PETER’S BUSINESS & FINANCE BRIEFING – Tuesday 26 November 2024, 06:00 Hong Kong
● Nomination of Scott Bessent as US Treasury Secretary calms markets ● Adani group outlines debt position following US bribery allegations ● US dollar retreats from 2-year high
Tuesday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 19,265 +114 points +0.6%
Nikkei 225 (Japan) Projected Open: 38,875 +95 points +0.2%
Quick Summary - 4 Things To Know Before Asian Markets Open
The nomination of Scott Bessent as US Treasury Secretary calmed markets on Monday. Stocks rallied around the world, bond yields dropped, the dollar weakened, and gold fell. The choice of Bessent fuelled a rally in currencies against the dollar on Monday, as traders considered him a “safe hands” candidate. The appointment of a moderate may give China room to negotiate with the US over their trade tensions.
Adani Group said Monday its listed companies had enough cash to cover debt payments over the coming year, as the conglomerate gave the first snapshot of its operations since US authorities indicted founder Gautam Adani in a bribery case last week. In report that a company official described as a “half-yearly compendium of the business”, Adani Group said it had passed US$10bn in earnings before interest, tax, depreciation and amortisation for the first half of its financial year and was on track to report US$12bn for the full year. “Each of the portfolio companies has sufficient liquidity to cover all debt servicing requirements for at least the next 12 months,” the Adani Group said on Monday.
India’s central bank governor has defended the country’s economic resilience, saying it was “well placed” to deal with spillovers from emerging global shocks as the spectre of protectionism and trade wars looms during Donald Trump’s second term as US president. Reserve Bank of India governor Shaktikanta Das cited “protectionism and tariffs”, as well as “geo-economic fragmentation”, supply chain bottlenecks and surging commodity prices due to conflict as the biggest potential challenges for the world’s most populous country.
Huawei is poised to launch its first flagship phone that can run its own apps on a fully homegrown operating system, in the latest sign of how technology is splintering into competing US and Chinese ecosystems. The smartphone will feature HarmonyOS Next, which the Chinese company hopes to establish as a major rival to Apple’s iOS and Google’s Android. The Mate 70 smartphone is set to be released today.
Week Ahead - Nov 25 - 30
It’s a holiday shortened week in the United States with markets closed on Thursday for Thanksgiving Day and ending early on Friday. Investors will be closely watching sales on Black Friday, the traditional beginning of the Christmas shopping season in the US, the day after Thanksgiving, but now adopted by retailers around the world as an excuse to launch sales on their products. US retailers are extending one-day Black Friday discount offers into a sales event lasting weeks in a bid to tempt US consumers to keep spending. Consultancy Bain estimates that from Black Friday to Cyber Monday, US retail sales could reach a record-breaking US$75bn.
The key economic data from the US this week will centre on the minutes of the last Fed rate-setting meeting, PCE inflation data, personal income and spending figures and revised US third-quarter GDP figures. Fed officials have already cut interest rates twice this year and are debating whether to do so again at their final meeting in December. Chair Jerome Powell recently reiterated that the central bank was not in a “hurry” to reduce rates to a level that constrained growth, given the underlying strength of the economy. The consensus expectation for PCE inflation in October is for a 0.3% m/m increase and a 2.3% y/y gain. These figures would be roughly comparable to the September results. Personal income growth is expected to be stable at 0.3% m/m with personal expenditure growth easing slightly to 0.4% from 0.5% m/m. Additionally, attention will be on US durable goods orders, the Conference Board's consumer confidence index, new and pending home sales, and the S&P/Case-Shiller Home Price Index.
In the Asia-Pacific region, interest rate decisions are expected in South Korea and New Zealand. South Korea is expected to leave rates on hold at 3.35% on Thursday. Carlos Casanova, Senior Economist, Asia at Union Bancaire Privée, Hong Kong, wrote in a note Monday, “any potential rate change could further weaken the KRW, which has been one of the worst-performing currencies in Asia year-to-date. Recall that the BOK trimmed its Base Rate by 25 basis points in October to 3.25%. However, the economy missed expectations in Q3, while inflation remains below target at 1.3% y/y in October. Therefore, we cannot entirely rule out the possibility of a consecutive rate cut in November, should the BOK be inclined to tolerate further weakness in the KRW.” The Reserve Bank of New Zealand’s Monetary Policy Committee is set to cut the official cash rate by 50 bps when it meets Wednesday, as the central bank shifts from a restrictive stance to a supportive one. With inflation back within target and likely to remain there over coming quarters, more gradual cuts will likely follow in 2025.
