Good Morning!
Stock futures showed mixed performance as investors assessed a new law signed by President Biden to avert a government shutdown. NASDAQ futures are up 0.42%, while DOW futures are down 0.26% and S&P futures are down 0.2%. Trading volume is expected to be light as the New York Stock Exchange will close early Tuesday for Christmas Eve. Investors remain hopeful for a "Santa Claus rally" to boost markets after a turbulent December.
MicroStrategy and Palantir are set to join the Nasdaq-100 index today. ETFs and mutual funds tracking the Nasdaq-100 are required to purchase shares of companies included in the index, increasing demand for these stocks. In the futures market, MicroStrategy is trading 1.84% lower, while Palantir is up 0.58%.
Novo Nordisk is gaining 4.99% today. The stock fell 19% on Friday following disappointing results from the REDEFINE-1 phase 3 trial for CagriSema, an experimental obesity treatment. The trial showed a 22.7% weight loss (20.3% placebo-adjusted), underperforming the anticipated 25% weight loss.
Crypto Highlights
Bitcoin’s Continued Decline: Bitcoin dropped 2% to $95,278 on Monday, marking a week of losses after falling below the critical $100,000 threshold last Thursday. The Federal Reserve’s hawkish tone, indicating only two rate cuts in 2025, has pressured the cryptocurrency market.
Mixed Performance Across Cryptocurrencies: XRP fell 3% to $2.19, while Solana and Polygon posted losses of 2% and 3%, respectively. On the other hand, Ethereum (ETH) gained 1% today, reaching $3,333 per coin, though it remains 2% lower compared to Friday afternoon.
Policy and Leadership Changes: Michael Kratsios has been appointed to lead the Office of Science and Technology Policy, and David Sacks has been named the "crypto czar." These appointments suggest a significant regulatory shift for the cryptocurrency sector.
Market Sentiment: Investor sentiment remains cautious of the Federal Reserve’s hawkish tone, indicating only two rate cuts in 2025.
Upcoming Earnings
There are no significant earnings announcements scheduled for today.
Headlines
Trump Threatens to Regain Control of Panama Canal
President-elect Donald Trump, speaking at Turning Point USA's annual conservative conference, criticized Panama for charging "exorbitant" fees for the use of the Panama Canal. He demanded fee reductions or a return of the canal to U.S. control, calling it a "vital national asset." Trump's remarks sparked a swift rebuke from Panama's President José Raúl Mulino, who affirmed the canal's sovereignty and Panama's independence.
The canal, a crucial trade link between the Atlantic and Pacific oceans, was controlled by the U.S. until 1977 treaties gradually handed it over to Panama by 1999. Trump's comments signal a potential shift in U.S. foreign policy.
Republicans Praise Elon Musk as a Political Powerhouse
Republican lawmakers praised Elon Musk for his involvement in last week's government funding debate, with some comparing his influence to that of a "prime minister." Musk's role in derailing a bipartisan spending bill has amplified his political clout, fueled by his threats to back primary challenges against dissenting candidates.
$600 Billion Bond Fund Boom
Global bond funds attracted over $600 billion in investments in 2024, according to a Reuters report. As inflation eases toward target levels, central banks have begun lowering interest rates, prompting investors to lock in higher yields. EPFR data shows a stark turnaround in fixed income flows, with $617 billion invested in bond portfolios by mid-December, compared to the $250 billion outflow seen in 2022. This figure comfortably surpasses the $500 billion record set in 2021. Equities also drew significant inflows, reaching $670 billion as global markets hit new highs.
Bond Traders Brace for Challenging 2025 Amid Fed Easing and Inflation Concerns
Bond traders are entering 2025 with trepidation, facing an unusual Federal Reserve easing cycle that has defied historical patterns. Despite three consecutive rate cuts, U.S. Treasury yields have surged, with the benchmark 10-year yield climbing to 4.54%. This marks the sharpest rise during an easing cycle since 1989, leading to significant losses in government debt. Persistent inflation and the Fed’s cautious approach to further cuts have disrupted traditional market expectations, creating a challenging environment for fixed-income investors.
One bright spot for traders has been the resurgence of the curve steepener strategy, where short-term Treasuries outperform longer-term bonds. With two-year yields near 4.3%, these securities offer an attractive blend of stability and potential price appreciation if the Fed cuts rates more aggressively than expected. This strategy contrasts with longer-term bonds, which continue to struggle to attract buyers due to sticky inflation and economic resilience.
The outlook for 2025 is further clouded by policy uncertainty as President-elect Donald Trump prepares to take office. His administration’s fiscal policies, including potential spending increases and tax reforms, are expected to fuel both economic growth and inflation.
China Condemns U.S. Military Aid to Taiwan
China has strongly protested recent U.S. military aid and sales to Taiwan, accusing the U.S. of "playing with fire" and urging a halt to actions it claims undermine peace in the Taiwan Strait. President Joe Biden authorized $571 million in defense aid, including military training, in addition to $295 million in arms sales. These efforts aim to bolster Taiwan's self-defense against potential Chinese aggression.
Taiwan welcomed the support, reaffirming the U.S.'s commitment to its defense. This aid follows earlier packages, including a $2 billion arms sale in October. China has responded with military drills near Taiwan, escalating regional tensions.
Meanwhile, President-elect Donald Trump has taken a different stance, suggesting Taiwan should pay for U.S. defense support and expressing uncertainty about committing to Taiwan's defense in case of a Chinese invasion.
U.S. Launches New Probe Into Legacy Chinese Chips as Tech Pressure on Beijing Escalates
The Biden administration has initiated a new investigation into Chinese legacy semiconductors, focusing on their production and use in sectors like automobiles, household goods, and defense systems. The probe, conducted under the Trade Act of 1974, will examine China’s non-market practices and industrial policies in the production of silicon carbide substrates and other materials critical to semiconductor fabrication. Legacy chips, while less advanced than cutting-edge semiconductors, are essential to foundational technologies such as telecommunications and the electrical grid.
