Market Daily
Macro Update:
Robust US data lowers expectations of Fed rate cuts in 2025
US retail sales data came in stronger than expected, at 0.7% increase for November. The figure underscores the resilience of US consumers despite the extended period of restrictive monetary policy and above-target inflation. US 10y yield rose to 4.43% on the back of the retail sales figure. While a 25bps rate cut is expected on Wednesday, markets are starting to price fewer rate cuts due by the Federal Reserve in 2025. Aside from the Fed, markets will also be looking to the BoJ for any hawkish move. We see a 25bps hike by the BoJ, either in this December meeting or in the upcoming January meeting.
Main Upcoming Macro Indicators
Equity Market Updates
US EQUITIES
US equities retreated on Tuesday as investors exercise caution ahead of the Fed’s policy announcement this week.
EUROPE EQUITIES
European shares also closed lower on Tuesday, pressured by losses in energy and bank stocks, as investors look ahead to a week of central bank policy decisions.
HK EQUITIES
Hong Kong stocks fell for the third day in a row on Tuesday, erasing all of last week’s gains, as investors await more support measures from Beijing.
Meta Platforms (META US)
The Irish Data Protection Commission (DPC) imposed on Tuesday a EUR251M fine on Meta Platforms Ireland for failing to protect user data during a 2018 breach that exposed the personal information of about 29M Facebook users worldwide, including 3M in the EU.
This case is the latest in a growing line of penalties for Meta from European regulators. The company has already faced billions in fines across its platforms, including Facebook, Instagram, and WhatsApp. However, even with this latest hit, it's unlikely to dent Meta's financial armor.
Meta has already said it plans to appeal, defending its track record on security and emphasizing the steps they've taken to beef up protections, like multifactor authentication and login alerts.
MARKET CONSENSUS: 68 BUYS, 9 HOLDS, 3 SELLS, AVERAGE TP USD658.04
Walmart (WMT US)
Walmart announced on Tuesday that it had formed a strategic partnership with Meituan under which the Chinese firm has begun providing delivery services for Walmart goods, with the US company to be featured on its popular app. The move is likely to accelerate Walmart’s e-commerce business in China, which accounts for nearly half of its sales in the country, potentially supporting the company’s share price going forward.
In the future, both Walmart and Meituan will work together to enrich Walmart’s product categories and enhance its operations, online customer services, and marketing.
MARKET CONSENSUS: 42 BUYS, 3 HOLDS, 1 SELL, AVERAGE TP USD98.52
Mastercard (MA US)
Mastercard on Tuesday announced that its board has approved a new share repurchase program, authorizing the company to buy back up to USD12B of its Class A shares. The payments processing behemoth also raised its quarterly dividend to USD0.76 per share over previous dividend of USD0.66. This is likely supportive of the company’s share price going forward.
Mastercard stated that its new share repurchase program will become effective at the completion of its previously announced USD11B program.
MARKET CONSENSUS: 39 BUYS, 7 HOLDS, 1 SELL, AVERAGE TP USD564.73
Nissan Motor (7201 JP)
Nissan’s US-listed American depositary receipts jumped on Tuesday after reports that it is considering a merger with Honda in a deal that could potentially be expanded to include Mitsubishi as well.
The move toward a merger follows a decision by the two companies earlier this year to work together on electric vehicle batteries and software.
Such a deal would create an automotive rival to Toyota and would provide Honda and Nissan with more resources to compete with larger peers after downsizing long-held global partnerships with other carmakers. This is likely to be positive for Nissan considering its recent struggles.
MARKET CONSENSUS: 2 BUYS, 9 HOLDS, 8 SELLS, AVERAGE TP JPY403.33
Alibaba (9988 HK)
Alibaba has agreed on Tuesday to sell its InTime department store business to Youngor Fashion Co. for around USD1B as it makes an effort to offload non-core assets, booking a USD1.3B loss from the deal. This could significantly impact the company’s bottom line in its next results announcement.
Alibaba’s InTime sale marks a further acceleration of its restructuring after the group split into six business units last year in its biggest-ever revamp and announced a series of top management reshuffles afterwards. It now aims to focus on its core e-commerce operation.
