Wednesday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 19,630 -116 points -0.6%
Nikkei 225 (Japan) Projected Open: 39,280 +31 points +0.1%
Quick Summary - 4 Things To Know Before Asian Markets Open
South Korea's President Yoon Suk Yeol says he will lift martial law only hours after announcing it. Yoon suddenly declared emergency military rule in a late-night move, plunging the country into a political crisis. But less than two hours after his declaration, MPs defied the president, gathering at the National Assembly and voting unanimously to block his move, as lawmakers and the head of state wrestled for control of the country. Some MPs and the speaker of the National Assembly broke through barricades or climbed fences to get inside the building where there were scuffles between police sent to enforce the president’s decree and protesters outside.
China will ban shipments to the US of several “dual use” items used in semiconductor manufacturing and military applications, as Beijing retaliates against the semiconductor restrictions Washington unveiled on Monday. China’s commerce ministry on Tuesday said it would not permit the export of dual-use items related to gallium, germanium, antimony and superhard materials to the US, and that it would implement stricter controls for graphite-related items. The items are used in the production of semiconductors as well as in military applications such as ammunition.
Bloomberg News reported Tuesday that China's top leaders are scheduled to begin the annual closed-door Central Economic Work Conference next Wednesday to set goals and devise stimulus plans for 2025. The high-profile conclave, scrutinized by investors for how officials steering the world’s second largest economy plan to direct monetary, fiscal and industrial policies, will last for two days, Bloomberg said. The meeting is normally attended by the nation’s top leadership including President Xi Jinping as well as senior financial regulators and was held on the same dates last year.
US President-elect Donald Trump has repeated his pledge to block Japanese company Nippon Steel’s planned purchase of US Steel. “I am totally against the once great and powerful U.S. Steel being bought by a foreign company, in this case Nippon Steel of Japan,” Trump said in a post to his social media platform Truth Social on Tuesday. “As President, I will block this deal from happening,” he said, adding that he will make US Steel “Strong and Great Again” through the use of tax incentives and tariffs. In response, Nippon Steel said it was determined to protect and grow US Steel. “We will invest no less than $2.7 billion into its unionized facilities, introduce our world-class technological innovation, and secure union jobs so that American steelworkers at US Steel can manufacture the most advanced steel products for American customers,” it said in a statement sent to CNN.
South Korea's President Will Lift Martial Law He Declared Hours Ago
South Korea's President Yoon Suk Yeol says he will lift martial law only hours after announcing it. Yoon suddenly declared emergency military rule in a late-night move, plunging the country into a political crisis. But less than two hours after his declaration, MPs defied the president, gathering at the National Assembly and voting to block his move, as lawmakers and the head of state wrestled for control of the country. Some MPs and the speaker of the National Assembly broke through barricades or climbed fences to get inside the building where there were scuffles between police sent to enforce the president’s decree and protesters outside.
In a surprise late night television address Tuesday, Yoon said the measure was necessary to protect the country from North Korea's communist forces and to eliminate anti-state elements. Lawmakers have since voted to block the president's move, after both the ruling party and opposition vowed to obstruct the declaration. The move comes as Yoon's People Power Party and the main opposition Democratic Party continue to disagree over next year's budget bill. Last week, the opposition majority in parliament voted to cut almost US$3bn from his proposed 2025 budget, a move seen as an attempt to rein in the presidency.
In his broadcast, President Yoon said he had no choice but to resort to martial law in order to safeguard free and constitutional order. "I declare martial law to protect the free Republic of Korea from the threat of North Korean communist forces, to eradicate the despicable pro-North Korean anti-state forces," Yoon said. South Korea’s main opposition party leader Lee Jae-myung condemned the move, calling it unconstitutional. He called on all lawmakers from his Democratic Party to converge on parliament to vote down the declaration, as police buses moved in to block the entrance to the parliament building. According to the country’s constitution, a parliamentary vote can reverse a declaration of martial law. Han Dong-hoon, the leader of Yoon’s own People Power party, called on the military to stand down in the aftermath of the vote. “Martial law has lost its effect,” he posted on social media. “So from this moment on, all state institutions exercising physical force, including the military and police of the Republic of Korea, are obligated not to follow unlawful or unfair instruction.” The last time martial law was declared in South Korea was in 1979 after the assassination of then dictator Park Chung Hee.
