Global Market Highlights: December 4, 2024

Asia-Pacific Markets

Stock markets in Asia remained mostly subdued. South Korea’s KOSPI index underperformed amid political and economic instability. Disappointing GDP data and underperformance in real estate, financials, and defensive sectors weighed down the ASX 200 in Australia. In China, mixed PMI data and trade frictions stemming from restrictions on key materials exports to the US created an uncertain market environment.

European markets

European markets started the day mostly in positive territory and continued to climb higher as the session progressed. Final PMI data across Europe presented mixed results but had little impact on market sentiment. Autos, retail, and technology sectors emerged as top performers, benefiting from the prevailing risk-on mood in European equities. Meanwhile, healthcare stocks lagged, primarily due to AstraZeneca’s decline after HSBC cut its price target. Positive sentiment from European bourses also lifted US equity futures, with the Nasdaq marginally outperforming other indices.

In corporate news, ASM International reported that the latest US export controls were broadly consistent with previous assumptions, easing concerns about regulatory impacts. Additionally, the EU announced plans to impose stricter regulations on Asian online retailers like Shein and Temu, aiming to curb tax evasion and the distribution of unsafe goods.

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FX markets

The US dollar (USD) showed broad strength across currency markets, performing particularly well against the Japanese yen (JPY) and antipodean currencies like the Australian dollar (AUD). The AUD was the weakest major currency, pressured by softer-than-expected Australian Q3 GDP data, which led markets to fully price in a rate cut by the Reserve Bank of Australia for April 2025. The British pound (GBP) also faced downward pressure following dovish comments from Bank of England Governor Andrew Bailey, who indicated the possibility of four 25 basis point rate cuts in 2025. This marked a shift from market expectations, which had priced in three rate cuts next year. The euro (EUR) traded slightly lower against the USD ahead of the French no-confidence vote scheduled later in the day, with ECB President Christine Lagarde’s upcoming comments unlikely to provide significant new guidance.

Fixed income markets

Fed official Waller’s comments sparked a bear-steepening trend in fixed income markets, which followed an earlier bull-steepening trend. Market participants awaited key US economic data, including ADP employment numbers and the ISM Services PMI, alongside remarks from Federal Reserve Chair Jerome Powell later in the session. In Europe, Bunds and OATs traded lower, with the market focused on the no-confidence vote in French Prime Minister Barnier’s government. Gilts also saw some upward momentum, though they remained softer overall, after Bailey’s dovish comments spurred brief gains.

Commodity markets

Commodity markets remained relatively subdued. Crude oil prices held a slight upward bias, supported by reports in the Wall Street Journal that Saudi Arabia intends to prioritize higher oil prices over increasing market share. This policy stance fueled minor gains in the oil market but failed to sustain significant upward momentum. Brent crude traded within a narrow range. A stronger dollar constrained precious metals like gold, while base metals also traded within tight ranges amid a mildly firmer risk tone.

Economic Updates

1. Private Payrolls Growth Slows
   November private payrolls grew by 146,000, below the 163,000 estimate. Gains in education, health services, and construction offset manufacturing job losses.
2. Eurozone PMI Declines
   Eurozone business activity contracted sharply in November, with PMI falling to 48.3. The Services PMI fell below 50 for the first time since January, indicating a decline in demand.
3. OECD Forecasts Stable Growth
   The OECD projects stable global growth of 3.3% in 2025 and 2026, citing easing inflation and interest rate cuts. However, rising protectionism remains a concern.
4. Australian Economy Misses Expectations
   Australia’s economy grew by 0.3% in Q3, slightly below the 0.4% estimate. Core inflation remains above the Reserve Bank’s target at 3.5%.

World News and Politics

1. South Korean Political Crisis
   President Yoon Suk Yeol faced backlash after briefly declaring martial law, leading to impeachment proceedings. The political instability could affect South Korea’s economic outlook.
2. French Government at Risk
   France’s PM Barnier faces a no-confidence vote, risking a government collapse and potential delays to the 2025 budget.
3. Airline Executives to Testify
   U.S. airline executives from major carriers will testify before a Senate panel regarding the billions earned from seat selection fees.

Geopolitical developments

Globally, geopolitical developments added uncertainty. The French no-confidence vote loomed large, with Prime Minister Barnier expected to lose, potentially destabilizing the government. In South Korea, political turmoil continued after President Yoon Suk Yeol’s controversial martial law declaration, leading to calls for his resignation and opposition-led impeachment efforts. Labor unrest is growing, with unions threatening strikes unless Yoon steps down. Meanwhile, Middle Eastern tensions persisted, with reports of Israeli forces firing on Lebanese army personnel and further military maneuvers in Syria.

