Market Review
The US dollar index continued to rise this week, and the CPI data performed in line with expectations, indicating that the process of inflation decline has been hindered, and the prospect of interest rate cuts in 2025 is still unclear. The "strong dollar" tone has not changed. As of press time, the US dollar index hovered below 107 and is expected to record a second consecutive week of gains this week.
As for spot gold, supported by the rising geopolitical tensions and the expectation that the Federal Reserve will cut interest rates for the third time next week, spot gold rose to a high of $2,726/ounce in the Asian session on Thursday. Then investors began to take profits, and the gold price fell and fell below the $2,700 mark. In addition, there was a large price gap between gold and silver in the Asian session on Wednesday, and financial institutions believed that market liquidity problems were the "culprit". As of press time, gold fell back to around $2,660.
As for non-US currencies, the euro, pound and Australian dollar all recorded declines this week under the pressure of the rising US dollar. The Swiss National Bank unexpectedly cut interest rates by 50 basis points, and the US dollar rose against the Swiss franc, ending two weeks of consecutive declines. Because people familiar with the matter revealed that the Bank of Japan may not raise interest rates next week, the yen experienced a huge shock and recorded its second consecutive week of increase this week.
International oil prices rose overall this week, as the situation in Syria brought more uncertainty to the Middle East, the market expected that crude oil demand in China and Europe, the world's largest buyers, would rise, and the EU agreed to impose a new round of sanctions on Russian oil exports, which may tighten global crude oil supply. However, OPEC lowered its forecast for global crude oil demand growth, marking the fifth consecutive month of reductions.
In the stock market, the S&P 500 and Nasdaq hit new highs this week, with the Nasdaq breaking 20,000 points for the first time in history. Tesla's stock price hit a new record high after three years, and its market value has increased by $556 billion since Trump was elected president, making Musk the first person in the world with a net worth of more than $400 billion. Google's stock price also hit a new high this week, with a market value of more than $2.4 trillion, thanks to its new generation of quantum computing chip Willow.
In terms of digital currency, Bitcoin once again returned to above the $100,000 mark this week, but it experienced large fluctuations during the period. For example, on Monday, Bitcoin took a short-term plunge and then fully recovered its losses, causing nearly 500,000 people to be liquidated.
Investment Banking Viewpoints
ING predicts that the gold price will continue to hit new highs this year, with the average gold price rising to $2,760 per ounce in 2025. Goldman Sachs predicts that the gold price will rise to $3,000 per ounce by the end of 2025, and the strong dollar is not a major risk factor. Citigroup is also optimistic about the outlook for gold, with a three-month target price of $2,800 per ounce and a 12-month target price of $3,000 per ounce.
Goldman Sachs believes that global long-term funds are regaining confidence in Chinese IPOs; CPI clears the way for the Federal Reserve to cut interest rates next week, and policies are expected to be gradually relaxed in the future.
JPMorgan Chase pointed out that with the weakening expectations of the Federal Reserve's interest rate cuts, it is optimistic that the value of China's stock market will outperform the growth style in 2025; Trump's policies may be beneficial to the US economy as a whole, but how to implement them will be the key.
Capital Economics said Assad's fall was unlikely to have a major impact on energy markets.
Jefferies says U.S. small-cap stocks are set to outperform large-cap stocks for the first time in eight years.
Events of the week
1. CPC Central Committee Political Bureau Meeting: Stabilize the property and stock markets and expand domestic demand
The meeting believes that the overall economic operation this year is stable and has made progress, and the main goals and tasks of economic and social development for the whole year will be successfully completed. The meeting stressed that to do a good job in economic work next year, it is necessary to implement more proactive macroeconomic policies, stabilize the property market and stock market, and prevent and resolve risks and external shocks in key areas. Next year, a more proactive fiscal policy and a moderately loose monetary policy will be implemented, and extraordinary counter-cyclical adjustments will be strengthened. We must vigorously boost consumption, improve investment efficiency, and expand domestic demand in all directions. We must lead the development of new quality productivity with scientific and technological innovation and build a modern industrial system. We must expand high-level opening up to the outside world, stabilize foreign trade, and stabilize foreign investment. We must increase efforts to protect and improve people's livelihood and enhance people's sense of gain, happiness, and security.
2. Central Economic Work Conference: Implement more proactive macroeconomic policies and increase the fiscal deficit ratio
The Central Economic Work Conference was held in Beijing. The conference pointed out that next year, we must maintain stable economic growth, maintain overall stability in employment and prices, maintain a basic balance in international payments, and promote the synchronization of residents' income growth and economic growth. We must implement a more proactive fiscal policy and increase the fiscal deficit ratio. We must implement a moderately loose monetary policy and reduce the reserve requirement ratio and interest rates at the right time. We must maintain the basic stability of the RMB exchange rate at a reasonable and balanced level. The conference determined that next year, we must focus on nine key tasks, including vigorously boosting consumption, improving investment efficiency, and expanding domestic demand in all directions.
