Market Wrap 2025-12-02

Market Wrap 2025-12-02

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Today's US Market Wrap — Key Points

• Stocks up, led by Nasdaq. AI developments, Amazon chip key.
• Trump delays Fed Chair pick, Dollar volatile on speculation.
• Oil down amid US-Russia talks. Putin warns Europe.
• Aussie Dollar gains on RBA outlook. Yen weakens.
• Focus on upcoming PMI, employment data, and earnings.

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MARKET SNAPSHOT

• Equities: Up
• Treasuries: Up
• Crude: Down
• Dollar: Flat
• Gold: Down

REAR VIEW

• US President Trump plans to announce the next Federal Reserve Chair in early 2026, referring to Hassett as a "potential" candidate.
• Russian President Putin stated readiness against Europe.
• Transneft reported an indefinite halt in loadings from CPC's second-point mooring.
• Eurozone inflation data was mixed.
• Amazon (AMZN) launched a new AI chip.
• OpenAI CEO declared a "code red."

COMING UP

• Data: Australian Real GDP (Q3), Chinese RatingDog Services/Composite PMI Final (Nov), Eurozone/UK/US Services/Composite PMI Final (Nov), Swiss CPI (Nov), US ISM Services PMI (Nov), ADP National Employment (Nov), Import Prices (Sep), Industrial Production (Sep).
• Events: NBP Policy Announcement.
• Speakers: ECB’s Lagarde, Lane; BoE's Mann.
• Supply: Australia, UK.
• Earnings: Salesforce, Snowflake, Dollar Tree, Macy's, Inditex.

MARKET WRAP

Stocks closed higher, with the Nasdaq outperforming. Industrials, Technology, and Communications sectors also showed strong performance. AI developments were a key focus, with OpenAI declaring a "code red" to improve ChatGPT amid competition. Amazon (AMZN) unveiled its new AI chip, viewed by some as rushed but by others as a challenge to NVIDIA (NVDA). The Amazon AI chip announcement initially led to downside in US equities, but this move later reversed. Attention was also directed to the potential next Fed Chair. President Trump indicated he would name Powell's successor in early 2026, causing a brief strengthening of the Dollar and a flattening of the Treasury curve as market participants speculated about Hassett's chances. However, Trump later stated he had narrowed his choice and introduced Hassett as a "potential" candidate, leading to a weakening of the Dollar and a steepening of the curve. Oil prices declined amid focus on the meeting between US Special Envoy Witkoff, Kushner, and Russian President Putin. No progress was reported, but US officials are expected to travel to Europe to meet with Ukrainian President Zelensky. In FX markets, the Yen relinquished some of its Monday gains and underperformed, while the Australian Dollar outperformed, supported by risk sentiment and ANZ's revised forecast for the RBA, removing its expectation of rate cuts in H1 26. Gold and silver prices diverged, with Gold selling off and trading around USD 4,200/oz, while silver experienced buying interest.

FIXED INCOME

T-NOTE FUTURES (H6) SETTLED 2 TICKS HIGHER AT 112-28+

Treasury notes bull steepened in quiet trading, influenced by Trump's announcement delaying the Fed Chair nomination to early 2026.

• 2-year: -2.9bps at 3.512%
• 3-year: -2.3bps at 3.530%
• 5-year: -1.6bps at 3.657%
• 7-year: -1.1bps at 3.853%
• 10-year: -1.0bps at 4.087%
• 20-year: -0.8bps at 4.703%
• 30-year: -0.4bps at 4.739%

INFLATION BREAKEVENS:

• 1-year BEI: -1.0bps at 2.737%
• 3-year BEI: -1.4bps at 2.409%
• 5-year BEI: -1.3bps at 2.227%
• 10-year BEI: -0.4bps at 2.222%
• 30-year BEI: -0.1bps at 2.208%

THE DAY:

Treasury notes experienced two-way trading, with downward pressure emerging during the US session. The weakness lacked clear macro drivers, but seven investment-grade issuers entered the market, and the move largely reversed thereafter. The 10-year yield rose above 4.10%, peaking at 4.116%, but did not sustain levels above 4.10% for long. With the Federal Reserve in a blackout period, focus is on upcoming data, including the September PCE report due Friday. President Trump's announcement of delaying the Fed Chair nomination to early 2026 led to a slight flattening of the yield curve, as the expected announcement before Christmas suggested a potential alternative candidate. However, he later reiterated that the choice was narrowed to one member and referred to Hassett as a potential Fed Chair. Kalshi prediction markets saw the probability of Hassett as Fed Chair fall from 82% to 66% on Trump's first comment, but it moved back up to 76% after his later comment. Treasury notes saw some upside following the Amazon (AMZN) AI chip announcement, which briefly triggered selling in US indices as AI stocks, including Amazon (AMZN), were affected. However, the move in equities pared from extremes.

SUPPLY:

Bills

• US sold 6-week bills at a high rate of 3.700%, B/C 3.15x
• US to sell USD 80bln 8-week bills (prev. 90bln) on December 4th
• US to sell USD 90bln 4-week bills (prev. 100bln) on December 4th
• US to sell USD 69bln 17-week bills (unch) on December 3rd; all to settle on December 9th

STIRS/OPERATIONS

• Market Implied Fed Rate Cut Pricing: Dec 21.2bps (prev. 23bps), January 29.48bps (prev. 30bps), March 36.6bps (prev. 36bps).
• NY Fed RRP op demand at USD 5.62bln (prev. 3.24bln) across 11 counterparties (prev. 9)
• NY Fed Repo Op demand at USD (prev. 26bln) across two operations
• EFFR at 3.89% (prev. 3.89%), volumes at USD 85bln (prev. 90bln) on December 1st.
• SOFR at 4.12% (prev. 4.12%), volumes at USD 3.454tln (prev. 3.361tln) on December 1st.

