- Asian Stocks Fall as Focus Shifts to US Jobs Data: Markets Wrap
Asian shares declined after a range-bound session on Wall Street, as caution grew ahead of Thursday’s
closure of US equity markets and an important jobs report later this week. Stocks fell in Japan and Australia,
while US contracts also slipped. Chinese equities on the mainland and in Hong Kong fluctuated, following
data that showed deflationary pressures worsening in the world’s No. 2 economy. Meanwhile, an index of
emerging-market stocks extended its losses from an early October peak to 10%, heading for a technical
correction. A regional gauge of semiconductor stocks was flat, in muted reaction to news that the Biden
administration is planning an additional round of export restrictions on artificial intelligence chips. Nvidia
Corp. dipped in post-market trading after the report. - S&P 500 ekes out narrow gain as investors shake off Fed’s inflation warning
The S&P 500 posted a modest gain on Wednesday as traders assessed the potential for future Federal
Reserve rate cuts amid persistent inflationary pressures. The broad market index added 0.16%, closing at
5,918.25, while the Nasdaq Composite slipped 0.06% to 19,478.88. The Dow Jones Industrial Average
outperformed, rising 106.84 points, or 0.25%, to end at 42,635.20. The three major averages are on pace for
a second straight weekly loss. Minutes released from the Fed’s December meeting reflected that nearly all
committee participants found that upside risks to the inflation outlook had increased, adding to investors’
concerns that there may be fewer rate cuts than expected this year. “In discussing the outlook for monetary
policy, participants indicated that the Committee was at or near the point at which it would be appropriate to
slow the pace of policy easing,” the minutes read. - Oil prices extend losses on rising U.S. fuel inventories
Oil prices fell on Thursday, extending losses from the previous day, pressured by large builds in U.S. fuel
inventories last week, though concerns over tighter supplies from OPEC members and Russia capped the
decline. Brent crude futures fell 28 cents, or 0.4%, to $75.88 a barrel by 0125 GMT. U.S. West Texas
Intermediate crude futures dropped 30 cents, or 0.4%, to $73.02. Both benchmarks lost more than 1% on
Wednesday, as a stronger dollar and a bigger-than-expected rise in U.S. fuel stockpiles weighed on prices.
Gasoline stocks rose by 6.3 million barrels last week to 237.7 million barrels, the U.S. Energy Information
Administration said on Wednesday. Analysts polled by Reuters had expected a 1.5 million-barrel build.
Distillate stockpiles rose by 6.1 million barrels in the week to 128.9 million barrels, versus expectations for a
600,000-barrel rise. - Gold climbs after weaker-than-expected private payrolls data
Gold prices rose on Wednesday to hit a near four-week high after a weaker than expected private
employment report for December provided reassurance for some in the market the U.S. Federal Reserve may
be less cautious about easing rates this year. Spot gold rose 0.4% to $2,659.16 per ounce and hit its highest
since Dec. 13. U.S. gold futures gained 0.4% to $2,676.90.
Weaker private payrolls “is contributing to gold’s move, because ultimately, weaker employment numbers
imply that the economy has been weaker than many had expected,” said Bart Melek, head of commodity
strategies at TD Securities. The ADP National Employment report showed the U.S. economy added 122,000
jobs in the private sector last month, compared with economists’ estimate of a rise of 140,000.
A separate Labor Department report showed jobless claims stood at 201,000 in the previous week, lower
than estimates of 218,000. - China’s inflation weakens near zero even after stimulus efforts
China’s consumer inflation weakened further toward zero, decelerating for a fourth straight month in a
setback for the government’s efforts to drive up demand by injecting stimulus into the economy. The
consumer price index rose 0.1% from a year earlier, the National Bureau of Statistics said Thursday,
compared with a 0.2% gain in the previous month. The median forecast of economists surveyed by
Bloomberg was 0.1%. Factory deflation extended into a 27th month, though the producer price index
recorded a slower drop of 2.3% compared to November. - Fed Minutes Show Officials Were Eager to Slow Interest-Rate Cuts
Federal Reserve officials in December adopted a new stance on rate-cutting amid elevated inflation risks,
deciding to move more slowly in the months ahead. Participants indicated that the committee was at or near
the point at which it would be appropriate to slow the pace of policy easing,” minutes from the Federal Open
Market Committee’s Dec. 17-18 gathering showed. “Many participants suggested that a variety of factors
underlined the need for a careful approach to monetary policy decisions over coming quarters.” - China Boosts Consumer Subsidies, Vows More Funding to Aid Demand
China will subsidize more consumer products and boost funding for industrial equipment upgrades, ramping
up a program aimed at bolstering domestic consumption in the face of growing headwinds for exports.