Japan will reveal retail sales, industrial production, unemployment rate, housing starts and consumer confidence figures. Also Tokyo CPI will be closely watched on Friday. There will be inflation data from Australia. Taiwan will report its second estimate for Q3 GDP on Friday. It will likely be revised to 3.9% year on year from an advance estimate of 4%. Full year growth is expected to be 4.3%. On Saturday, the latest Chinese purchasing managers index data will be released.
India will post September-quarter GDP results on Friday. Growth is expected to have slowed to 6.3% year-on-year from 6.7% in the June quarter. Carlos Casanova wrote Monday, “India remains the fastest-growing economy in Asia, and we continue to observe secular opportunities. However, we anticipate that growth momentum will continue to slow in Q3, due to reduced government spending and sustained monetary and fiscal policy tightness. Inflationary pressures could delay the timing of cyclical support measures until Q1 2025. The CPI increased to 6.21% y/y in October, slightly exceeding the Reserve Bank of India’s (RBI) 2-6% tolerance range. Most of this was led by food prices, which surged to 9.7% y/y following intense flooding in September, which disrupted crops.”
Elsewhere, inflation figures from the eurozone will be closely watched. France, Turkey, Switzerland and Canada will release their latest GDP growth rates. Germany will publish its CPI rate and harmonised CPI, unemployment rate, the Ifo Business Climate Index, Gfk consumer confidence, and retail sales data. On Friday, Ireland heads to the polls as its centrist coalition hopes to buck the anti-incumbent trend roiling the rest of the world.
Trump Names Hedge Fund Chief Scott Bessent As Treasury Secretary
US president-elect Donald Trump has nominated Scott Bessent to lead the Department of the Treasury, ending days of speculation after other names emerged as competitors for the role. Bessent, 62, is a Wall Street veteran who once worked for George Soros, and in 2015, he started his own fund, Key Square Capital Management, which is known for making investments based on big-picture economic policy. Key Square’s hedge fund had years of unremarkable performance until it gained about 31% in its main fund in 2022. In 2023 and so far this year, the fund has gained more than 10%, according to an investor. By comparison, the S&P 500 is up around 25% so far this year.
He also served as a key economic adviser to Trump’s 2024 campaign. “Scott is widely respected as one of the world’s foremost international investors and geopolitical and economic strategists. Scott’s story is that of the American Dream,” Trump said in a statement on the nomination. In his statement, Trump said that economic policy under his administration would maintain the US dollar’s reserve currency status, fortify the United States’s position as the world’s strongest economy, and invigorate the private sector. “In his announcement, Trump said Bessent would “help curb the unsustainable path of federal debt”. That issue has long been a priority for traditional Republicans, but financial markets see an increase in debt as a risk in a second Trump term.
Nevertheless, financial markets were calmed by the nomination of Bessent as investors were relieved that Donald Trump didn’t make another risky or disruptive cabinet appointment. Stocks rallied around the world, bond yields dropped, the dollar weakened, and gold fell. The choice of Bessent fuelled a rally in currencies against the dollar on Monday, as traders considered him a “safe hands” candidate. The appointment of a moderate may give China room to negotiate with the US over their trade tensions. Bessent told the Wall Street Journal that putting tariffs in place and reducing spending will be his focus, though he didn’t go into detail, according to the newspaper’s report. Trump has threatened to hit Chinese shipments with tariffs of 60%. Earlier this year, Bessent thought about tariffs as a negotiating tool, telling investors in a letter that the “tariff gun will always be loaded and on the table but rarely discharged.” Bessent has spoken in the past of layering in trade levies, an approach less likely to roil markets or ignite inflation than what Trump advocated on the campaign trail. He has argued that the president-elect’s plans to extend tax cuts and deregulate parts of the US economy would create an “economic lollapalooza.” “We are going to have to have some kind of a grand global economic reordering,” Bessent said at a June event. “I’d like to be a part of it. I’ve studied this.” He's also discussed how to return the budget deficit to 3% via “deregulation, energy dominance and re-privatizing the economy,” and spur economic growth. He criticized trade policy with China for enriching Wall Street, weakening domestic industrial might and failing to lead to Chinese economic overhauls.