3. The ECB cut interest rates by 25 basis points, leaving the door open for further rate cuts
On Thursday, the European Central Bank cut interest rates for the fourth time this year and removed from its policy statement a reference to keeping rates “sufficiently restrictive,” leaving the door open for further cuts as inflation nears its target and the economy remains weak. The bank also cut its economic and inflation forecasts for this year and next.
The ECB cut its three key interest rates by 25 basis points, with the deposit rate cut from 3.25% to 3.0%. The ECB said that financial conditions have eased somewhat, with recent rate cuts reducing borrowing costs for businesses and households, but financial conditions remain tight because monetary policy remains restrictive and past rate hikes are still being transmitted to outstanding stock credit.
President Lagarde said that economic growth faces downside risks, and inflation will fluctuate at the current level in the near term and then stabilize at the medium-term target of 2%, but there are dual risks. This meeting considered a 50 basis point rate cut, but the Governing Council finally agreed that 25 basis points was the right choice, and will continue to make decisions at each meeting based on the data.
In terms of other central bank dynamics, the Reserve Bank of Australia kept its benchmark interest rate unchanged at 4.35%, the ninth consecutive meeting, in line with market expectations. The Swiss National Bank unexpectedly cut interest rates by 50 basis points, the fourth consecutive rate cut, while the market generally expected a 25 basis point cut. The Bank of Canada lowered its policy rate from 3.75% to 3.25%, the second consecutive month of 50 basis point cuts, in line with market expectations, and a total of 175 basis points cuts this year.
4. US CPI rebounded for two consecutive months, but expectations of interest rate cuts continued to rise
Data on Wednesday showed that the U.S. unadjusted CPI in November was 2.7% year-on-year, rising for the second consecutive month and 0.3% month-on-month, the largest increase since April. The unadjusted core CPI was 3.3% year-on-year and 0.3% month-on-month.
After the CPI data, swap traders increased their bets that the Fed will cut interest rates by the end of 2025. They now expect a cumulative rate cut of 87 basis points by then, which means the Fed will cut interest rates by 25 basis points next week; and about two more rate cuts of 25 basis points each in 2025, which is less than the four proposed by Fed officials in their latest quarterly dot plot in September.
5. After the fall of the Assad regime in Syria, the geopolitical game in the Middle East has entered a new stage
According to Kremlin sources, Syrian President Bashar al-Assad and his family have arrived in Moscow, and Russia has provided them with asylum. At the same time, the leader of the Syrian opposition armed forces promised to ensure the security of Russia's military bases and diplomatic institutions in Syria. Russia has also contacted representatives of the Syrian opposition to prepare for a possible transition of power in Syria.
The opposition authorized Mohammed al-Bashir of the "Syrian National Salvation Government" to form a transitional government in Syria. The "Syrian National Salvation Government" was established by the Syrian opposition, with al-Bashir as its prime minister.
This week, Israeli ground forces openly crossed the Israeli-Syrian demilitarized zone border into Syria for the first time since the Fourth Middle East War, marking a major shift in Israel's policy toward Syria. The Israeli military recently struck 320 strategic targets in Syria, destroying about 70% of the Syrian military forces, and continued to deploy troops in the military buffer zone on the border of the Golan Heights.
Israeli military officials revealed that as the Assad regime in Syria is close to collapse, Israel is preparing to further strike Iran's nuclear facilities. The Israeli military believes that Iran may use the isolation situation to accelerate the advancement of its nuclear program. At present, Israel has destroyed the Syrian air defense system to clear the way for possible air strikes.
In addition, the United States is reviewing its relationship with Syrian opposition groups. An anonymous senior US government official said that the United States may remove the "Organization for the Liberation of the Levant" from the list of terrorist organizations to promote cooperation and support the Syrian transition process. This adjustment reflects the United States' realistic considerations in the complex situation in the Middle East.
6. The individual pension system is rolled out nationwide
Since December 15, the individual pension system has been rolled out across the country from 36 pilot cities (regions), and the scope of implementation of the individual pension tax preferential policy has also been expanded to the whole country; at the same time, on the basis of existing financial products, government bonds will be included in the scope of individual pension products, and specific pension savings and index funds will be included in the individual pension product catalogue.
Many banks have taken the lead in making arrangements. China Guangfa Bank, CITIC Bank, China Merchants Bank and others have all issued notices on the automatic account opening services for personal pension funds. Some banks, such as China Everbright Bank, have launched gift activities for personal pension appointments.
7. Trump: The stock market is everything to me
On December 13, US President-elect Trump rang the opening bell for Thursday at the New York Stock Exchange. On the same day, he was named Person of the Year 2024 by Time magazine. After ringing the bell, Trump attributed the recent rise in the stock market to his victory over Biden in an interview. He said, "For me, the stock market is everything. This is very important."
