Rise and shine everyone.

It’s a busy week with the Fed meeting tomorrow, and the Bank of Japan and the Bank of England on Thursday. But, let’s look at what’s been going on since yesterday.

Yesterday, EU bourses moved lower while US stocks edged higher to start the week, led by gains in big-cap tech and the Nasdaq. Services PMI readings across Europe and the US remained stronger than manufacturing. The US energy complex lost ground, but indices benefited from tech strength, other than Nvidia.

Here’s a look at the Equal-Weight SPX Sector Performance.

Treasury yields were slightly lower compared to Friday, maintaining last week’s steepening post-November US inflation data. Bitcoin surged further, breaking above $107K midday.

Today the bond rally in China continued aggressively, with 10-year yields falling another 4bps overnight to 1.72%, well below the 2.05% seen on November 29th. Despite recent government stimulus, Chinese investors view government bonds as the safest asset, given risks in stocks, property, and starting businesses. The offshore Yuan approached the 7.30 level again. Reports from the CEWC meeting suggested that China may raise its budget deficit ratio to a record 4.0% in 2025.

Tensions emerged between Japan and the incoming US administration as President-elect Trump appeared to snub Japan’s new PM Ishiba, meeting only with his team in Florida. This contrasts sharply with former PM Shinzo Abe, who developed a close relationship with Trump, securing favorable trade and security ties. Asian markets were mixed, with ASX outperforming and Kospi underperforming. Chinese and Hong Kong equities continued to struggle, while the Nikkei was flat. Australian weekly and monthly consumer confidence indices saw sharp declines.

In Canada, political pressures mounted on PM Justin Trudeau. Deputy PM and Finance Minister Chrystia Freeland abruptly resigned, forcing Trudeau to swiftly appoint a new Finance Minister ahead of the budget. Further turmoil arose as a member of Trudeau’s own party, Chad Collins, joined opposition calls for his resignation.

European markets were mixed. The FTSE100 underperformed following stronger-than-expected UK job and wage data, which reduced expectations for 2025 BOE rate cuts. The surprise data lifted GBP, though gains were offset by a stronger USD amid risk-off flows. UK jobless claims unexpectedly dropped to -0.3K, while ILO employment change smashed estimates at +173K (vs. +5K expected). Weekly earnings growth hit 5.2%, the highest since May.

Meanwhile, in Germany, the IFO Business Climate and ZEW Current Situation surveys both fell to post-pandemic lows, reflecting weakness in flash manufacturing PMIs. French manufacturing PMI also hit pandemic-era lows.

Premarket weakness in Nvidia was tied to TF International analyst Ming-Chi Kuo, who cited severe thermal issues in testing for Nvidia’s GB300/B300 systems, potentially impacting production timelines. Bitcoin continued its rally, reaching another all-time high at $107.8K and consolidating above the $100K psychological level.

Chart of the Day

Morgan Stanley highlights that the current earnings growth inflection is not accompanied by an unemployment cycle, signaling an extension of the late business cycle. Economists forecast continued rate cuts into 2025 and note stabilization in business cycle indicators, suggesting a broader recovery across industries. Financials and Software are currently the standout sectors expected to lead this rebound, supported by relative earnings revisions and growth.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)