He has advised Trump to pursue a policy he calls 3-3-3, inspired by former Japanese Prime Minister Shinzo Abe, who revitalized the Japanese economy in the 2010s with his “three-arrow” economic policy. Bessent’s “three arrows” include cutting the budget deficit to 3% of gross domestic product by 2028, spurring GDP growth of 3% through deregulation and producing an additional 3 million barrels of oil or its equivalent a day.
He’s a “fiscal hawk,” who wants to rein in spending, one investor said. “Having a macro hedge fund guy feels like a good thing for markets,” according to another strategist. “We have known Scott for many years,” Jens Nordvig, founder of financial research provider Exante Data, told clients over the weekend. “Scott will work very hard to reduce extreme tail risk for markets, including importantly for the US bond market and the dollar, and for the US economy.”
However, an open question is how long Bessent’s honeymoon can last. As Trump sought someone to run the Treasury, adviser Elon Musk publicly complained that Bessent was the “business as usual” choice. Markets like that in a Treasury secretary, but Bessent will now need to find a way to keep them and the president happy. “While the markets couldn’t have done much better than Bessent at Treasury, we caution he is one player – albeit an important one – in the new Trump orbit,” said Krishna Guha of Evercore ISI. “We don’t see this as a signal that Trump will drop his campaign ideas on immigration, trade, and deficits in favour of a new market-friendly platform.”
UN COP29 Climate Summit Agrees Bitterly Contested Finance Deal
Days of negotiations at the UN COP29 climate summit in Baku, Azerbaijan, have ended with a finance deal to help less-developed countries tackle climate change. The talks were extended by more than 30 hours after an alliance of small island nations and least-developed countries representing about 80 countries walked out on the finance discussions in frustration. Under the deal agreed by almost 200 countries, wealthy nations said they would take the lead in providing “at least” US$300bn in climate finance a year by 2035 to help developing countries cope with climate change. The amount includes public and private sources, meaning not all of it will have to be paid for directly by governments. This was improved from an initial US$250bn offer but well short of the US$500bn which the G77 group of developing nations had sought. Poorer countries had initially asked for US$1.3 trillion to help them fight the climate battle. The deal also reiterates the phrasing in last year's COP28 agreement, which for the first time called for a transition away from fossil fuels. This is something that many countries had worried would be missing from the final text. Nations including Switzerland, Maldives, Canada and Australia protested that the language about reducing global use of fossil fuels was too weak.
However, the incoming Trump administration is not expected to fulfil its commitments to the Baku agreement, at least in the near term. The Trump campaign pledged to pull the US out of the landmark Paris agreement in 2015 which created a roadmap for nations to tackle climate change. That puts pressure on Europe to help fill the hole left by the US at a time when government budgets on the continent are squeezed by spending to arm Ukraine and rebuild their militaries against the threat from Russia. Prof Joanna Depledge, an expert on international climate negotiations at Cambridge University, told the BBC, "the other developed country donors are acutely aware that Trump will not pay a penny and they will have to make up the shortfall.” She said, "for sure it brought the headline number down.”
Trump’s victory will bring changes to almost every aspect of US environmental policy. The Trump Administration is expected to repeal pollution limits on automobiles, power plants and factories. Agencies will give oil and gas companies easier access to federal lands for drilling. And Trump will work with a Republican-controlled Congress to repeal as much as possible of President Biden’s signature climate change law, the Inflation Reduction Act. The 2022 law offers US$390 billion over 10 years to reduce emissions. It funds wind and solar power, electric vehicle battery factories and nuclear reactors. Trump calls the law wasteful, and many Republicans are eager to dump its clean energy provisions to help pay for tax cuts that Trump has promised. He would ditch a US$7,500 tax credit for people who purchase electric vehicles. Allies say he’ll strip the phrases “climate change,” “clean energy” and “environmental justice” from every agency website. The result of all of this is that the United States will emit more greenhouse gases.
Trump’s team also has big plans for the Interior Department, which oversees nearly 500 million acres of federal land, and for the Energy Department. Soon they will become almost entirely focused on aiding fossil fuel companies. Trump tapped Doug Burgum, the governor of North Dakota, to be his interior secretary and to lead a new White House energy council. Burgum is close to fossil fuel companies. Trump picked Chris Wright, who runs a fracking company, to lead the Energy Department. Trump promises to end protections against fragile areas such as the Arctic National Wildlife Refuge in Alaska, approve all pending drilling permits and relax regulations against pollution and harming wildlife.