Consumers will qualify for a 15% subsidy for buying new mobile phones, tablets and smartwatches under
6,000 yuan ($818) this year, according to an official notice published Wednesday by China’s top economic
planner and the Ministry of Finance. The benefit is capped at 500 yuan for at most one device in each
category. The authorities will also expand the types of home appliances eligible for state support to 12 from
eight last year to include products such as dishwashers and rice cookers, according to the announcement.
China has made boosting consumption a higher priority this year as it looks to fight deflation amid subdued
household and business confidence. Exports as a growth engine may also lose steam as trade tensions with
the US will likely intensify with Donald Trump returning to the White House later this month. - US Blacklist of China’s Tech Giants Risks Faster Decoupling
The US’s latest move to expand its list of Chinese military companies risks doing more than tanking the shares
of some of its most valuable companies: It also threatens to accelerate decoupling of the world’s biggest
economies. The Biden administration on Monday added Tencent Holdings Ltd., the world’s largest gaming
publisher, and Contemporary Amperex Technology Co. Ltd., a key battery supplier to Tesla Inc., to its list of
“Chinese military companies”, firms it says are working directly or indirectly with the People’s Liberation
Army, or contributing significantly to China’s industrial base. - British luxury carmaker Rolls-Royce says super rich fueling a demand boom for bespoke models
British luxury carmaker Rolls-Royce Motor Cars on Wednesday said it is investing over £300 million ($369.9
million) to expand its global headquarters, citing growing demand for highly personalized models from its
ultra-wealthy clientele. The BMW-owned company said its investment of more than £300 million at its
Goodwood manufacturing facility in southern England would help to create space for bespoke and
Coachbuild projects. “Rolls-Royce is a global business,” Chris Brownridge, CEO of Rolls-Royce Motor Cars, told
CNBC’s “Squawk Box Europe” on Wednesday. - Why Trump’s pursuit of Greenland could be cheered on by Russia
President-elect Donald Trump’s ongoing pursuit of Greenland may have raised the hackles of Denmark, but
his territorial ambitions might find support in Russia. Prominent Russian pundits reportedly voiced support
for the move, saying it would validate Moscow’s own expansionist ambitions. Meanwhile, Trump announced
on Monday that his son Donald Trump Jr. was making an impromptu visit to the island. - Novo Nordisk shares rose 2.8% after being upgraded to buy from neutral at UBS, which said shares in
the Danish drugmaker are at an attractive entry point following an overdone selloff
UBS analyst Jo Walton says Novo Nordisk is “well placed” to continue benefiting from high demand for the
GLP-1 class of medicines in the near term. Sees a “positive inflection” for GLP-1 trends in 1Q following
“muted” prescription growth in the US in 4Q. Says CagriSema data in obesity was undoubtedly disappointing
but it is still a higher efficacy treatment that could still show differentiation in type-2 diabetes. PT lowered to
DKK750 from DKK1,100. Separately, Barclays analyst Emily Field (overweight) says in a note that the share
price reaction following last month’s CagriSema trial results is “overdone”. Barclays highlights a key opinion
leader’s view that the drug would help treat patients who don’t benefit from Novo’s Wegovy or Eli Lilly’s
Zepbound. - Shell shares fell 1.4% after a 4Q trading update that showed weakness across several divisions,
including natural gas
Shell said its natural gas divisions saw lower sales volumes and trading earnings, the latest sign that 2024
ended on a weak note for major energy companies. The warning on Shell’s crucial natural gas division, in a
fourth-quarter trading update, was accompanied by figures showing a slight rise in operating expenses across
the company and lower profits from buying and selling oil products. Shell’s natural gas production in the