CRUDE

WTI (F6) SETTLED USD 0.68 LOWER AT 58.64/BBL; BRENT (G6) SETTLED USD 0.72 LOWER AT USD 62.45/BBL

Crude oil prices declined as market participants awaited updates from the US-Russia meeting in Moscow. The complex experienced downward pressure despite a lack of significant market-moving news. Prior to the meeting, Russian President Putin criticized Europe, deeming EU demands unacceptable and stating that Russia is "ready now" if Europe wants to fight a war. WTI and Brent reached lows of 58.28/bbl and 61.81/bbl, respectively, before rebounding around the US cash open, then approaching lows again into settlement. Energy updates included Russia's Transneft reporting an indefinite halt in loadings from CPC's second-point mooring following recent Ukraine attacks. After the close, private inventory metrics are due, with current expectations (in barrels) as follows: Crude -0.8 million, Distillate +0.7 million, Gasoline +1.5 million.

EQUITIES

CLOSES: SPX +0.25% at 6,829, NDX +0.84% at 25,556, DJI +0.39% at 47,474, RUT -0.17% at 2,465

SECTORS: Energy -1.28%, Materials -0.83%, Utilities -0.72%, Health -0.58%, Consumer Staples -0.40%, Real Estate -0.20%, Financials -0.05%, Consumer Discretionary -0.01%, Communication Services +0.37%, Technology +0.84%, Industrials +0.87%.

EUROPEAN CLOSES: Euro Stoxx 50 +1.17% at 5,793, Dax 40 +1.22% at 24,381, FTSE 100 +0.12% at 9,911, CAC 40 +1.04% at 8,241, FTSE MIB +0.80% at 44,793, IBEX 35 +1.39% at 16,616, PSI +1.21% at 8,294, SMI +0.80% at 12,803, AEX -0.21% at 969

STOCK SPECIFICS

• Marvell Tech (MRVL): In advanced talks to acquire Celestial AI for over USD 5 billion.
• MongoDB (MDB): Reported better-than-expected profit and revenue with strong guidance.
• Credo Technology (CRDO): Profit, revenue, and guidance exceeded expectations.
• Signet Jewelers (SIG): Issued a disappointing outlook.
• Iren (IREN): To offer USD 2 billion of convertible senior notes.
• XPO (XPO): Preliminary November LTL metrics showed tonnage per day down 5.4% year-over-year.
• Janux Therapeutics (JANX): Latest clinical data disappointed investors.
• Teradyne (TER): Upgraded at Stifel to 'Buy' from 'Hold'.
• Solventum (SOLV): Upgraded at BITG to 'Buy' from 'Neutral'.
• OpenAI is reportedly developing an LLM named "Garlic" to challenge the success of Google's (GOOGL) Gemini.
• Amazon (AMZN) announced updates to AI models, stating new chips are more cost-effective than NVIDIA's (NVDA). AWS launched its in-house-built Trainium3 AI chip that delivers over four times the computing performance of its predecessor while using 40% less energy. The company also announced it is already developing Trainium4, expected to deliver at least three times the performance of Trainium3 for standard AI workloads.
• President Trump will hold a White House meeting with auto executives on Wednesday to announce the rollback of vehicle fuel standards. Ford (F), General Motors (GM), and Stellantis (STLA) will be present at the event.

FX

The Dollar Index showed little change as the Dollar struggled to sustain a move in either direction. With no data releases or Federal Reserve commentary scheduled, news flow was generally light, but remarks from the US President were in focus. Despite Trump announcing over the weekend that he knew who he'd pick for the Fed Chair Role, he now says he will announce it in early 2026 (was expected by year's end). The move saw a blip of USD strength, perhaps on speculation that the extension of the announcement may mean the base-case view, that NEC Director Hassett (who holds dovish views) is to be the new Fed Chair, is not the clearest of paths that markets originally thought. However, Trump later reiterated that he has it narrowed down to one and even referred to Hassett as "potential Fed Chair" later on, which took the Dollar to lows. Nonetheless, consensus is for a third consecutive 25bps Fed rate cut in December, but only a ~20% chance of another in January.

AUD

The Australian Dollar strengthened after ANZ removed its forecast for an RBA rate cut in H1 26, expecting the central bank to be on an "extended pause" through 2026. This change aligns with a growing view that the RBA's policy cycle is at a standstill. However, Westpac continues to anticipate two rate cuts in 2026 (May and August). AUD/USD reached highs of 0.6570, with AUD/NZD modestly firmer at around 1.1440 at the time of writing.

In Europe, Eurozone inflation data for November was mixed, having little impact on ECB rate expectations. Core inflation was slightly cooler than expected, while the headline figure showed the opposite. Meanwhile, US officials met with Russian President Putin, aiming to bring an end to the war. While we still await readout from both sides, Putin spoke firmly on Europe, "if Europe wants to fight a war, we are ready now". EUR/USD experienced a choppy trading day, currently flat at ~1.1620.

JPY

The Yen pared strength seen on Monday in response to hawkishly perceived remarks from BoJ's governor Ueda. Behind the reversal, fresh drivers were light as continued digestion of Ueda's remarks has left the JPY outlook more unclear than price action had implied on Monday. USD/JPY trades around the middle of the 155.44-156.17 intraday range.