Meanwhile, with Elon Musk now planning to take an axe to regulatory agencies as co-head of a new Department of Government Efficiency, some people who have worked with him for years expect he will attempt to curb environmental regulations, including those that affect his companies. At the same time, Tesla is racking up pollution violations. At Tesla’s Gigafactory in Austin, a faulty door to a metal-burning furnace allowed toxins into the air and raised temperatures for workers on the floor to as high as 100 degrees. Hazardous wastewater from production flowed untreated into the city’s sewer.
Islamabad In lockdown As Protesters Call For Imran Khan’s Release
Pakistan has put the capital Islamabad under lockdown as thousands of supporters of jailed former prime minister Imran Khan marched towards the city to demand his release, in the latest threat to the legitimacy of the military-backed government. One police officer was killed and dozens of others were injured in clashes with protesters loyal to Khan on Monday, according to Pakistani officials. The march is in response to a "final" protest call made by Khan to his supporters, where he also called on them to remain in the capital until the government addresses their demands. Some top leaders of Khan's PTI party met him at the Rawalpindi prison where he is serving a three-year jail term for corruption. He has been acquitted or received bail in five cases, but faces criminal charges in more than 100 others, ranging from graft to terrorism, according to his party. Khan has denied all of the charges, which his supporters say are politically motivated. Authorities have put Islamabad under lockdown, blocking highways and suspending mobile and internet services in certain areas. The march which began on Sunday, has seen police using tear gas against protesters, and reportedly arresting hundreds.
Khan's wife, Bushra Bibi, is among those leading the rallies. She addressed the convoy led by lawmaker Ali Amin Gandapur from Peshawar to Islamabad. "Until Khan comes to us, we will not end this march," said Bushra Bibi, who was sentenced alongside Khan in January but released on bail in late October. "This is not just about my husband but about this country and its leader," she said. Khan’s party has demanded the government, now led by Prime Minister Shehbaz Sharif, release “political prisoners” and “return the stolen mandate”, a reference to allegations that the election was rigged against the PTI, according to a statement posted to Khan’s X account on Tuesday.
RBI Governor Says India’s Economy ‘Well Placed’ To Handle Shocks
India’s central bank governor has defended the country’s economic resilience, saying it was “well placed” to deal with spillovers from emerging global shocks as the spectre of protectionism and trade wars looms during Donald Trump’s second term as US president. Reserve Bank of India governor Shaktikanta Das cited “protectionism and tariffs”, as well as “geo-economic fragmentation”, supply chain bottlenecks and surging commodity prices due to conflict as the biggest potential challenges for the world’s most populous country. “These are issues on which we have no control,” Das told the Financial Times in an interview at the RBI’s headquarters in Mumbai. But he said India was “well placed to deal with any kind of spillovers that may emanate from any external sources”, pointing to its “strong” US$676bn of foreign exchange reserves and the fastest growth rate of any major economy. “Whatever is happening within India, we can to a great extent influence, but what is happening outside, we have to defend against them,” he said.
Das said, when asked about Trump’s campaign pledge of blanket tariffs, “it’s a different thing when you assume office. Every government the world over, when they impose tariffs, they are fully mindful of what impact it will have on their domestic inflation.” Das, whose second term expires before the year-end, is grappling at home with accelerating inflation, which breached the RBI’s upper target threshold of 6% in October on the back of rising food prices. Goldman Sachs last week forecast that India’s economic growth would slow to 6.3% in 2025 from an estimated 6.7% this year.
Adani Group Outlines Debt Position
Adani Group said Monday its listed companies had enough cash to cover debt payments over the coming year, as the conglomerate gave the first snapshot of its operations since US authorities indicted founder Gautam Adani in a bribery case last week. In report that a company official described as a “half-yearly compendium of the business”, Adani Group said it had passed US$10bn in earnings before interest, tax, depreciation and amortisation for the first half of its financial year and was on track to report US$12bn for the full year. “Each of the portfolio companies has sufficient liquidity to cover all debt servicing requirements for at least the next 12 months,” the Adani Group said on Monday.
The report comes after Gautam Adani, the chair of India’s Adani Group conglomerate and one of the world’s richest people, was indicted in New York federal court on Wednesday with other defendants accused of having paid Indian government officials more than US$250 million in bribes to obtain solar energy supply contracts worth more than US$2 billion in profits. An Adani Group spokesperson said the allegations made by the US Department of Justice and the US Securities and Exchange Commission against directors of Adani Green Energy were “baseless and denied.” Gautam Adani’s network of public companies saw US$20bn wiped off their value on Thursday.