The Korea Exchange announced it would hold an emergency meeting “to prepare response measures” and later decide whether the market would open today, according to local media reports.
China Retaliates Against Latest US Trade Restrictions
China will ban shipments to the US of several “dual use” items used in semiconductor manufacturing and military applications, as Beijing retaliates against the semiconductor restrictions Washington unveiled on Monday. China’s commerce ministry on Tuesday said it would not permit the export of dual-use items related to gallium, germanium, antimony and superhard materials to the US, and that it would implement stricter controls for graphite-related items. The embargoed minerals and metals are used in the production of semiconductors and batteries, as well as communications equipment components and military hardware such as armour-piercing ammunition. China produces 98% of the world’s supply of gallium and 60% of germanium, according to the US Geological Survey.
The move comes after Washington on Monday launched its third crackdown in three years on China's semiconductor industry, curbing exports of advanced chips to 140 companies, in a bid to limit Beijing’s ability to create advanced artificial intelligence with military applications. The restrictions on the export of key manufacturing tools will affect both US companies and foreign firms that use American technology in their chip making equipment. The US will also prevent the export of advanced high bandwidth memory (HBM), a critical component in AI chips, to China. It also introduced new export curbs on chip making equipment made in countries such as Singapore, Malaysia and South Korea. Taiwan is also subject to the rule while Japan and the Netherlands will be exempt. Washington also added 136 Chinese companies to a US trade blacklist, including major Apple and Samsung supplier Wingtech, which had been working to buy up foreign semiconductor technology.
“The US has broadened the concept of national security, politicising and weaponising trade and technology issues, and abused export control measures,” the Commerce Ministry said in a statement. “To safeguard national security, China has decided to strengthen export controls on dual-use items to the US,” it added, noting that the measures would be effective immediately.
Four major Chinese industry associations, representing the internet, auto, semiconductor and communications industries, reacted to the US moves by calling on their members to reduce purchases of US semiconductors. “US chip products are no longer safe or reliable, and relevant Chinese industries should be cautious in procuring US chips,” said the China Semiconductor Industry Association. Instead, Chinese internet firms should “expand cooperation” with semiconductor suppliers in other countries and regions, while actively using China-made chips, the Internet Society of China said.
China Leaders Plan To Discuss GDP Target & Stimulus Next Week
Bloomberg News reported Tuesday that China's top leaders are scheduled to begin the annual closed-door Central Economic Work Conference next Wednesday to set goals and devise stimulus plans for 2025. The high-profile conclave, scrutinized by investors for how officials steering the world’s second largest economy plan to direct monetary, fiscal and industrial policies, will last for two days, Bloomberg sources said. The meeting is normally attended by the nation’s top leadership including President Xi Jinping as well as senior financial regulators and was held on the same dates last year. The ruling Communist Party likely won’t announce when the meeting begins, with the public learning it’s taken place when the readout is published. While any specific numbers settled on won’t be revealed until the yearly parliament session in March, market participants will scour the statement for clues of policymakers’ conclusions.
China To Broaden M1 Money Supply Measure
The People's Bank of China (PBoC) announced that a new statistical method for measuring the M1 money supply will be implemented from January 2025. This updated measure will include personal demand deposits and customer reserves of non-bank payment institutions, aligning with practices of other major economies. The central bank stated late Monday that it will release the first M1 reading using this new measure in early February 2025, covering data for January 2025. Additionally, it will unveil revised M1 outstanding figures and growth rates from January 2024 under the new standard. Governor Pan Gongsheng, speaking at a forum, said that the PBoC will also enhance the monitoring of M2 and overall total social financing. He added that the PBoC plans to use a range of monetary policy tools and enhance countercyclical measures in 2025 to maintain sufficient liquidity and reduce overall financing costs for businesses and households.
