- Asian Stocks Gain, Bucking a Rocky Start to 2025: Markets Wrap
Asian equities on Friday bucked the dour global stocks mood that dragged US shares lower for a fifth day.
Giants SK Hynix Inc. and Samsung Electronics Co. drove the South Korean benchmark as much as 2.1% higher.
Shares in Australia and Hong Kong also rose, as did US equity futures, after the S&P 500 and Nasdaq 100 both
fell on Thursday. Equity trading in Japan is closed for a holiday. Chinese stocks fluctuated after the worst start
to the year since 2016. The nation’s 10-year government bond yield slipped below 1.6% for the first time ever
on Friday amid concerns about the state of the country’s economy. - Stocks close lower in volatile start to 2025 as S&P 500 losing streak grows
Stocks slid on Thursday in a choppy first trading session of the new year, as the slump to end 2024 extended
into January. The blue-chip Dow Jones Industrial Average traded down 151.95 points, or 0.36%, to close at
42,392.27. The S&P 500 fell 0.22%, finishing at 5,868.55. The Nasdaq Composite slipped 0.16% to 19,280.79.
The S&P 500 and Nasdaq have now fallen for five straight sessions, their longest losing streaks since April.
The market averages initially rose on Thursday, with the Dow up more than 300 points at session highs, but
the gains reversed in late-morning trading. The Dow’s intraday swing from high to low was more than 700
points. - Oil rises from two-month highs on optimism over policy support for growth
Oil prices extended their gains on Friday after closing at their highest in more than two months in the
previous session on hopes governments across the world may increase policy support to revive economic
growth that would lift fuel demand. Brent crude futures rose 16 cents, or 0.2%, to $76.09 a barrel by 0132
GMT after settling at its highest since Oct. 25 on Thursday. U.S. West Texas Intermediate crude was at $73.32
a barrel, up 19 cents, or 0.3%, with Thursday’s close its highest since Oct. 14. Both contracts are on track for
their second weekly increase with investors back from holidays, improving trade liquidity. Factory activity in
Asia, Europe and the U.S. ended 2024 on a soft note as expectations for the new year soured amid growing
trade risks from a second Donald Trump presidency and China’s fragile economic recovery. - Gold set for weekly rise; market awaits Trump’s policy moves
Gold edged up on Friday on a softer U.S. dollar and safe haven flows, with the metal en-route for a weekly
gain as attention turned to U.S. President-elect Donald Trump’s proposed policy changes that could influence
the economic and interest rate outlook going forward. Spot gold was up 0.2% at $2,661.19 per ounce, as of
0257 GMT, hitting its highest level since Dec. 13. Bullion is up about 1.6% for the week so far. U.S. gold
futures rose 0.2% to $2,675.40. The dollar index fell 0.2%, making dollar-priced bullion more affordable for
holders of other currencies. - Reserves at Fed Sink Below $3 Trillion to the Lowest Since 2020
The US banking system’s reserves, a key factor in the Federal Reserve’s decision to keep shrinking its balance
sheet, tumbled below $3 trillion to the lowest since October 2020. Bank reserves fell by about $326 billion in
the week through Jan. 1 to $2.89 trillion, according to Fed data released on Thursday. That’s the largest
weekly slide in over two-and—a-half years. The decline comes as year-end dynamics force banks to pare
balance-sheet intensive activities like repurchase agreement transactions in order to shore up their books for
regulatory purposes. That means cash is directed to places like the central bank’s overnight reverse repo
facility, draining liquidity from other liabilities on the Fed’s ledger. Balances at RRP swelled by $375 billion
between Dec. 20 and Dec. 31 before falling by $234 billion on Thursday. - Ukraine just stopped Russian gas flows to Europe
Ukraine halted the flow of Russian gas to several European countries on New Year’s Day, bringing an end to
Moscow’s decades-long dominance over Europe’s energy markets. The widely expected move marks an end
to a five-year transit agreement between Russia and Ukraine, with neither side willing to strike a new
agreement amid the ongoing war. Austria has insisted it is well prepared for the stoppage, but Slovakia’s
prime minister, Robert Fico, has threatened to cut electricity supplies to neighboring Ukraine. - Paris faces uncertain 2025 as Macron admits snap elections destabilized France