Separately on Monday, French oil major TotalEnergies suspended fresh investments in joint energy projects with the Adani Group and said the Indian conglomerate had not informed it of a US corruption probe even as the companies pursued deals together. Total said on Monday it would not make “any new financial contribution” linked to its Adani ventures until the allegations were clarified. It said it “was not made aware of the existence of an investigation into the alleged corruption scheme”.
Huawei Launches Flagship Smartphone With Own Software
Huawei is poised to launch its first flagship phone that can run its own apps on a fully homegrown operating system, in the latest sign of how technology is splintering into competing US and Chinese ecosystems. The smartphone will feature HarmonyOS Next, which the Chinese company hopes to establish as a major rival to Apple’s iOS and Google’s Android. The Mate 70 smartphone is set to be released today. The Mate 70 builds on the Mate 60, which was launched last year, powered by a self-developed and domestically made processor capable of near 5G speeds, a feat many in Washington believed was not possible. It is the latest demonstration that US sanctions designed to weaken the company have instead cemented Huawei’s status as a technological juggernaut. “This is a significant turning point for China, it’s being driven by the fear that the US could cut off everything,” said Paul Triolo, a tech expert at Albright Stonebridge Group.
EU Challenges Anti-Dumping Measures On Brandy
The European Union on Monday formally launched a challenge at the World Trade Organization (WTO) against China's move to impose anti-dumping measures on brandy imported from the bloc. The European Commission said in a statement, "by requesting consultations with China over its provisional anti-dumping measures on EU brandy, the Commission is following through on its commitment to protect our industry from unfounded accusations and misuse of trade defence measures." The Commerce Ministry in Beijing said its temporary anti-dumping measures on certain brandy imports are legitimate trade remedies fully in line with WTO rules. The move from China came after the EU slapped additional import tariffs on Chinese-made electric vehicles.
New Zealand Trade Deficit Shrinks In October As Exports Jump
New Zealand exports rose 7.5% y/y in October to 5.8 billion New Zealand dollars (US$3.4bn), up from a revised September figure of NZ$4.91 billion. The rise was mainly led by exports of milk powder, butter, and cheese, according to government data. Imports to the country rose 3% to NZ$7.3 billion, compared to the revised figure of NZ$7.06 billion in September. The country’s trade deficit shrunk to NZ$1.54 billion from NZ$ 2.15 billion the previous month.
PBoC Keeps Medium-Term Loan Rate Unchanged
China on Monday kept its medium-term lending rate steady, as the country’s central bank seeks to stabilize the yuan which has come under pressure following Donald Trump’s victory in the US presidential election. The People’s Bank of China kept the medium-term lending facility rate unchanged at 2.0% on 900 billion yuan (US$124.2bn) worth of one-year loans to some financial institutions, according to the bank’s official statement. The decision was the second consecutive month of a steady MLF rate following a record 30 bps reduction in September. “It is a well-expected move, given that the market liquidity has remained ample,” said Bruce Pang, chief economist and head of Research, Greater China at JLL, citing PBOC’s move in October that injected 500 billion yuan into the banking system.
S&P Global Ratings Cuts China’s GDP Forecast
S&P Global Ratings said on Sunday it expected China’s GDP to expand by 4.1% in 2025 and 3.8% in 2026, down by 0.2 and 0.7 percentage points, respectively, from its September projections. “We expect China’s economy to be hit by the US tariff increases on its exports. Exports will obviously grow much less, and investment too,” said economists at S&P in their first-quarter 2025 Asia-Pacific outlook. “The impact on investment will in part kick in even before US tariff implementation, because of the increased uncertainty.” The report pointed to Finance Minister Lan Foan’s recent promise that China would “actively utilise” room for a higher budget deficit in 2025, suggesting more growth support from fiscal policy next year. The report also lowered inflation forecasts for the coming years and projected a weaker yuan, citing expected US tariffs and their associated downward pressure on prices.
