Equity Markets Overview
Equity markets experienced mixed performance on Wednesday, with large-cap equities outperforming small- and mid-cap counterparts. Gains in the healthcare and materials sectors provided support, but concerns over inflation and rising bond yields weighed on overall sentiment. The decline of China’s yuan to a 16-month low against the U.S. dollar further added to investor caution.
U.S. Market Highlights
Wall Street closed with little direction. The S&P 500 posted a modest gain, while the Nasdaq registered a slight decline. Market caution was fueled by disappointing ADP job creation figures, which fell short of expectations ahead of the non-farm payroll report. Investors remained hesitant to make significant moves amidst persistent economic uncertainties and the upcoming holiday commemorating former President Jimmy Carter.
Latest Market and Economic Updates
Asian Markets
Asian equities mostly declined on Thursday due to weak Chinese inflation data and expectations of a gradual reduction in U.S. interest rates. South Korea’s KOSPI stood out with a 0.4% increase, defying the regional trend.
U.S. Futures and Bond Yields
U.S. equity futures moved lower on Thursday following signals from the Federal Reserve about a potential slowdown in the pace of policy easing amid persistent inflation concerns. The 10-year Treasury yield paused its recent upward momentum, standing at 4.68% after briefly hitting 4.72%.
European Equities
European markets closed predominantly lower on Thursday. Germany’s DAX and France’s CAC 40 fell, driven by weak economic data, including a drop in German industrial orders.
Key Stock Movements in Europe:
- Shell: Fell 1.4% after cutting its LNG production outlook.
- Roche: Gained 1.4% after announcing a $1.5 billion acquisition.
- Novo Nordisk: Rose 2.8%, following an upgrade by UBS.
Dollar Index and Inflation Outlook
The dollar index remained steady around 109 on Thursday as investors assessed the Federal Reserve’s policy outlook. The euro declined to 1.0308, supported by reports suggesting President-elect Trump may declare a national economic emergency to implement tariffs.
Oil Prices
Oil prices declined for the second consecutive day due to larger-than-expected U.S. fuel stockpile builds and a stronger dollar. Brent crude futures fell to $76.08 a barrel, while West Texas Intermediate dropped to $73.21.
Federal Reserve Minutes
The Federal Reserve’s December meeting minutes highlighted concerns about stalled disinflation, indicating a slower pace of rate cuts in 2024. Fed Governor Christopher Waller reassured markets that inflation is expected to slow further, enabling gradual rate reductions later in the year.
China’s Inflation Data
China’s consumer price index (CPI) rose by 0.1% year-on-year in December, reflecting weak consumer spending and persistent deflationary pressures. The producer price index (PPI) contracted by 2.3%, marking the 27th consecutive monthly decline as factories continued to face challenges from weak domestic demand and overcapacity.
U.S. Labour Market
The ADP employment survey showed private-sector job growth of 122,000 in December, missing expectations and falling below the monthly average for the year. Initial jobless claims dropped to 201,000, pointing to a resilient labour market, though continuing claims rose slightly, suggesting some individuals remain on unemployment benefits for longer periods.
Equities on the Move
Key Corporate Updates
- Delta Air Lines: Announced a switch from Lyft to Uber for its SkyMiles loyalty program.
- eBay: Partnered with Meta to integrate listings on Facebook Marketplace, beginning tests in Germany, France, and the United States.
- SoftBank and Arm: Reportedly exploring a takeover of Oracle-backed Ampere Computing, which is considering strategic options, including a sale.
- Constellation Energy: Negotiating the acquisition of Calpine Corp. in a deal valued at approximately $30 billion, including debt.
- Vanguard Group: Increased its stake in Talen Energy Corp to 10.4%, purchasing over 4 million shares amid rising electricity demand.
- Volkswagen: Announced €300 million in pay cuts for management and plans to reduce staffing by 35,000 as part of a cost-cutting deal.
- Novo Nordisk: Received an upgrade from UBS due to strong demand for its weight-loss drugs, including GLP-1 medications like Wegovy.
Upcoming Data and Events
Economic Data Releases
- Eurozone Retail Sales: December figures are expected to show a month-on-month decline of 0.5% and a year-on-year increase of 1.9%.
- U.S. Economic Updates: All releases have been postponed due to the national day of mourning for former President Jimmy Carter, with updates expected on Friday.
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