As France enters the new year, there’s little hope that the political and economic uncertainty that’s been
plaguing Paris for months will disappear in 2025. A new minority government is in place but it faces the same
challenges as before — how to get political rivals in France’s National Assembly to agree to spending and
taxation plans for 2025. France’s budget deficit is seen standing at 6.1% in 2024 and its debt pile at 112% of
gross domestic product. - U.S. dollar index hits more than two-year high as markets brace for Trump return
The British pound fell to an eight-month low against the U.S. dollar on Thursday, while the euro hit its
weakest level since November 2022. Optimism around the U.S. economy was in focus as markets reopened
following disrupted trade over Christmas and the New Year’s holiday. Interest rate expectations and the for
lower taxes and deregulation under Donald Trump have been pulling the dollar higher in recent months. - China stocks extend declines with bond yields hitting record lows as PBOC reportedly signals rate cuts
The People’s Bank of China is reportedly planning interest rate cuts “at an appropriate time” this year, the
Financial Times reported citing comments from the central bank. The country’s 7-day reverse repo rate is
currently set at 1.5%. South Korea’s corruption watchdog has moved to execute an arrest warrant for
impeached President Yoon Suk Yeol, according to local media Yonhap News. - Biden decides to block US Steel sale to Nippon Steel
U.S. President Joe Biden has decided to block the sale of U.S. Steel (NYSE:X) to Japan’s Nippon Steel
(TYO:5401), the Washington Post reported on Thursday evening, closing over a year of political sparring and
debate over the takeover. CBS News had reported earlier that Biden was set to make a decision on the deal
by as soon as Friday, after the Committee on Foreign Investment in the United States referred the final
decision on the deal to the White House in December. Biden had largely opposed the deal, as had several
lawmakers, on the grounds that it could compromise U.S. steel supplies. The United Steelworkers Union had
also opposed the deal, on the grounds that it could cut U.S. steelmaking capacity and spark layoffs. Biden’s
reported rejection of the deal comes after reports said Nippon Steel had offered the government veto power
on any decisions on domestic steel production, as a seemingly last-ditch effort to win regulatory favor for the
deal. - South Korea authorities arrive to arrest impeached President Yoon
Authorities sought on Friday to execute an arrest warrant for impeached South Korean President Yoon Suk
Yeol, as a crowd of protesters faced off with police outside his residence and vowed to block any attempt.
Yoon is under criminal investigation for insurrection over his short-lived martial law attempt on Dec. 3. An
arrest would be unprecedented for an incumbent South Korean president. Officials from the Corruption
Investigation Office for High-ranking Officials (CIO), which is leading a joint team of investigators that include
the police and prosecutors, had arrived gates of Yoon’s compound shortly after 7 a.m. (2200 GMT Thursday),
according to Reuters witnesses. Yonhap News Agency reported that about 3,000 police had been mobilized in
preparation. - Airbus shares rose 3.5% as Bank of America reiterated its buy rating citing the planemaker’s deliveries
BofA says the firm “looks to have had a strong December;” deliveries likely >110. A320s have had a strong
acceleration in 4Q despite significant LEAP engine issues, “which is encouraging”. A350, on the other hand,
has had a poor end to 2024 with Airbus only delivering ~55 across the year versus BofA est. >60. Price target
remains at €180. - Apple shares fell 2.6% as Reuters reported that the iPhone maker is offering discounted smartphones in
China as competition intensifies
Bloomberg Intelligence analyst Anurag Rana notes the price cuts are “unsurprising,” adding that the iPhone’s
“sales may not jump appreciably in fiscal 2025”. “That’s because of the lack of availability of Apple
Intelligence in many areas including China — where market conditions have been plagued by a slowdown in
consumer spending as well as increased rivalry from Huawei,” Rana wrote. - Tesla shares fell 6.1% after fourth-quarter deliveries trailed the average analyst estimate
FOURTH QUARTER: Deliveries 495,570, estimate 512,277. Model 3/Y deliveries 471,930, estimate 484,575.