Taiwan Retail Sales Tumble In October
Retail sales in Taiwan slipped 0.5% year-on-year in October from a 3.2% gain in the previous month. This marked the first fall in retail trade since August 2021. On a monthly basis, retail sales fell 0.1% in October from a four-month high of 3.6% growth in the previous month
Singapore Inflation Lowest Since March 2021
On Monday, Singapore released its inflation figures for October. The country’s headline inflation rate fell to 1.4%, the lowest rate of inflation since March 2021 as the cost of cars dropped and rent prices rose at a slower pace. This was lower than the 1.8% expected by economists polled by Reuters and down from 2.0% in the previous month. On a monthly basis, consumer prices dropped 0.3% in October from a 0.3% rise in September.
Singapore’s annual core inflation rate, which strips out accommodation and private transport prices, came in at 2.1%, down from a three-month high of 2.8% in September and lower than the 2.5% expected in the Reuters poll. The Monetary Authority of Singapore said this was due to service inflation slowing, as well as prices of electricity, gas, medicine and clothing rising at a slower pace. It was also the lowest reading since November 2021.
Ifo German Business Climate Index Falls In November
Ifo’s business climate index for Germany fell to 85.7 points in November, the economic institute said Monday, as the threat of trade tariffs from the upcoming Trump administration weighed on sentiment. The index had increased in October, coming in at 86.5 points, after previously declining for four straight months. The sub-index for current conditions worsened to 84.3 from 85.7 and business expectations edged down to 87.2 from 87.3 Ifo said November’s pullback “was due primarily to the worse assessment of the current situation,” while expectations for the economy only fell slightly. “The German economy is floundering,” Ifo said. Breaking it down by sector, the current business climate worsened in the manufacturing, service and construction sectors, and expectations for the coming months grew more sceptical or pessimistic in all three sectors. The trade sector was the outlier, with the business climate index rising and expectations becoming less pessimistic, but sentiment “is still a long way off from being positive,” Ifo noted.
Asian Markets Ex China Gain
Major Asian trading partners of the US were buoyed by news of the appointment of hedge fund founder Scott Bessent as US Treasury Secretary, which came after the market closed on Friday. Bessent is viewed by Wall Street as a pragmatist who has called for tariffs to be implemented “gradually”. Japan’s export-heavy Nikkei 225 index closed 1.3% higher at 38,780.
South Korea’s Kospi also closed up 1.3%. Young Poong Group and LG Energy Solution led gains on the index, rising 10.9% and 3.6%, respectively. Samsung Electronics rose 3.4% and SK Hynix added 0.2% following Nvidia’s results last week.
South Korean carmaker Hyundai Motor is recalling about 42,465 vehicles in the US due to improperly routed wiring that may increase the risk of a crash, the US National Highway Traffic Safety Administration said on Saturday. On Friday, the automaker also recalled over 145,000 electric vehicles in the US due to a loss of drive power. Shares of Hyundai rose 0.9% in Seoul Monday.
Taiwan’s Taiex added 0.2%. Shares of Taiwan Semiconductor Manufacturing Co declined 1.0% after Nvidia shares fell more than 3% on Friday.
Australia’s S&P/ASX 200 rose 0.3% to close at 8,418, hitting a new all-time closing high. The index also reached a new intraday high of 8,462 during the trading session.
India’s Nifty 50 gained 1.3%. Market sentiment was boosted by Prime Minister Modi's party and its alliance securing victory in the Maharashtra state elections, bringing an end to political instability in the country’s wealthiest state. Sentiment was also supported by last week's RBI bulletin, which projected the country’s economic growth to accelerate to 7.6% in Q3 from 6.7% in Q2. The official Q3 GDP data is set for release on Friday. Shares of Adani Group companies partially recovered Monday from the fallout of US bribery and corruption charges against billionaire founder Gautam Adani. Shares of Adani Enterprises rose 1.3%. Adani Ports rose 2.6%. However, Adani Green Energy, the company at the centre of the US probe, slumped 7.9% Monday after losing 8.2% Friday and tumbling 18.9% in Mumbai Thursday.
China Markets Close Lower
China stocks closed lower Monday as the mainland’s economic and corporate performance weighed heavily on the market. Investors grew increasingly uncertain about the effectiveness of China’s stimulus measures in driving economic growth, while fears of higher tariffs under the incoming Trump administration added further pressure to the economic outlook. Tech earnings have also weighed on sentiment with Baidu recording its biggest revenue drop in more than two years and PDD warning that its profitability will trend downward over time because of intensifying competition in its home market of China.
On the mainland, the CSI 300 index fell 0.5% to 3,848, extending last week’s losses of 2.6%. The index is down 9.6% since its October 8th peak, putting it close to correction territory, defined as a 10% fall from the recent high.