South Korea’s Inflation Climbs Less Than Expected In November
South Korea’s inflation rate climbed in November to 1.5% year-on-year, from a 45-month low in October, as the country grapples with a weakening Korean won and slowing exports. The figure was higher than October’s inflation reading of 1.3%, and lower than the 1.7% expected by economists polled by Reuters. However, despite the slight increase, inflation remained below the Bank of Korea's (BOK) 2% target range for the third consecutive month.
Last week, the BOK surprised markets by cutting its policy rate by 25 bps to 3%, marking the second consecutive monthly reduction and the first instance of back-to-back rate cuts since 2009. The BOK said in a statement that the cut was to “mitigate downside risks to the economy.” The BOK revised its inflation projections for 2024 and 2025, lowering them to 2.3% and 1.9%, respectively, down from previous forecasts of 2.5% and 2.1%.
Turkish Inflation Slows To 47%
Turkish inflation slowed to 47.1% in November, slightly above expectations, ahead of the central bank’s latest interest rate decision later this month. Prices grew 2.24% on a monthly basis, the state statistics department said on Tuesday, driven by food, education and health. Economists expected annual inflation of 46.6% and monthly inflation of 1.9%. At its last meeting, the central bank kept interest rates at 50% for the ninth straight month. It said it would consider the “lagged effects of monetary tightening” and look at underlying trends in inflation when it makes its next decision on December 26.
US Job Vacancies Rise More Than Expected In October
Demand for US workers rose in October. There were 7.7mn job vacancies in October, sharply up from 7.4mn in September, the Labor Department said on Tuesday in its latest job openings and labor turnover survey (JOLTS). Economists, who consider job openings to be a proxy for labour demand, had been expecting 7.47mn openings. Layoffs held at 1.6mn, while job quits increased to a five-month high of 3.3mn, signalling worker confidence in the labour market. The quits rate, a metric that measures voluntary job leavers as a proportion of total employment, increased to 2.1% from 1.9% in the previous month. The job openings figures come after last month’s private payrolls data showed far fewer jobs created than anticipated. November’s payrolls data will be released on Friday.
US Consumers Spend Record $10.8bn On Black Friday
US consumers spent US $41.1bn over the Thanksgiving period, as shoppers spent record amounts on Black Friday. Overall spending for the five-day period was up 8.2% on last year, with Black Friday drawing a record US$10.8bn, according to data on Tuesday from Adobe Analytics, up 10.2% year-on-year. Spending on Cyber Monday was US$13.3mn, up 13.3% from a year earlier, with more half of online sales made through a mobile device, Adobe said, representing US$7.6bn. Adobe forecasts that sales across the full holiday season from November 1 to December 31 will hit US$240.8bn, a rise of 8.4% from last year.
Trump Repeats Vow To Block Nippon Steel’s Bid For US Steel
US President-elect Donald Trump has repeated his pledge to block Japanese company Nippon Steel’s planned purchase of US Steel. “I am totally against the once great and powerful U.S. Steel being bought by a foreign company, in this case Nippon Steel of Japan,” Trump said in a post to his social media platform Truth Social on Tuesday. “As President, I will block this deal from happening,” he said, adding that he will make US Steel “strong and great again” through the use of tax incentives and tariffs. In response, Nippon Steel said it was determined to protect and grow US Steel. “We will invest no less than $2.7 billion into its unionized facilities, introduce our world-class technological innovation, and secure union jobs so that American steelworkers at US Steel can manufacture the most advanced steel products for American customers,” it said in a statement sent to CNN.
