More weak US data was ‘good’ news for equities as the OIS now prices 84% chance the Fed cut rates on Dec 10th. The S&P500 closes just 2.1% of all-time highs, while bonds edge lower to critical support, with the OIS pricing 91bp cuts over the next 12 months.
Retail sales we flat MoM (estimated +0.5%). ADP employment -13.5k (weaker than expected), Core PPI fell from 2.9% YoY to 2.6% (while PPI came in as expected), while Conference Board consumer confidence collapsed. The overall index landed at 88.7, well short of the 93.3 consensus forecast. Current Struggles: The current conditions component sank to its lowest level since 2021.Future Doubts: The forward-looking index slid back to its April 2025 low. The one bright spot, consumers remain EXTREMEELY confident about the stock market (of course!!) ….. The Santa Claus seasonal rally historically starts on 24th December!
The new long/short equity trade is Google/Nvidia. Google’s AI chips (TPUs, tensor processing units) are having a moment. These semiconductors were used to train its latest genAI model, Gemini 3, which has received rave reviews, and are cheaper to use than Nvidia’s offerings. Meta is looking at large scale purchases. Google rallied +1.5% on the day, Nvidia fell -4.7%. (Chart 1, Charles-Henry Monchau)
UK budget day but the economy is already struggling. Retailers were hit by Budget worries in November, with sentiment about the business situation recording its steepest fall in 17 years – according to the CBI’s latest quarterly Distributive Trades Survey.
GDP growth in Germany was confirmed yesterday at 0% in the third quarter, continuing the long stagnation since 2018
More than half of the 1.6% US GDP growth in the first 6 months of this year came from AI-related spending, according to Barclays. (Chart 2, Barclays)
The Oracle concerns grow, now approaching its largest drawdown in a decade, off 39% from the highs.
Bitcoin and credit spreads correlation (Chart 3, Bloomberg) amazing that S&P500 is so strong with the underlying AI sentiment.
China’s property market is bracing for a worsening crisis at state-backed Vanke, as the builder struggles to convince investors it can avoid default in the months ahead without clearer signs of government support. Vanke saw its bonds plunge over 20% on Wednesday, triggering trading suspensions on five exchange-traded bonds.
Tom Lee said live on CNCB that bitcoin is still going to $200,000 in the next 35 days….. I’m amazed he still gets airtime!
Data today – UK Autumn Budget, US jobless claims, Fed Beige book.