Separately, the Wall Street Journal reported this week that Trump’s team is considering eliminating the Federal Deposit Insurance Corporation, and his advisers are said to have asked nominees being considered for related positions at the FDIC and the Office of the Comptroller of the Currency whether deposit insurance could be folded into the Treasury Department.
Still, any proposal to eliminate the FDIC or any other agency would require action by Congress. The FDIC’s deposit insurance is considered nearly sacrosanct. Any move that threatens to undermine the perception of deposit insurance could quickly set off a chain reaction through the banking industry and, during a crisis, exacerbate customer panic.
8. The Bank of Japan may not raise interest rates next week, and the yen will fluctuate
According to foreign media reports this week, the Bank of Japan believes that the cost of continuing to wait to raise interest rates is not high and may be inclined to keep interest rates unchanged next week.
Officials believe it is only a matter of time before another rate hike, but five sources familiar with the Bank of Japan's thinking said the Bank of Japan is inclined to keep interest rates unchanged next week as policymakers prefer to spend more time examining overseas risks and clues on wage growth next year. If it does not raise interest rates next week, it will increase the possibility of a rate hike in January or March next year.
The source also said there was no consensus within the Bank of Japan on the final decision, with some on the committee still believing that Japan has met the conditions for a rate hike in December. While many policymakers appear in no hurry to pull the trigger, the Bank of Japan could also favor a rate hike if the Fed's meeting next week triggers another yen plunge, which in turn fuels inflationary pressures.
9. OpenAI releases new tricks! Apple launches Siri with ChatGPT
OpenAI has been releasing new tools and features this week. At OpenAI's 12-day launch event, OpenAI announced that it would open its digital editing space Canvas, which is used to assist writing and programming, to all ChatGPT users, and added a series of new features. OpenAI also released Sora, an AI model that generates videos from text.
ChatGPT's Advanced Voice Model (AVM) has finally launched video and screen sharing capabilities, which can recognize objects captured by the camera or displayed on the device screen and respond through its Advanced Voice Model function. Users can chat with ChatGPT using their mobile phone camera, and the model will "see" what the user sees.
Separately, Apple on Wednesday released software updates for iPhones, iPads and Macs that included Siri with ChatGPT, a major win for OpenAI as it exposes its most important product to millions of iPhone users.
10. Musk becomes the first person in the world to have a net worth of over $400 billion
Musk's net worth increased by about $50 billion to $439.2 billion this week, according to the Bloomberg Billionaires Index. Musk's net worth fell by more than $200 billion at the end of 2022, but after Trump won the election last month, Musk, as his biggest financial backer, saw his net worth soar.
On Wednesday, SpaceX and its investors agreed to buy $1.25 billion worth of stock from employees and other company insiders. The deal values the private space exploration company at about $350 billion, making SpaceX the world's most valuable private startup. This week, Tesla's stock price hit a record high for the first time in three years, which also helped increase Musk's wealth.
11. The latest developments on Hong Kong stamp duty are here!
The Legislative Council of the Hong Kong Special Administrative Region passed the (Stamp Duty Legislation (Miscellaneous Amendments) Bill 2024) to implement the exemption of stamp duty on the transfer of shares or units of real estate investment trusts and the securities distribution business of option bookmakers, as well as to amend the stamp duty collection arrangements under the implementation of the paperless securities market system in Hong Kong. The amendment ordinance will be gazetted on December 20. The stamp duty exemption for the transfer of shares or units of real estate investment trusts and the securities distribution business of option bookmakers will take effect on December 21.
12. EU ambassadors agree to impose 15th round of sanctions on Russia
According to foreign media reports, Hungary, the rotating EU presidency, said that EU ambassadors agreed on Wednesday to impose the 15th round of sanctions on Russia for its military actions against Ukraine. The country's president said in a post on the social media platform "X" that these sanctions will restrict the activities of third-country ships that operate in a way that supports Russia's actions against Ukraine, and the EU will add more people and entities to the sanctions list. The sanctions plan may be formally adopted at the EU foreign ministers' meeting next Monday.
13. Nvidia is under investigation for suspected violation of antitrust law
Recently, the State Administration for Market Regulation has launched an investigation into Nvidia for suspected violations of the Anti-Monopoly Law. Nvidia responded that it would be happy to answer any questions from the regulator about its business. There were market rumors that Nvidia had cut off supply to China, but the company refuted the rumor, saying that China is an important market for it and it will continue to provide high-quality services to Chinese customers in the future.
In addition, according to people familiar with the matter, Nvidia will increase recruitment in China to enhance its ability to research new autonomous driving technologies. By the end of this year, Nvidia's total number of employees in China is expected to increase to about 4,000 from about 3,000 at the beginning of 2024, including about 200 new employees in Beijing to strengthen autonomous driving research.
Article forwarded from: Jinshi Data