Equity Markets Performance
Equity markets were subdued on Thursday, with the Dow achieving a marginal gain that ended a ten-session losing streak—the longest since 1974. Meanwhile, the S&P 500 and Nasdaq edged slightly lower, following Wednesday’s sharp sell-off triggered by the Federal Reserve’s announcement of a slower pace of rate cuts in 2025 than previously anticipated.
Rising bond yields weighed heavily on interest rate-sensitive sectors, with real estate underperforming. Conversely, utilities and financials led the S&P 500. In economic developments, the third-quarter GDP growth rate was revised up to an annualised 3.1%, signalling robust economic momentum. Additionally, initial jobless claims fell to 220,000, well below expectations, highlighting continued strength in the labour market.
Overseas, Asian and European markets closed lower, influenced by rising global bond yields.
Optimism Amid Volatility
Despite recent market volatility, the longer-term outlook for equities remains optimistic. The US economy shows resilience, supported by strong consumer spending and business investment. Labour market conditions continue to be favourable, with unemployment rates below historical averages and consistent job creation. Corporate earnings projections also reflect positive momentum, with robust growth expected for the S&P 500 through 2025.
However, monetary policy remains a critical factor, as the Federal Reserve signalled interest rates may remain elevated for a prolonged period. Global central banks, including the Bank of England and the Bank of Japan, are also assessing their monetary policy strategies. Inflation data and interest rate expectations will continue to shape equity market trajectories into the new year.
Latest Market Update
Asian Markets
Asian equities traded in a flat-to-low range on Friday, with most markets nursing steep weekly losses as a hawkish Federal Reserve outlook dampened risk appetite. Japanese equities edged higher due to stronger-than-expected inflation data. Chinese and Hong Kong equities experienced milder losses amid expectations of increased fiscal spending in 2025 to support growth.
US Futures and Government Uncertainty
US equity futures fell on Friday morning after Congress rejected a Trump-backed spending bill, raising the possibility of a partial government shutdown amid holiday travel. This uncertainty added to Wall Street’s recent losses following the Federal Reserve’s cautious outlook on rate cuts in 2025. Market attention is now turning to key PCE inflation data.
European Markets
European equities closed sharply lower on Thursday, with the Euro STOXX 50 declining by 1.6% amid widespread selling triggered by the Federal Reserve’s hawkish rate outlook. Leading the declines were tech and industrial giants, including ASML, Infineon, Siemens, and Schneider, which dropped between 2.5% and 5%. Banks such as UniCredit and Santander also fell by more than 1%.
US Dollar Performance
The US dollar remained strong on Friday, with the dollar index hovering around 108.4, its highest level since November 2022, as markets anticipated the latest PCE inflation data. The euro also weakened further, trading at 1.0361, under pressure from the Federal Reserve’s hawkish stance and revised projections of fewer rate cuts in 2025.
Oil Prices
Oil prices declined in Asian trade on Friday and were set for a weekly loss of over 2%. The stronger dollar and concerns about slowing demand, particularly from China, added to the downward pressure. Brent crude traded at $72.49, while WTI stood at $69.07 per barrel.
Bank of England Decision
The Bank of England decided to keep interest rates steady during its final meeting of the year, aligning with market expectations. Concerns over persistent inflation and wage growth influenced this decision. Projections for future rate cuts have been adjusted to 50 basis points, down from an earlier forecast of 70 basis points.
Equities on the Move
- Accenture: Exceeded Wall Street estimates for Q1 revenue and profit, driven by growing demand for AI-powered services, with its GenAI business generating $1.2 billion in new bookings. The company raised its annual revenue growth forecast to 4%-7%, though its Q2 revenue outlook fell slightly below analyst expectations.
- Nike: Shares dropped 0.5% in after-hours trading despite better-than-expected Q2 earnings and revenue exceeding estimates. However, a muted forecast overshadowed the results. New CEO Elliott Hill pledged to refocus on sport, curb excessive promotions, and invest in product lines and retail partnerships to regain market share.
- FedEx: Shares jumped over 8% in after-hours trading as the company announced plans to spin off its less-than-truckload freight division into a separate public company within 18 months. Q2 earnings met estimates, though revenue missed expectations. Fiscal 2025 earnings were projected at $19.00 to $20.00 per share.
- Lennar: Shares fell 5.1% after reporting lower-than-expected fiscal fourth-quarter results, including declines in revenue and adjusted earnings. The company also forecasted a sequential drop in deliveries for the current quarter due to higher mortgage rates.
- Palantir: Shares rose 3% following a Neutral rating initiation by UBS and news of an extended $400.7 million partnership with the U.S. Army. UBS highlighted strong revenue growth but remained cautious due to Palantir’s high valuation, trading at 49 times revenue and 124 times free cash flow.
- Uber: Oppenheimer maintained an “Outperform” rating, citing strong fundamentals and identifying Uber as a top large-cap pick for 2025, with a price target of $85. Despite concerns over robotaxis and US ride growth, the firm highlighted significant upside potential.
- Netflix: UBS raised its price target to $1,040, citing the company’s strong content slate and ability to benefit from industry shifts. Subscriber growth projections included an addition of 32 million users in 2024 and 22 million in 2025, supported by price increases and ad revenue growth.
- Micron Technology: Bank of America downgraded Micron to Neutral, citing weaker-than-expected gross margins and disappointing Q2 guidance. Despite positive trends in data centers, memory pricing pressures in PC and phone markets impacted the outlook.
- Boeing: TD Cowen reaffirmed an “Outperform” rating and raised its price target to $200, citing improving fundamentals and strong free cash flow projections, driving optimism for a recovery after a challenging year.
Upcoming Data and Events
The US PCE data for November is expected today, with forecasts suggesting a monthly increase of 0.2%. Any deviation, especially an increase of 0.3% or higher, could influence expectations for future Federal Reserve rate cuts.
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