In Hong Kong, the Hang Seng fell 79 points, or 0.4%, to close at 19,151, the lowest close since September 25. The Tech Index was 0.3% lower Monday, after losing 1.9% last week. It is down over 20% from an October high, putting it in a bear market. New World Development sank 4.3% and was the worst performer on the Hang Seng Index. It will be dropped from the city’s benchmark index on December 9.
European Markets Higher
European markets followed Asia higher on Monday, as traders breathed a sigh of relief following Donald Trump’s decision to appoint fiscal hawk Scott Bessent as US Treasury secretary. The region-wide Stoxx Europe 600 closed 0.1% higher. Household goods and mining stocks led gains, both adding 1.2%, while oil and gas stocks fell 1%. London’s FTSE 100 gained 0.4%.
Italy’s UniCredit has launched a €10.1bn (US$10.6bn) takeover bid for rival Banco BPM, as chief executive Andrea Orcel steps up his efforts to consolidate Europe’s fragmented banking industry. UniCredit said on Monday that its all-stock offer valued each Banco BPM share at €6.66 and the deal, if agreed, would create Europe’s third-largest lender by market capitalisation. It also opens a second major takeover front as the bank also pursues Commerzbank. Shares of UniCredit fell 4.8% in Milan, while Banco BPM rose 5.5%. Commerzbank’s stock took a hit as investors bet that UniCredit’s bid for Banco BPM indicates its interest in the German bank is cooling. Shares of Commerzbank were down 5.0%.
Thyssenkrupp Steel plans to cut 11,000 jobs, 40% of its workforce, through lay-offs and outsourcing by the end of the decade, as Germany’s largest steelmaker warns of structurally weaker demand from European industry and growing competition from Asian rivals. The company said on Monday it would cut production capacity from its current 11.5mn tonnes to between 8.7mn and 9mn tonnes to adapt “to future market expectations”. Shares of Thyssenkrupp rose 2.2% in Frankfurt.
Shares in the British broadcaster ITV surged 8.6% following Sky News reports over the weekend that a clutch of investors were considering making a bid for the group. Shares in the UK-based DIY retail group Kingfisher dropped 13.3%, leading declines on the Stoxx, after the owner of B&Q and Brico Dépôt nudged down its full-year guidance.
US Stocks Rise On Relief At Bessent Nomination
US stocks rose Monday after Donald Trump nominated hedge fund manager Scott Bessent as Treasury secretary, easing investors’ fears over the president-elect’s trade tariff plans. “Markets are interpreting Trump’s pick as positive for the economy, as he could try to steer policies towards the more growth-oriented matters as opposed to more controversial measures,” said Jan von Gerich, chief analyst at Nordea.
The Dow Jones Industrial Average, S&P 500 and small-cap focused Russell 2000 index reached new records on Monday but were well off their highs. The blue-chip Dow rose 440 points, or 1.0%, to 44,737. The broad-based S&P 500 gained 0.3% to end at 5,987. The Nasdaq Composite ticked up 0.3%, finishing the day at 19,055.
Almost four out of five S&P 500 stocks traded higher in the session. Real estate and consumer discretionary were the best performing stocks Monday. A sub-index of all the regional bank stocks in the S&P 1500 was ahead by 1.6% and at its highest since April 2022. Big technology, on the other hand, was more mixed. While Amazon (+2.2%) and Alphabet (+1.8%) rose, Nvidia (-4.2%) and Netflix (-3.6%) dropped. Energy stocks fell along with oil prices as hopes increased for a ceasefire agreement between Israel and Hezbollah.
The main index of small US small cap stocks hit a new record on Monday for the first time in three years, on hopes of pro-business Trump policies such as corporate tax cuts and deregulation. The Russell 2000 gained as much as 2.5%, to surpass its previous intraday peak from November 2021. However, it closed 1.5% higher, less than one point shy of its November 8, 2021 peak close. The index has climbed nearly 10% since election day. At its nadir last year, the index had dropped as much as a third from its peak, by rising interest rates and fears about a potential recession.
After underestimating the past two years, Wall Street strategists are back to being bullish. Year-end targets from firms including Goldman Sachs and Morgan Stanley fall near the 6,600 line, representing an advance of about 11.7% from Friday’s close. “Good years tend to follow more good years for US equities, and January is when capital gets deployed from the largest asset base,” wrote Goldman Sachs’ technical specialist Scott Rubner.” At the beginning of 2024, Wall Street strategists on average were forecasting the S&P 500 would rise by about 2%. It’s up 25% so far this year.
