- Asian Stocks Decline Ahead of US Inflation Data: Markets Wrap
Asian equities declined as investors awaited the release of the Federal Reserve’s preferred inflation gauge for
fresh clues about its policy outlook. A gauge of regional shares is set to decline for a sixth straight session, the
longest losing run since April. Stocks fell in Australia and South Korea, and Japanese equities pared gains as
the yen reversed losses. China’s one-year bond yield slumped to 1% for the first time since the global
financial crisis, as traders ramped up bets on monetary easing. Market attention is now on the US personal
consumption expenditures data for November, due later Friday. This last major piece of data for the year
follows the Fed’s latest hawkish policy pivot, and is weighing on US stock index futures in Asian trading.
Thursday’s US data, which showed faster-than-expected economic growth and robust consumer spending,
has further weakened the case for imminent rate cuts. Treasuries were steady after the 10-year yield rose
Thursday to 4.57%, a level last seen in May. A Bloomberg dollar index hovered around 2022 highs. - Dow ekes out narrow gain to snap 10-day losing streak, its longest in 50 years
The Dow Jones Industrial Average narrowly snapped its longest losing streak since 1974 on Thursday. The 30
stock Dow added 15.37 points, or 0.04% to close at 42,342.24. The S&P 500 slid 0.09% to 5,867.08, while the
Nasdaq Composite fell 0.10% to 19,372.77. Though the major averages initially rebounded to start the
session – with the Dow up more than 460 points and the S&P 500 up more than 1% at their respective highs
of the day – they shed their gains as the day went on, resulting in a very weak close. Seven of the 11 sectors
of the S&P 500 ended the day lower. - Oil prices fall on demand concerns, strong dollar
Oil prices fell in early trading on Friday on worries about demand growth in 2025, especially in top crude
importer China, putting global oil benchmarks on track to end the week down more than 2%. Brent crude
futures fell by 31 cents, or 0.43%, to $72.57 a barrel by 0139 GMT. U.S. West Texas Intermediate crude
futures fell 26 cents, or 0.26%, to $69.12 per barrel. Chinese state-owned refiner Sinopec said in its annual
energy outlook, released on Thursday, that China’s imports could peak as soon as 2025 and the country’s oil
consumption would peak by 2027 as diesel and gasoline demand weaken. - Gold set for weekly drop; traders await U.S. data for cues
Gold prices were set for a weekly decline on Friday after the Federal Reserve’s verdict on its monetary policy
easing cycle signaled a slowdown in rate cuts, while focus shifted to the U.S. Personal Consumption
Expenditure data due later in the day. Spot gold was little changed at $2,596.89 per ounce, as of 0326 GMT,
and has lost about 2% so far this week. U.S. gold futures nudged 0.1% higher to $2,611.30. - Japan’s Inflation Accelerates on Energy as BOJ Seeks More Data
Japan’s key inflation gauge strengthened on the waning impact of government energy subsidies as the
central bank continues to parse data before deciding on the timing of its next interest rate hike. Consumer
prices excluding fresh food rose 2.7% in November from a year earlier driven by higher energy costs, the
Ministry of Internal Affairs reported Friday. That came in above a consensus estimate of 2.6%, and was higher
than October’s 2.3% increase. An index excluding energy costs and fresh food prices advanced 2.4%, up from
2.3%. Friday’s data support the view among economists that inflation continues to develop in line with the
Bank of Japan’s outlook and the bank will likely keep reducing the degree of its monetary easing with gradual
interest rate hikes. - Bank of England holds rates but vote split surprises markets
The Bank of England on Thursday ended its last meeting of the year with a decision to leave interest rates
unchanged, after U.K. inflation rose to an eight-month high. Three members of the Monetary Policy
Committee voted to reduce rates, while six were in favor of a hold. Economists polled by Reuters had
forecast only one member would vote to cut. BOE staff also downgraded their economic forecast for the
fourth quarter of 2024, now predicting no growth, compared with the 0.3% expansion predicted in its
November report. - China keeps benchmark lending rates steady as Fed signals fewer cuts ahead
China kept its one-year and five-year LPRs unchanged at 3.1 and 3.6% respectively. The move, which follows