MARKET CONSENSUS: 39 BUYS, 3 HOLDS, AVERAGE TP HKD119.53
Earnings Announcements
US Market
General Mills, Lennar Corp
European Market
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HK - China Market
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Global Indices Changes (%)
Fixed Income Market Updates
With China’s proactive policy support announced at the CEWC, the PBOC will likely cut the RRR or policy rate in the coming weeks to create necessary capacity to withstand Trade War 2.0. This is likely to boost demand for CNH bonds, as offshore CNH rates lag recent onshore movements.
EUROPEAN BANK COCO (AT1)
The AT1 market opened 0.25 points lower, reflecting recent weakness in rates, which have compressed significantly this month. AT1 spreads are close to the 2021 tights. French bank AT1s underperformed following Moody’s downgrade of the French sovereign rating to Aa3, although some buyers emerged.
ASIA INVESTMENT GRADE (IG)
In China, IG spreads for state-owned names remained largely unchanged. Demand for 1–3-year local government bonds was strong as investor sought short-term carry. In Hong Kong, IG corporate bond spreads tightened by 1 basis point amid rising rates. Outside China, buying pressure on high-quality names continued, tightening spreads buy another 1-3 basis points. Emerging market benchmark IG flows stabilized, with increased buying from Asia particularly in Malaysian sovereign and quasi-sovereign bonds.
ASIA HIGH YIELD (HY)
China HY, property benchmarks held steady as investors remained largely sidelined. The Macau gaming sector showed resilience, trading at the tighter end of the spectrum. Asian institutional and private accounts selectively purchased long-dated, higher-yielding names like Studio City and Melco Resorts. Outside China, flows shifted slightly towards Indian HY, with improved buying from both Asian and US investors, especially in non-bank financial institutions and renewable energy sectors.
Forex Market Updates
The US Dollar gained against major currencies on Tuesday following better-than-expected retail sales data while markets braced for interest rate moves from the Federal Reserve and other central banks.
USD
The US Dollar gained against major currencies on Tuesday following better-than-expected retail sales data that showed underlying economic momentum while markets braced for interest rate moves from the Federal Reserve and other central banks. The US dollar index rose 0.17% to 106.97, after trading as high as 107.08 on the session. While the Greenback may receive ongoing support from consistent growth and positive US data, market awaits until there is a clear breakthrough above the current resistance levels.
The Dollar Index is likely to remain supported above 105.50 heading into FOMC meeting on Wednesday.
CNH
The Chinese Yuan held near a 13-month low against the dollar on Tuesday, as traders anticipated additional easing measures following disappointing economic data, while focus has also shifted to the Federal Reserve's rate decision this week. Chinese leaders have agreed to raise the budget deficit to 4% of GDP next year, the highest on record, in an effort to resolve local government debt issues. The People's Bank of China may deliver a required reserve ratio cut ahead of the Lunar New Year, and extending subsidies is also being considered.
USDCNH should remain well-supported above 7.2400 handle in the near term.
JPY
The Japanese Yen remained near a multi-week low against the US dollar. Expectations that the Bank of Japan will keep interest rates unchanged, and a positive risk sentiment are undermining the safe-haven JPY. Japan's economy minister, Ryosei Akazawa, stated on Tuesday that the Bank of Japan and the government will collaborate to implement appropriate monetary policy, with the central bank should handle the specifics of monetary policy. Additionally, bets for a less dovish Federal Reserve are supporting higher US Treasury bond yields, which is weighing on the lower-yielding JPY.
USDJPY is likely to pave the way for a move towards reclaiming the 155 psychological barrier.
XAU
Gold prices slipped on Tuesday under the pressure from a strengthening US dollar and climbing Treasury yields as investors focused on the Federal Reserve's final policy meeting of the year with growing expectations of a gradual pace of rate cuts in 2025. While the future direction of monetary policy is uncertain, with potential concerns about inflationary pressures, spot gold was down 0.2% at $2,647.81 per ounce. Additionally, upcoming policy decisions from major central banks, including the Bank of Japan, could impact the trajectory of the precious metal in the months ahead.
The precious metal should remain range-bound staying between 2560 and 2720.
