Bitcoin hits new record highs

General market commentary

Last week, central banks dominated market attention, with notable moves from the Bank of Canada and European Central Bank. While the Bank of Canada delivered a sharper-than-expected 50-basis-point rate cut, the ECB opted for a more measured 25-basis-point reduction, reflecting subdued growth and inflation prospects in Europe. Despite these policy shifts and some indices touching record highs, overall market performance was largely flat. As the week closed, investor focus shifted to the Federal Reserve’s upcoming rate decision, expected to set the tone for 2025, along with announcements from the Bank of England and Bank of Japan.

Equity markets demonstrated resilience, with the Nasdaq crossing the 20,000 mark, reflecting solid investor confidence. The year’s performance has been underpinned by a supportive mix of robust economic growth, improving corporate earnings, moderating inflation, and central bank easing. However, as inflation progress slows, central banks, particularly the Fed, are expected to adopt a more cautious stance on rate cuts in 2025, balancing stability with the need to maintain momentum.

Diverging monetary policies across regions have strengthened the US dollar, boosting the appeal of American equities compared to global counterparts. While higher borrowing costs could limit valuation growth, strong fundamentals such as rising wages, robust corporate performance, and enthusiasm for innovation-driven sectors like artificial intelligence continue to support markets. Looking ahead, increased macroeconomic uncertainty may lead to volatility, but diversified portfolios remain well-positioned for moderate returns amid resilient economic conditions.

Latest market update

• Asian markets mostly fell on Monday as investors remained cautious ahead of the U.S. Federal Reserve’s interest rate decision, with weak Chinese retail sales data raising concerns about the pace of recovery in the world’s second-largest economy. Chinese shares declined, with the Shanghai Composite down 0.1% and the CSI 300 dropping 0.4%, despite industrial production meeting expectations.

• US equity futures were largely unchanged on Monday, with investors awaiting the Federal Reserve's policy decision and forward guidance on interest rates. Market focus was also on upcoming purchasing managers' index data and the potential impact of MicroStrategy's inclusion in the Nasdaq 100 Index.

• The S&P 500 closed flat on Friday, while the Nasdaq gained 0.1%, and the Dow fell 86 points, extending its losing streak to seven sessions. Key market movers included losses in major tech companies like Nvidia and Meta, while Tesla surged 4.3% and Broadcom saw a 24.4% jump after reporting strong AI-related revenue growth, boosting semiconductor equities like Marvell and Taiwan Semiconductor.

• European equities extended its losses on Friday, weighed down by the ECB’s rate cuts and lowered growth and inflation forecasts. LVMH, Sanofi, and Siemens saw declines, while insurers Allianz, AXA, and Munich rebounded strongly, as markets remained cautious amid political developments in France and uncertainty over future economic support from China.

• The dollar eased to around 106.8 this morning, remaining near its highest levels in three weeks ahead of the Federal Reserve’s policy decision, with markets anticipating a 25 basis point rate cut. Meanwhile, the euro traded at 1.0516 against the dollar, reflecting ongoing uncertainty over global inflation and central bank policies.

• Bitcoin surged to a record high above $106,000 on Monday, driven by optimism over President-elect Donald Trump’s proposal for a U.S. bitcoin strategic reserve, pro-crypto regulatory signals, and continued whale trading reducing supply on exchanges. Additional momentum came from MicroStrategy’s inclusion in the Nasdaq 100, further boosting investor sentiment.

• Oil prices edged lower on Monday as markets awaited the U.S. Federal Reserve’s policy decision and assessed weak Chinese retail sales, fuelling demand concerns. Despite recent gains driven by potential U.S. sanctions on Russia, fears of oversupply and sluggish global demand continued to weigh on sentiment.

• China's economic data for November 2024 showed weaker-than-expected retail sales growth of 3%, particularly in sectors like clothing and petroleum, while industrial production rose by 5.4%, supported by strong manufacturing gains. Fixed-asset investment increased by 3.3%, but real estate investment dropped by 10.4%, and the unemployment rate remained stable at 5%.

• Moody's downgraded France’s credit rating to "Aa3" from "Aa2," citing concerns over political fragmentation and its potential to hinder efforts to reduce large fiscal deficits in the coming years. Despite this downgrade, France’s sovereign outlook was revised to stable from negative as President Macron named the centrist ally François Bayrou as the new Prime Minister on Friday.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

• Palantir Technologies, MicroStrategy, and Axon Enterprise will join the Nasdaq 100 index on December 23, following impressive gains in 2024. Meanwhile, Moderna, Super Micro Computer, and Illumina are set to be removed due to poor performance or declining market capitalisation.

