possibly to around Rmb 7.5 per dollar. It later trimmed declines to Rmb 7.28. Pressure on the yuan has intensified since the re-election of Donald Trump, who has threatened to impose tariffs on China and other countries. Some investors have speculated Beijing will abandon its current policy of maintaining a stable currency to compensate for any impact this could have on its economy. The yawning yield gap between Chinese sovereign bonds and Treasuries is also putting pressure on the yuan. China’s 10-year benchmark yield fell to a fresh record low this week, below 1.9%, amid bets on more interest-rate cuts from the PBOC.
The move in the yuan triggered drops in regional peers, with the New Zealand dollar falling to the weakest in more than two years, while the Australian dollar hit levels last seen in November last year. The Japanese yen fell 0.4% to a two-week low of ¥152.59. The South Korean won strengthened 0.2% towards 1,430 per dollar, recovering losses from a more than two-year low in the previous session after government authorities pledged active measures to stabilize markets amid political uncertainty.
Gold Hits 1-Month High
Gold climbed above $2,700 per ounce on Wednesday, advancing for the third consecutive session to reach a one-month high, supported by expectations of loose monetary policies from major central banks and increased demand for safe-haven assets. Spot gold ended the day 1.0% higher at $2,719 an ounce.
Oil Prices Rebound From Early Losses
Oil prices were trading higher on Wednesday reversing earlier losses driven by the European Union's approval of a new sanctions package targeting Russian oil flows, heightening supply concerns. The EU’s 15th round of sanctions against Russia aims to escalate pressure over its actions in Ukraine. However, gains were tempered as the US EIA reported larger-than-anticipated increases in gasoline and distillate inventories, signalling subdued domestic fuel demand. OPEC cut its global oil demand growth forecasts for 2024 and 2025 for the fifth consecutive month, citing weak demand in China and rising non-OPEC+ supply. However, energy market participants are also expecting demand to rise in China, following Beijing’s announcement of “moderately” looser monetary policy next year. Brent crude oil futures with February expiry settled 2.1% higher at $73.59 per barrel.
Bitcoin Rebounds Above $100,000
Bitcoin advanced, topping $100,000 again. It was up almost 6% at $101,400.
Peter Lewis’ Money Talk Podcast
On Thursday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Andrew Freris, the CEO of Ecognosis Advisory, and Sunil Kashyap, director of Finmet. With a view from Taiwan is Ross Feingold, Director of Research, Caerus Consulting, Taipei.
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