Macy’s has delayed the release of its third-quarter results after the US retailer revealed that an employee had hidden more than US$132mn of delivery expenses since late 2021. The group, which was due to report its results on Tuesday, said in a securities filing on Monday that an employee had “intentionally made erroneous accounting accrual entries” to hide US$132mn to US$154mn of delivery expenses between its fourth quarter of 2021 and the quarter ended November 2, 2024. Shares of Macy’s dropped 2.2%.
Treasury Yields Fall Sharply
Treasuries extended a rally on Monday after the nominee for Treasury Secretary, Scott Bessent, vowed to return the budget deficit to 3%. Yields rose in the weeks before and after Trump’s re-election. However, on Monday, the US 10-year Treasury yield, a benchmark for economic expectations, fell 14 bps to 4.27%. The yield on the 2-year note tumbled 11 bps to 4.28%. The Treasury yield curve reinverted, with the yield on the 10-year Treasury note settling below the yield on the 2-year note for the first time since early September.
Dollar Falls After Bessent Nominated For US Treasury Secretary
The US dollar weakened on Monday as president-elect Donald Trump’s appointment of Scott Bessent brought an end to eight straight days of gains. The US Dollar Index was down 0.7% at 106.84. Last week, the dollar index rose 0.8% against a basket of currencies, its eighth straight week of gains. The euro dropped to a two-year low against the dollar on Friday, following a dreadful set of Eurozone PMI metrics. Investors hope that hedge fund manager Bessent, who will be responsible for delivering Trump’s economic agenda, will be able to soften some of the president-elect’s aggressive tariff policies and also curb a widening fiscal deficit.
The euro was a top performer, up 0.9% Monday to $1.0508 having hit a low of $1.3330 on Friday on hopes that Bessent can take some of the sting out of Trump’s more extreme economic views. Sterling rose 0.4% to $1.2575.
In Asia, the yen added 0.4% to 154.08. The offshore yuan was steady at Rmb 7.2450 per dollar, snapping a four-day decline, as traders digested the latest monetary decision from the People's Bank of China. On Monday, the PBoC kept the MLF rate steady at 2.0%, injecting 900 billion yuan but withdrawing a net 550 billion yuan as 1.45 trillion yuan matured.
Crude Oil Falls
Brent crude oil slumped 2.7% to $73.16 a barrel on reports that Israel and Lebanon are close to a ceasefire agreement. The White House said a ceasefire deal in Lebanon between Israel and Hezbollah was “close. The downward pressure was also a function of Scott Bessent's aim to lift US oil production by 3 mln bpd. The next OPEC+ meeting on December 1 will also be on investors' radar as the cartel is expected to postpone planned output increases.
Gold Sees Steep Losses
Reports of a ceasefire also affected gold prices which saw the steepest daily losses since 2020. Spot gold fell 3.26% to $2,626 an ounce.
Bitcoin Close To $100,000
Bitcoin slipped 3.6% to $95,000, after almost touching $100,000 last week. The digital currency has gained close to 50% over the past four weeks, a period that included the election of pro-crypto presidential candidate Donald Trump.
MicroStrategy, the software-intelligence company turned bitcoin-holding entity, bought about US$5.4 billion of bitcoin, its largest bitcoin purchase since it first started acquiring the cryptocurrency more than four years ago. The company said Monday it bought 55,500 bitcoins last week for cash. It paid an average price of $97,862 per coin, including fees and expenses. It now holds about 386,700 bitcoins worth nearly US$38 billion.
Peter Lewis’ Money Talk Podcast
On Tuesday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Mark Michelson, Chairman of the Asia CEO Forum at IMA Asia, Nick Marro, Principal Economist for Asia at the Economist Intelligence Unit, and in Washington D.C., our US Economics Correspondent, Writer & Broadcaster, Barry Wood.
The podcast is also available on Apple Podcasts, YouTube Studio and Spotify.
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https://www.youtube.com/playlist?list=PLnwqOJD9ie5gHH29bNfuG1Nscy8rdJo6O
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This podcast is sponsored by Surfin Group, which is headquartered in Singapore and offers online financial services to 50 million customers across 9 countries. You can find out more about them by going to their website www.surfin.sg