• Super Micro Computer is working with Evercore to explore fundraising options, including equity, debt, and a potential private investment in public equity, after missing its August deadline for filing its annual financial report. The move aims to stabilise the company’s finances and prevent delisting from the stock exchange.

• Porsche SE warned of potential write-downs of up to €20 billion on its Volkswagen stake and €2 billion on its Porsche AG stake, citing high costs, union conflicts, and weakening demand. It expects a "significantly negative" group result for 2024, as Volkswagen's dividend drops amid declining earnings and mounting financial pressures.

• Eli Lilly's Manjaro is gaining popularity in the UK, outpacing Novo Nordisk's Wegovy due to its higher efficacy in clinical trials, with patients losing up to 23% of their body weight compared to Wegovy's 15%. Although not yet available through the NHS, Manjaro is expected to be accessible within a year, offering strong competition to Wegovy.

• Shares of Munich Reinsurance rose over 5% on Friday after the company projected a net profit of €6 billion and €64 billion in insurance revenue for 2025, driven by strong performance across its business segments. While acknowledging potential risks, Munich Re expects continued profitability, particularly in its reinsurance and ERGO divisions, with a focus on maintaining operational efficiency.

• Ferrovial, alongside other shareholders, sold a 37.62% stake in FGP Topco Ltd., the parent company of Heathrow Airport Holdings, to Ardian and PIF, reducing its own holding to 5.25%. The transaction is expected to generate Ferrovial a profit of €2.5 billion by the end of 2024, including €2 billion from the share sale and €500 million from its remaining stake.

• China's CNOOC has sold its U.S. oil and gas assets in the Gulf of Mexico to British chemicals group INEOS for nearly $2 billion, aiming to optimise its global portfolio. The sale follows concerns over potential Western sanctions linked to China's stance on Russia's invasion of Ukraine.

• Wolfe Research views Visa as well-positioned for strong growth in 2025, citing robust consumer trends, cross-border transaction growth, and diversified areas like value-added services and tokenisation, which are driving double-digit momentum. Analysts maintain an "outperform" rating with a $350 price target, highlighting opportunities in pricing, innovation, and fraud prevention as key drivers of continued outperformance.

• Wolfe Research upgraded PayPal to "outperform" and raised its price target to $107, citing growth opportunities and operating leverage, particularly through monetising Venmo and improving checkout experiences. The brokerage projects upside potential for PayPal, with a forecast of $5.61 adjusted earnings per share for 2026, surpassing consensus estimates.

• Jefferies downgraded Allianz to "hold" from "buy," citing the company's strong performance and high valuation, despite its growth targets and earnings potential. Allianz's share price has risen 23% over the past year, and while its capital return policy is positive, Jefferies sees limited upside from current levels.

• Wedbush Securities raised Tesla’s price target to $515, citing a $1 trillion opportunity in autonomous driving and AI, with Full Self-Driving (FSD) technology and the Cybercab ride-sharing service seen as pivotal to future growth. The firm expects regulatory easing under the Trump administration and strong demand from China to accelerate Tesla’s path to a potential $2 trillion market cap by 2025.

• Barclays has upgraded Norwegian Cruise Line Holdings to "overweight," citing strong industry demand and the company's attractive valuation. The bank also maintained a positive outlook on Royal Caribbean but downgraded Viking Cruises due to its premium valuation and lower growth potential.

• J.P. Morgan has downgraded several U.S. homebuilder shares, including D.R. Horton and Toll Brothers, citing slowing earnings growth, stretched valuations, and challenging supply-demand dynamics for 2025. Analysts expect housing prices to stabilise, with limited demand improvement due to high interest rates and affordability pressures.

• Goldman Sachs initiated coverage on ELF Beauty with a "buy" rating and a $165 price target, highlighting its innovative marketing and strong growth momentum. Analysts praised ELF as a disruptive leader in the beauty sector, outperforming amid slowing demand and retail disruptions.

Upcoming data and events

This week brings a flurry of key economic data, including PMI updates, US retail sales, Germany's Ifo index, and November PCE prices, alongside pivotal monetary policy decisions from the UK, Japan, and the US, with the Fed's announcement taking centre stage on Wednesday. Quarterly earnings from major firms such as H&M, Nike, FedEx, Micron, and Accenture will also offer valuable insights into corporate performance and consumer trends.

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