Notable corporate news

1. Eli Lilly’s Zepbound Outperforms Wegovy
   Eli Lilly’s (LLY) weight-loss drug Zepbound demonstrated superior results compared to Novo Nordisk’s (NVO) Wegovy in a direct trial. Over 72 weeks, Zepbound users lost an average of 20.2% of body weight compared to Wegovy’s 13.7%. This strengthens Lilly’s market position in the growing weight-loss drug sector.
2. Amazon Faces Discrimination Lawsuit
   The D.C. Attorney General sued Amazon (AMZN) for allegedly excluding two predominantly Black ZIP codes from Prime’s expedited delivery services, despite charging full membership fees. This lawsuit could influence regulatory scrutiny on e-commerce practices.
3. General Motors Restructures in China
   General Motors (GM) announced a $5 billion charge in Q4 due to a major restructuring of its Chinese operations. Amid declining sales and stiff competition from local EV makers, GM’s market share in China has dropped significantly, highlighting challenges for foreign automakers in the region.
4. Volkswagen CEO Warns of Further Cuts
   Volkswagen (VWAGY) CEO Oliver Blume criticized current union cost-cutting proposals, deeming them inadequate to address the automaker’s declining competitiveness. He called for tougher measures to secure the company’s future amidst market challenges.
5. Hyundai Faces Potential Strike
   Hyundai Motor (HYMTF) union workers plan partial strikes on December 7–8 and a full strike on December 11, with demands including the resignation of South Korean President Yoon Suk Yeol. This reflects growing labor unrest in South Korea.
6. Intel Shares Drop on CEO Exit
   Intel (INTC) shares plunged 6% following the resignation of CEO Pat Gelsinger. The company faces challenges including declining PC demand, AI struggles, and losses in its foundry business. Analysts expressed pessimism about short-term recovery.
7. Constellation Brands Restructures
   Constellation Brands (STZ) will sell its Svedka vodka brand to Sazerac. This move aims to address challenges in its wine and spirits segment, which saw a 12% drop in Q2 net sales.
8. Donald Trump Jr. Joins PublicSquare
   PublicSquare (PSQ) surged 270% after Donald Trump Jr. joined its board. The company markets itself as a “cancel-proof,” economy-focused platform.
9. SpaceX Tender Offer
   SpaceX is reportedly conducting a tender offer for insider shares, raising its valuation to $350 billion, up sharply from $210 billion earlier this year. The growth underscores the company’s significant gains in space exploration and satellite internet ventures.
10. Frontier Airlines Adds First Class
    Frontier Airlines (ULCC) plans to introduce first-class seating and enhance loyalty perks. It projects these changes will contribute $250 million in revenue by 2026 and $500 million by 2028.
11. Banks Raise Fees
    Synchrony (SYF) and Bread Financial (BFH) increased credit card APRs by 3-5 points and introduced monthly fees of $1.99–$2.99, anticipating a potential CFPB rule capping late fees at $8. These changes could impact consumers significantly.

Earnings Highlights

1. Salesforce (CRM)
   • Q3 Performance: Revenue rose 8% YoY to $9.44 billion, beating estimates by $104 million. Net income increased by 25% to $1.5 billion.
   • Guidance: Q4 revenue guidance exceeded expectations at $9.9–$10.1 billion. FY25 revenue guidance was raised slightly to $37.8–$38 billion. Shares surged 9%.
2. UnitedHealth (UNH)
   • 2025 Outlook: Higher-than-expected medical cost ratio (86%-87% vs. 84.77%) could pressure profitability. Adjusted profit guidance met expectations.
3. Foot Locker (FL)
   • Q3 Results: The company reported a $33 million loss, a decrease from a $28 million profit in the previous year. Revenue fell to $1.96 billion, missing estimates. Shares plummeted 15%.
4. Okta (OKTA)
   • Q3 Performance: Revenue grew 14% YoY to $665 million, beating expectations. Adjusted EPS of $0.67 marked a $16 million profit. Shares surged 18%.
5. Lululemon (LULU)
   • Challenges: Anticipates just 7% YoY growth in Q3 revenue, down from 19% last year. The stock has fallen 33% YTD due to competition and North American market fatigue.
6. Rio Tinto (RIO)
   • Guidance: Increased 2025 capex to $11 billion. Copper production forecast for 2025 is 780,000–850,000 tons, targeting 1 million tons annually by 2030.

Upcoming Events and IPOs

1. Key Economic Events
   • December 5: ISM Services PMI, Factory Orders (MoM), and Fed Chair Powell’s Speech.
   • December 6: Non-Farm Payrolls and Unemployment Rate.
2. IPO Highlights
   • December 5: Jinxin Technology (NAMI), a Chinese digital education company.
   • December 6: zSpace (ZSPC), an AR/VR educational tech provider.

Looking ahead

Looking ahead, the focus shifts to upcoming US data releases, including ADP employment, ISM Services PMI, and factory orders. We eagerly await Fed Chair Powell’s speech, the French no-confidence vote, and the remarks of ECB President Lagarde. The OPEC+ meeting scheduled for tomorrow is also a key event for energy markets. Market participants remain cautious amid geopolitical risks, evolving economic data, and central bank communications.