fourth quarter is seen at 880,000 to 920,000 barrels of oil equivalent a day, down from 941,000 a day in the
third quarter due to maintenance at the Pearl Gas-to-Liquids plant in Qatar. Gas liquefaction volumes are
seen between 6.8 million and 7.2 million tons, down from 7.5 million in the prior period. “Trading and
optimization results are expected to be significantly lower than the third quarter of 2024, driven by the non
cash impact of expiring hedging contracts” for the fuel, Shell said. These hedging contracts were related to
Russia’s invasion of Ukraine according to the company. Shell’s update “looks soft relative to current
expectations,” RBC Capital Markets Head of European Energy Research Biraj Borkhataria said. “We expect the
update to drive downgrades to consensus earnings expectations,” but “do not expect weaker results to
impact shareholder returns or the broader outlook.” - Johnson & Johnson shares fell 2.7% after Wells Fargo published a research report alleging some
disruption to the supply of the company’s ablation device, Varipulse, due to side effects
Johnson & Johnson later confirmed in a statement that it temporarily paused its US External Evaluation and
all US Varipulse cases on Jan. 5. “We spoke with a few physicians and industry contacts who said JNJ has
paused cases in some areas of the US with its Varipulse pulsed field ablation (PFA) catheter potentially due to
adverse events such as stroke,” analyst Larry Biegelsen wrote. JNJ said its investigating the root cause of four
neurovascular events in the evaluation. No impact to commercial activity and Varipulse cases outside the US.
Piper Sandler analyst Matt O’Brien says the pause is “very good” for Boston Scientific and “good” for
Medtronic. “While we are not sure how long this pause could last, we believe it will be a while and that even
if back on market, most clinicians will lean towards using BSX and MDT,” O’Brien wrote. Adds that BSX would
likely benefit more as the pulsed field ablation (PFA) market leader, while MDT’s tailwind will likely be a bit
more muted. - AMD shares fell 4.3% after HSBC downgraded the chipmaker to reduce from buy
“Its AI GPU roadmap is less competitive than we previously thought,” and “hence, we believe AMD wouldn’t
be able to penetrate the AI GPU market as much as we had earlier anticipated,” wrote analyst Frank Lee.
AMD “is unlikely to have an AI rack solution to compete with Nvidia’s”.PT to $110 from $200.
Meanwhile, Bloomberg reported afterhours that the Biden administration plans one additional round of
restrictions on the export of artificial intelligence chips before President-elect Donald Trump is sworn in on
Jan. 20. AMD and Nvidia stock edged lower (-0.8% and -1% respectively) in afterhours trading. - eBay Inc (EBAY US)
Meta Platforms offered to publish listings from eBay on Facebook Marketplace in an effort to comply with a
landmark European Union antitrust order that was accompanied by a €798 million fine. Meta said
Wednesday it will launch a test in Germany, France and the US that will enable “buyers to browse listings
from eBay directly on Facebook Marketplace while completing their transaction on eBay.” EBay shares rose
9.9%. - Edison International fell 10.2% as thousands flee the Los Angeles area due to wildfires destroying
homes and infrastructure in the region
The decline put the California-based utility on track for its worst trading day since March 2020.
Edison International’s Southern California utility shut off electricity to about 136,000 homes and businesses
in an effort to prevent wildfires and warned it may need to cut power to additional customers. “The fires are
in EIX service territory but there have not been any reports of utility equipment involvement
yet,” Guggenheim analysts said. “Investors remain nervous from our conversations given the lack of
containment with a ‘sell first, ask questions later’ mindset,” Jefferies analysts wrote. However, they say that
they “remain comfortable” given California’s AB 1054 liability protections that limit tail risks for the utilities.
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