Other models deliveries 23,640, estimate 26,475. Production 459,445 vehicles, estimate 505,239. Model 3/Y
production 436,718, estimate 481,306. Other models production 22,727, estimate 22,790. Morgan Stanley’s
Jonas highlights the “increased availability of lower priced competition globally ahead of the hyped
introduction of the cheaper new model (Juniper) in early/mid-2025”. The “aged product” and that “more
than offset pre-buy and promotional forces”. At the same time, Jonas notes “Tesla delivered 36k more units
than it produced in 4Q, driving a 6 to 7 day reduction in days’ supply of inventory (on a full calendar day
basis) in the quarter. At an ATP of $45k/unit this, by itself, drives a ~$1.6bn working capital inflow during the
quarter – roughly in line with our forecast”. He adds that “energy storage deployments beat expectations by
15%”. Wedbush’s Dan Ives calls the delivery numbers “respectable,” though he says “the Street and bulls
wanted to see a 500k+ number”. “Looking to FY25, we remain highly confident in Tesla’s ability to accelerate
delivery growth into FY25,” with 20%-30% growth targets the focus for the Street as Tesla is “also expected
to launch its lower-priced EV in early 2025 to spur growth for vehicle deliveries”. Sees the “autonomous and
AI era which will be accelerated under a Trump White House” benefiting Tesla, which he says “remains the
most undervalued AI play in the market today,” adding “any selloff today on weaker 4Q delivery numbers we
are strong buyers”. Keeps outperform, PT $515. - Cloudflare shares rose 4.5% as Goldman Sachs raised the recommendation on the software company to
buy from sell. PT set to $140
The analysts argued that an improving sales and marketing productivity cycle could kickstart growth in 2025.
The growth will come after “two years of evolution to better address platform sales in the enterprise,”
beginning when Marc Boroditsky, former chief revenue officer of Twilio and Okta, joined the company in
November 2022. Boroditsky led “meaningful changes” to Cloudflare’s go-to-market strategy in spring 2023,
the analysts wrote. The analysts also lauded Cloudflare’s “easily scalable, flexible network architecture,”
which, coupled with a broad customer base, provides the company a leg up on competitors. At its core, the
analysts argued, Cloudflare has built “a unique globally distributed cloud platform” that offers a range of
network services to businesses. “This architecture allows new products to be deployed at low incremental
cost, and monetized at high incremental margin,” the analysts wrote. Goldman believes Cloudflare will see
success as it rolls out developer services and production environment tools, with a path to monetization
becoming “more tangible.” The firm also cited an increased demand for edge computing with the spread of
generative AI, arguing that Cloudflare is “particularly well positioned to capture wallet share.” - Constellation Energy shares gained 8.4% after the company signed a pair of deals with the US
government to provide more than $1 billion of electricity and services, enough to fund upgrade projects
that will boost capacity at the country’s biggest nuclear fleet
The company announced a 10-year, $840 million contract with the General Services Administration to deliver
more than a million megawatt-hours of electricity annually, starting this year. Constellation will also receive
$172 million for energy savings and conservation measures at five GSA facilities. The deals demonstrate the
growing demand for clean energy from nuclear plants, and will provide Constellation with the funds to
pursue upgrades to its fleet that will add about 135 megawatts of capacity. The company has said it’s
planning to add at least 1,000 megawatts to its nuclear plants through these projects, roughly comparable to
adding an entire new reactor. “This agreement is another powerful example of how things have changed,”
Constellation Chief Executive Officer Joe Dominguez said. “Under this agreement, the United States
government joins Microsoft and other entities to support continued investment in reliable nuclear energy.” - Chinese EV makers extend buying incentives as price war enters third year
Chinese electric vehicle makers including Nio (NYSE:NIO) and Li Auto (NASDAQ:LI) have followed market
leaders Tesla (NASDAQ:TSLA) and BYD (SZ:002594) in extending buying incentives to the start of 2025, as a
price war in the world’s largest auto market continues for a third year. Li Auto announced on Thursday cash
subsidies of 15,000 yuan ($2,055) per car purchase as well as a three-year zero-interest financing scheme. Nio
launched a similar zero-interest loan plan for its Nio- and Onvo-branded EV buyers on Wednesday. The
incentives are intended to encourage purchases before the government subsidy schemes for the new year
start. More than 5.2 million cars sold as of mid-December had benefited from Chinese government subsidies.
China has signalled an extension of consumer goods trade-ins in 2025, but specifics for the policy
implementation nationwide remain unclear. Nanjing, the capital city of eastern China’s Jiangsu province, said
earlier this week it would continue to provide subsidies of up to 4,000 yuan per car purchase this year.
Chinese authorities have agreed to issue 3 trillion yuan worth of special treasury bonds this year, Reuters has
reported, as Beijing ramps up fiscal stimulus to revive a faltering economy partly via subsidy programmes.
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