a 25-basis-points rate cut by the U.S. Federal Reserve earlier in the week, was expected, according to a
Reuters poll of economists. Analysts said the Fed’s revised outlook on future rate cuts is unlikely to have a
huge influence on the trajectory of policy easing by China’s central bank, although it could put pressure on
the Chinese yuan. - The US economy expanded at a faster pace in the third quarter than previously estimated, owing in part
to to stronger consumer spending and exports
Gross domestic product increased at a 3.1% annualized rate in the third quarter, the third estimate of the
figures from the Bureau of Economic Analysis showed Thursday. That compared to a previous projection of
2.8%. Consumer spending was marked up to a 3.7% pace, the fastest since early 2023, boosted by stronger
outlays on services. - Wharton’s Jeremy Siegel says stock sell-off is ‘healthy’ as cautious Fed gives investors a ‘reality check’
Wharton business school professor Jeremy Siegel said the stock sell-off on Wall Street was healthy, as the
Federal Reserve’s cautionary projection gives investors a reality check. The market was in almost a runaway
situation and this brought them to reality that we are just not going to get as low interest rates as investors
were betting on when the Fed started its easing cycle, Siegel said on CNBC’s Squawk Box Asia. - Micron shares suffer steepest drop since 2020 after disappointing guidance
Shares of Micron plummeted Thursday after the chipmaker issued weaker-than-expected guidance for the
second quarter. Micron expects further delay in the PC refresh cycle and cited pockets of elevated customer
inventory in smartphones, Stifel analysts wrote in a report to clients. Still, data center revenue jumped 400%. - Roche shares dropped 3.3% after a mid-stage study of the pharmaceutical company’s prasinezumab
missed its primary endpoint. Analysts said the experimental drug for Parkinson’s disease had already been
considered high risk
Roche’s phase IIb study of prasinezumab missed its primary endpoint, but suggested possible benefit in early
stage Parkinson’s disease. Prasinezumab showed potential clinical efficacy in the primary endpoint of time to
confirmed motor progression, missing statistical significance, according to a statement. Consistent positive
trends across multiple secondary and exploratory endpoints were observed. Prasinezumab continues to be
well tolerated and no new safety signals were observed in the study. The Phase II PASADENA and Phase IIb
PADOVA open-label extension studies will continue in order to explore the observed effects in both studies. - Accenture shares rose 7.1% after the IT services company reported its first-quarter results and raised its
revenue forecast for the full year
FIRST QUARTER RESULTS: EPS $3.59 vs. $3.10 y/y. Revenue $17.69 billion, +9% y/y, estimate $17.15 billion.
Bookings $18.7 billion, +1.6% y/y, estimate $18.45 billion. Operating cash flow $1.02 billion vs. $498.6 million
y/y, estimate $1.06 billion. Operating margin 16.7% vs. 15.8% y/y. SECOND QUARTER FORECAST: Sees
revenue $16.2 billion to $16.8 billion, estimate $16.68 billion. Sees revenue +5% to +9%. 2025 YEAR
FORECAST: Sees revenue +4% to +7%, saw +3% to +6%. Sees EPS $12.43 to $12.79, saw $12.55 to $12.91,
estimate $12.74. Still sees operating margin 15.6% to 15.8%. Still sees operating cash flow $9.4 billion to
$10.1 billion, estimate $9.83 billion. Bloomberg Intelligence: The raise to the revenue growth forecast is
surprising in the current climate, and likely driven by increased spending by generative-AI clients, coupled
with stability in non-AI related projects. The company’s consulting bookings growth is encouraging, and
bodes well for the possibility of sales acceleration. Mizuho Securities (outperform, PT $395): The results are
solid, and genAI new bookings of $1.2bn vs. $1bn in F4Q is a sentiment booster. - Nike Inc.’s new Chief Executive Officer Elliott Hill pledged to reignite growth by refocusing on sports
and revamping the company’s products. But first, he has to undo all the things his predecessor did wrong
The world’s largest sportswear company reported revenue, profit and gross margin that surpassed analyst
estimates in the quarter ended Nov. 30, an early positive development in Hill’s turnaround bid. But the sales
slump that began under previous CEO John Donahoe persisted, and Nike expects revenue in the current