Nippon Steel, the fourth largest global steelmaker, reached an agreement to acquire US Steel last December. However, the deal encountered opposition from United Steelworkers, a prominent labour union, as well as President Joe Biden, who has vowed that US Steel will remain American-owned. US Steel said in September it would be forced to lay off workers and shutter mills without Nippon Steel’s backing. It had put itself up for sale last year after receiving an unsolicited US$7 billion takeover offer from Ohio-based Cleveland Cliffs. The $14.9 billion offer from Nippon Steel resulted from that sale process. The Committee on Foreign Investment in the United States (CFIUS), a team of Cabinet-level appointees that reviews all deals of a certain size involving US entities, had been studying the takeover of US Steel for several months on the grounds of national security.
Takahiro Mori, Nippon Steel’s vice chairman, had told reporters in November that he believes the deal could be closed before Trump assumes the White House in January. In September, US Steel CEO David Burritt had also expressed confidence, defending the planned sale as a deal that would strengthen national security, as well as economic and job security.
UK Regulator Opens Door To Shein London Listing
The UK’s top financial watchdog has opened the door to China’s fast-fashion group Shein joining the London Stock Exchange by saying its decisions on whether companies can list in the UK are based only on their disclosures, not “every aspect of their corporate behaviour”. Nikhil Rathi, chief executive of the Financial Conduct Authority, told the Financial Times that it was “not unusual” for UK-listed companies to carry legal risks around the world and “what’s important is that they disclose it, the investors understand it and they can price that risk”.
Shein filed confidential documents with the FCA this year to do an initial public offering in the UK with a planned market valuation of £50bn (US$63bn). The regulator has come under pressure to block the listing over allegations that Shein uses forced labour as part of its cotton supply from China’s north-western Xinjiang region. “What parliament has not asked us to do is to be a broad regulator around every aspect of corporate behaviour and every company listed in the UK, everywhere around the world,” said Rathi. He declined to comment on Shein specifically.
Vietnam Court Upholds Death Sentence For Property Tycoon
Vietnamese property tycoon Truong My Lan has lost her appeal against her death sentence for masterminding the world’s biggest bank fraud. In April, the trial court found that 68-year-old Truong My Lan had secretly controlled Saigon Commercial Bank, the country’s fifth biggest lender, and taken out loans and cash over more than 10 years through a web of shell companies, amounting to a total of US$44bn. Of that, prosecutors say US$27bn was misappropriated, and US$12bn was judged to have been embezzled, the most serious financial crime for which she was sentenced to death. Tens of thousands of people who invested their savings in SCB lost money, shocking the communist nation and prompting rare protests from the victims.
She appealed the verdict in a month-long trial, but on Tuesday the court in Ho Chi Minh City determined that there was "no basis" to reduce the death sentence for Lan. She is one of very few women in Vietnam to be sentenced to death for a white collar crime. However, there is still a chance for her to escape the death penalty. The law in Vietnam states that if she can pay back 75% of what she took, her sentence will be commuted to life imprisonment.
Asia-Pacific Markets Track Wall Street Higher
Asia-Pacific markets rose Tuesday, tracking gains on Wall Street after the S&P 500 and the Nasdaq Composite closed at new records. Japan’s Nikkei 225 closed 1.9% higher at 39,249. South Korea’s Kospi was up 1.9%. Taiwan’s Taiex notched a 1.3% gain. Australia’s S&P/ASX 200 rose 0.6% to close at a new record high of 8,495. In India, the BSE Sensex closed up 0.7% at 80,846, the highest level since October 21.
Major Asian chip stocks outside of China rose Tuesday, shrugging off a new round of US semiconductor export curbs on Beijing aimed at impairing the country’s capability to produce certain high-end chips. Taiwan Semiconductor Manufacturing Company, the world’s largest contract chip supplier, saw its shares rise 1.9%. In Japan, Tokyo Electron rose 4.3%, Lasertec climbed 4.3% and Advantest gained 3.9%. Japanese technology conglomerate Softbank, which owns a stake in British chip designer Arm, saw its shares rise 2.7%. Japanese tech companies are expected to benefit from further US export controls on China as restrictions related to advanced chips could spur a scramble for China to secure legacy-generation chip tools from elsewhere.
