Nasdaq Hits New High, Euro Falls Over 1%

As markets grapple with shifting economic indicators, the spotlight remains on the actions of central banks, particularly the European Central Bank (ECB) and the US Federal Reserve. Current expectations are indicating that both institutions may adopt a more aggressive stance in their interest rate policies. Recent data from the US, particularly the ISM manufacturing index for November, has shown that while manufacturing continues to contract, the decline is less severe than predicted, bolstered by a rise in new orders. In contrast, the Eurozone is witnessing a contraction in both its service and manufacturing sectors, with the PMI figures pointing to a concerning trend: new orders have dropped for six consecutive months, and business confidence is at its lowest in a year.

The dialogue surrounding interest rates has intensified, notably with comments from 2024 voting member Raphael Bostic of the Atlanta Federal Reserve, who has indicated a willingness to remain open to policy adjustments. Fellow Fed Governor Christopher Waller has voiced support for a potential rate cut in December, though he expressed caution regarding inflation trends. Such remarks have heightened market speculation, increasing the probability of a 25 basis point cut in December from 66% to 74.5%. Meanwhile, the ECB is also expected to lower rates by 31 basis points in December, with predictions suggesting a total cut of 145 basis points by late 2025.

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France, meanwhile, is facing significant political turbulence. Budget plans pushed through without parliamentary approval have led to threats from both far-right and leftist parties of a potential no-confidence vote. This instability is seemingly propelling the government towards dissolution, triggering a wave of investor caution. Consequently, French stocks and the euro stumbled by over 1%, as investors sought refuge in German bonds. The spread between French and German 10-year bond yields ballooned by 8 basis points, reflecting a profound lack of investor confidence in the French government's stability.

In Japan, the Bank of Japan’s Governor Kazuo Ueda hinted at the proximity of a possible interest rate hike, a sentiment echoed by market indicators suggesting that there is a 60% chance of a rate increase by December. The likelihood rises to nearly 90% for a hike before the end of January next year.

The ramifications of France’s political chaos have spilled over into the broader market, leading to a sell-off in risk assets. France’s bond yields have surged in comparison to Germany’s, reaching crisis levels associated with past EU financial turmoil, to the extent where French bond yields now match or even exceed those of Greece.

Turning to the US stock market, the first trading day of December saw the NASDAQ and S&P 500 reach historical highs, although the Dow Jones, after initially surpassing 45,000, subsequently dipped. Technology and semiconductor stocks performed robustly, with Apple reaching new peaks. The Nasdaq rose 185.78 points, marking an increase of 0.97%, while the S&P 500 climbed 14.77 points to close at 6,047.15. In contrast, the Dow fell by 128.65 points, recording a decrease of 0.29%. The tech-heavy NASDAQ 100 index recorded a 1.12% increase, and the NDXTMC, which measures the performance of Nasdaq’s technology sectors, rose by 1.61%. The Russell 2000 small-cap index experienced a slight decline.

The performance across various sectors of the S&P 500 was mixed, with telecommunications leading gains by 1.45%, followed by consumer discretionary and technology sectors incrementally increasing by 1.06% and 1.03% respectively. On the downside, utilities fared the worst, dipping 2.08%.

In terms of investment strategies, JPMorgan has projected that the S&P 500 could ascend to the 6,200 to 6,300 range by year-end—a 3% to 4% increase from the previous week’s close. This optimistic outlook is underpinned by a favorable macroeconomic environment, earnings growth, and Federal Reserve support. Analysts recommend pursuing opportunities in cyclical sectors such as banking, automotive, and transportation, alongside technology stocks, particularly the so-called "Seven Sisters," which include major players like Tesla and Meta Platforms, among others.

Specifically, the "Tech Seven" stocks saw increased activity; Tesla surged by 3.46% following the introduction of the latest version of its Full Self-Driving technology. Meta Platforms gained 3.22%, Microsoft increased by 1.78%, while Alphabet and Amazon saw increases of 1.5% and 1.36% respectively. On the other hand, UBS has reported lukewarm demand for Apple's AI-integrated devices, suggesting a tepid market response.

Chipmakers distinguished themselves in the market, with the Philadelphia Semiconductor Index rising by 2.61%. Notable performers included Wolfspeed, jumping 15.87%, while AMD and Intel’s stocks fluctuated, the latter seeing a significant increase followed by a mild decline amid management changes amid shareholder pressure.

The AI sector presented a mixed performance; SoundHound AI, in which NVIDIA holds shares, slid by 3.87%, while companies like CrowdStrike showed minor gains. Following an internal investigation yielding no adverse findings, stock prices for AMD soared, reflecting resilience and investor confidence. Concurrently, the Nasdaq Golden Dragon China Index saw a bounce, representing a general upward trend among Chinese stocks.

China's tech sector demonstrated resilience as well, with stocks like Miniso and Tsinghua Unigroup reporting notable gains. Meanwhile, cryptocurrency markets displayed volatility, with Bitcoin futures plummeting below $95,000, prompting a flurry of reactions from crypto investors amidst fluctuating interest in this asset class.

Oil prices, after an initial spike due to positive manufacturing data from China and rising geopolitical tensions, faced headwinds from strengthening dollar and OPEC+ production uncertainties. The market eventually stabilized, with WTI crude closing near $68.10 per barrel, while Brent crude remained level around $71.83. This fluctuation reflected broader market trends influenced by seasonal demand and geopolitical considerations.

Lastly, the precious metals segment saw mixed results, with gold prices retreating slightly as dollar strength and rising bond yields cut into previous gains. Gold futures closed at $2,661.60 per ounce. Despite the losses, ongoing geopolitical concerns have bolstered safe-haven buying, partially offsetting declines in this market.