Tech Consortium Eyes Defense Contracts to Challenge Industry Giants
Palantir Technologies and Anduril Industries are in talks with companies like OpenAI, SpaceX, Saronic, and ScaleAI to form a consortium aimed at competing for U.S. defense contracts, according to The Financial Times. The group plans to leverage AI and autonomous technologies to challenge traditional defense giants like Lockheed Martin, Northrop Grumman, Boeing, and RTX.
Anduril, known for autonomous systems like pilotless fighter jets, and Saronic, which develops autonomous ships, are at the forefront of this initiative. An announcement of alliances is expected next month.
Meanwhile, Michael Kratsios of ScaleAI was named director of the White House Office of Science and Technology Policy under President-elect Donald Trump, further emphasizing the focus on AI and technology in defense strategy. Palantir stock continues to soar, hitting a record close on Friday and gaining 369% this year, as it joins the Nasdaq 100 index.
Starbucks Union Strike Expands Across 9 States
The Starbucks Workers United strike has grown to nine states as baristas protest for wage increases ahead of an end-of-year deadline. By Sunday, stores in Missouri, New Jersey, and New York joined earlier walkouts in Colorado, Ohio, Pennsylvania, and other locations. The union, representing over 10,000 workers at 525 stores, reported 30 store closures so far and expects the strike to impact hundreds more by Tuesday.
The five-day strike coincides with Starbucks’ busy holiday season. Starbucks claims its wage demands are unsustainable, while the union denies asking for excessive increases. Starbucks maintains the disruptions have had minimal impact and highlights its benefits package, including an average pay of $18 an hour. The strike is set to continue through Christmas Eve.
Amazon and Starbucks Workers Strike Amid Push for Union Recognition
Amazon delivery drivers and Starbucks baristas in several U.S. cities are on strike, demanding union recognition and progress on labor contracts. The strikes, coinciding with the holiday season, aim to pressure the companies into negotiations.
Workers at Amazon delivery hubs and warehouses demand higher wages, better benefits, and safer conditions. Amazon disputes their union status, arguing that delivery drivers are employed by contractors. The National Labor Relations Board (NLRB) recently ruled that drivers are joint employees of Amazon, escalating the legal battle.
Honda-Nissan Merger Could Boost Manufacturing Efficiency
Speculation about a potential Honda-Nissan merger continues, with reports suggesting the automakers may collaborate by using each other's existing manufacturing facilities. This could streamline production and reduce costs, particularly in regions like Europe, where Honda lacks car production plants but could utilize Nissan's UK facility.
In the U.S., Honda's five auto plants and Nissan's three could see complementary operations, potentially focusing on hybrid and electric vehicles to meet North American demand.
Party City to Close All Stores Amid Bankruptcy Filing
Party City, the popular retailer for party supplies and decorations, announced plans to shut down nearly 700 stores nationwide and wind down its operations. The company filed for Chapter 11 bankruptcy protection for the second time in under two years, citing inflationary pressures, rising costs, and declining consumer spending as key factors.
Despite restructuring in 2023 that eliminated nearly $1 billion in debt, Party City was unable to overcome "macroeconomic headwinds." More than 95% of its 12,000 employees will remain to assist with the closure process, and the company has begun offering steep discounts of up to 50% as it clears inventory.
Swiss Inquiry Castigates Failings of Credit Suisse Oversight, but Pins Most Blame on Bosses
Swiss lawmakers have called for stricter financial sector oversight following a comprehensive investigation into the collapse of Credit Suisse. A 569-page parliamentary report highlighted systemic mismanagement within the bank and exposed lapses in the transparency and effectiveness of Swiss regulators. The inquiry, initiated in response to Credit Suisse’s dramatic downfall in March 2023, attributed the crisis primarily to years of mismanagement by the bank’s leadership rather than direct failures of the authorities.
The report chronicled the chaotic final days of Credit Suisse, revealing haphazard crisis management among government officials, the central bank, and the financial regulator FINMA. While the committee criticized the lack of written records and transparency, it acknowledged that regulators prevented a global financial crisis. The unravelling of the 167-year-old institution has left Switzerland with only one major international bank, UBS, which acquired Credit Suisse in a government-orchestrated rescue.
M&G Sues Royal London for £27M Over Client Access to 'Inappropriately Risky Investments'
Asset management firm M&G has filed a lawsuit against Royal London at the High Court in London, seeking damages of at least £27 million plus interest. The legal action stems from Royal London’s 2020 acquisition of the wealth management platform Ascentric.
According to court documents cited by the Financial Times, M&G alleges that Ascentric exposed its customers to excessively risky investments, with an inappropriately high percentage of their pension funds allocated to such products. M&G claims Royal London failed to adequately disclose these investment risks before the acquisition.
EU Imported Record Volumes of Russian LNG in 2024, Bloomberg Reports
The European Union imported record amounts of Russian liquefied natural gas (LNG) in 2024, according to ship-tracking data compiled by Bloomberg. France reached its highest-ever volumes, while Spain neared record levels set in 2023, highlighting the bloc’s ongoing reliance on Russian energy despite earlier efforts to diversify supplies.
New Blow to Official UK Data with Fall in Responses to GDP and Inflation Survey
The UK's Office for National Statistics (ONS) faces declining response rates for key surveys that inform GDP and inflation estimates. The Living Costs and Food (LCF) survey, critical for understanding household spending, has seen participation drop from 60% in 2000 to a record low of 22% in 2023. This mirrors issues with the Labour Force Survey, which hampers job market analysis.