Chinese Tech Shares Underperform
Chinese shares rose as the Politburo skipped a readout of its regular November meeting, fuelling speculation that additional stimulus measures could be on the way. Technology shares underperformed as the latest US crackdown on China’s semiconductor industry weighed on market sentiment.
On the mainland, the CSI 300 closed 0.1% higher at 3,952, reversing earlier losses of 0.3% on hopes of more stimulus. The Politburo took the rare step of skipping a readout of its meeting last month, suggesting the group didn’t convene and putting more emphasis on gatherings next week. Bloomberg News reported Tuesday that China's top leaders are scheduled to begin the annual closed-door Central Economic Work Conference next Wednesday to set goals and devise stimulus plans for 2025.
Naura Technology Group, a partly state-owned chipmaker, contributed the most to the index’s decline as it fell 3.9% after being added to the US entity list. Dawning Information Industry, which manufactures supercomputers, dropped 7.1%. Wingtech shed 1.6% in Shenzhen.
Hong Kong stocks closed higher for a third session, reaching a three-week high. The Hang Seng index added 196 points, or 1.0%, rebounding from morning losses, to close at 19,746, after China's central bank pledged to adopt a supportive policy stance next year and reduce financing costs for companies and households. The Tech index ended the day 0.3% higher.
The yield on Chinese 10-year debt fell to a record low of 1.98% on Tuesday, breaching the 2% mark for a second day. For the year, the yield is down by 57 bps, putting it on track for the biggest annual drop since 2018.
European Markets Higher
European stocks closed higher Tuesday following Wall Street’s tech-led gains on Monday. The region-wide Stoxx Europe 600 index rose 0.4%. Retail stocks led gains, up 1.6%. Insurance stocks meanwhile fell 0.4%. France’s Cac 40 rose 0.3% as stocks steadied ahead of a no confidence vote in Michel Barnier’s minority government due later today. Frankfurt’s Dax rose 0.4%. The political turmoil in France is taking its toll on markets. The CAC 40 Index is underperforming Germany’s stock benchmark by the most in three decades. London’s FTSE 100 was up 0.6%, helped by budget airline easyJet with a 3.3% rise.
The closely watched additional interest rate on France’s 10-year debt, compared with benchmark German Bunds, eased slightly to 85 bps. The yield on French 10-year bonds stands at 2.91%, around the same level currently returned to investors who lend to Greece, which stood at the centre of Europe’s 2012 debt crisis. Mark Haefele, Chief investment officer at UBS Global Wealth Management, said, “this is not going to be something like a euro crisis for a variety of reasons, including the fact that we're talking about France and not something that was at the time called the periphery. But it speaks to the ongoing problems of growth, debt and population that have been this drag on Europe.”
US Stocks Close At Fresh Record Highs
US stocks continued the strong start to December, closing at record highs, even against the backdrop of political turmoil in South Korea, France and the Middle East. The S&P 500 closed 0.1% higher, notching its 10th gain in 11 sessions. It ended the session at a record high of 6,050. The communication services and technology sectors were the best performers, while utilities and financials were the biggest laggards. The S&P 500 on Tuesday notched its 55th closing record of the year and is up almost 27% in 2024, powered by technology shares and a broad preference for US assets. The Nasdaq Composite also hit a new record Tuesday, closing 0.4% firmer at a record close of 19,481. It also touched a new intraday high earlier in the session. The Dow shed 76 points, or 0.2%, to end the session at 44,706.