quarter to decline in the low double digits, a steeper drop than the 7.7% decline posted last quarter. Hill, who
came out of retirement to step into the company’s top job in October, gave investors their first look at his
strategy to pull Nike out of a deep sales slump. The company is organizing into teams focused around sports
like basketball, football and soccer. Nike will also more closely manage inventory to avoid saturation of
products, a move that could help the brand regain exclusivity and avoid markdowns. I recognize that some of
these actions will have a negative impact on our near-term results, but we’re taking the long-term view here,
Hill said. Shares rose 0.3% in afterhours trading, erasing most of an earlier gain of as much as 12%. - FedEx Corp. shares rose 8.4% afterhours, after the company said it plans to spin off its freight division
into a separate publicly traded company
With revenue of $9.4 billion last year, FedEx Freight will become the largest player by sales in an industry that
specializes in carrying shipments from multiple customers on a single truck. FedEx said it will separate the
unit, which Bloomberg Intelligence estimates has an enterprise value of more than $30 billion, within the
next 18 months. Chief Executive Officer Raj Subramaniam said the move will help both companies benefit
from enhanced focus and competitiveness. Shedding the freight unit will allow FedEx to concentrate on fixing
its core business. It could also boost the company’s underwhelming stock performance by capitalizing on
rising valuations of standalone trucking companies whose shares have outpaced the broader market since 2019. A divestiture could add $79 in value per share, Daiwa analyst Jairam Nathan said in a note prior to the
announcement. The two companies will maintain commercial agreements and continue to work together.
FedEx in June said it was reviewing the freight business, fueling expectations that it could be spun off or sold.
The widely anticipated transaction was announced as the company trimmed its full-year profit forecast,
highlighting how FedEx’s main businesses continue to struggle with weak demand, especially in the US at its
Express unit. Adjusted earnings in its 2025 fiscal year will be $19 to $20 a share, below FedEx’s previous
forecast for $20 to $21 a share, the company said in a separate statement announcing fiscal second-quarter
earnings that topped Wall Street estimates. - A divestiture could add $79 in value per share, Daiwa analyst Jairam Nathan said in a note prior to the
announcement. The two companies will maintain commercial agreements and continue to work together
FedEx in June said it was reviewing the freight business, fueling expectations that it could be spun off or sold.
The widely anticipated transaction was announced as the company trimmed its full-year profit forecast,
highlighting how FedEx’s main businesses continue to struggle with weak demand, especially in the US at its
Express unit. Adjusted earnings in its 2025 fiscal year will be $19 to $20 a share, below FedEx’s previous
forecast for $20 to $21 a share, the company said in a separate statement announcing fiscal second-quarter
earnings that topped Wall Street estimates. - Darden Restaurants shares rallied 14.7% after the Olive Garden-owner raised the full-year sales
outlook above estimates, suggesting casual diners are eating out more
The company now expects fiscal 2025 sales of $12.1 billion, above the average analyst estimate of $11.9
billion and the company’s earlier projection. The financial outlook was updated to include results from
Chuy’s, an acquisition it completed in October. Second-quarter revenue of $2.89 billion was in line with
estimates, while comparable sales of 2.4% topped expectations, lifted by Olive Garden and LongHorn
Steakhouse’s higher-than-expected same-store sales growth. It looks like the consumer is starting to feel a
little bit better than they were in prior quarters, Chief Executive Officer Rick Cardena said. Visits from diners
who make $50,000 to $100,000 a year are up, helping the restaurant operator’s casual dining brands.
However, Darden has seen a pullback among diners making $150,000 or less, affecting fine-dining brands like
The Capital Grille, Cardena said. Darden rolled out a delivery partnership with Uber Technologies Inc. last
quarter. It also ran its Never Ending Pasta Bowl promotion at Olive Garden from mid-August to mid
November, four weeks longer than last year.
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