Tesla’s shares fell 1.6% after a Delaware judge upheld her earlier ruling striking down Elon Musk’s multibillion-dollar pay package, saying the board was improperly influenced. It creates more uncertainty for Tesla over how to compensate its chief executive. Even without the payout, worth about US$102 billion, he remains the world’s richest person.
New York-listed shares in South Korean companies slumped Tuesday after President Yoon Suk Yeol declared martial law. The iShares MSCI South Korea ETF (EWY), which tracks more than 90 large and mid-sized companies in South Korea, tumbled as much as 7% to hit a 52-week low, before recovering to end the session 1.6% lower. Korea Electric Power’s American Depositary Receipts (ADRs) closed 2.1% lower, after dropping 5% earlier in the session. Korean e-commerce giant Coupang shed almost 10% at one stage but recovered to end the day down 3.7%. KT Corporation, formerly Korea Telecom, saw shares fall 0.4%, recovering from an earlier decline of 4.4%. Posco, a South Korean steel manufacturer, closed 4.4% lower.
Treasury Yields Edge Higher
Treasury yields edged higher as traders digested the latest job openings data. These figures underscored the continued resilience of the US labour market. Yields fell in early trading, with traders seeking safe assets after the declaration of martial law in South Korea. But they turned upward after the JOLTS data. The yield on the 10-year note climbed 4 bps to 4.23%. The 2-year yield fell 2 bps to 4.18%. Markets now see a 72% chance of a Fed rate cut on December 18, up from 62% a day earlier.
Offshore Yuan Hits One-Year Low
The US Dollar Index pared earlier losses following the JOLTS data to close unchanged on Tuesday. The index had gained 0.5% in the previous session.
The offshore yuan weakened 0.2% to a one-year low around Rmb 7.30 per dollar on Tuesday. The yuan has lost more than 2% since the US presidential election on November 5. The Chinese currency faces downward pressure from a strengthening US dollar, driven by recent robust US economic data and increased bets on further Chinese rate cuts amid lacklustre growth in China. Recent data showed a modest improvement in manufacturing activity, while services activity came in weaker than expected, suggesting the need for further policy support. Additionally, escalating trade tensions put further pressure on the yuan. On Monday, the US announced new restrictions on China's access to key components for chips and AI, while over the weekend, Donald Trump threatened to impose 100% tariffs on BRICS nations, which included China.
South Korea’s won fell sharply against the US dollar shortly after President Yoon Suk Yeol declared an emergency marital law. The South Korean currency slumped nearly 3% to a two-year low, before recovering to trade 1.3% down against the US dollar. The won was last trading down 1.6% against the dollar. “This is not a normal thing to happen in a developed economy,” said Lee Hardman, a currency analyst at MUFG, adding that he expected the won to come under further pressure.
The Japanese yen was unchanged around ¥149.50 per dollar on Tuesday, close to its highest levels in seven weeks amid expectations that the Bank of Japan could soon raise interest rates again.
The euro was unchanged against the dollar at $1.05 ahead of a no-confidence vote later today against French prime minister Michel Barnier after he forced draft budget measures through parliament. He is expected to lose the vote. “The unfavourable political developments add to downside risks for the euro, alongside a potential trade war with the US,” said Mr. Hardman.
Gold Unchanged
Spot gold was little changed at $2,642 an ounce as the dollar also barely moved.
Oil Prices Jump After US Imposes New Sanctions On Iran
Oil prices surged after the US imposed additional sanctions on 35 entities and vessels that it said are part of a “shadow fleet” that played a “critical role” in exporting illicit Iranian petroleum. Brent crude futures jumped 2.6% to $73.68 a barrel, ahead of this week's OPEC+ meeting. Traders have also started to worry that OPEC+ is unlikely to rush into restoring production with the group closing in on a deal to delay output increases. A “shaky ceasefire in the Middle East” is also adding to the price pressure.
Bitcoin Hovers Below Record High
Bitcoin prices hovered below $96,000, little changed from Monday and off about 4% from its recent all-time high.
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