This report is from today’s TNC’s Daily Open, our international markets update. TNC Daily Open keeps investors informed on everything they need to know, no matter where they are.
What To Note Today
Fed Wary Of Trump’s Agenda And Inflation
U.S. Federal Reserve officials voiced concerns during their December meeting about the potential effects of President-elect Donald Trump’s policies and the persistent persistence of inflation above the central bank’s 2% target. According to minutes made public on Wednesday, officials would, therefore, reduce interest rates more gradually.
US Stocks Dismissed Worries About Inflation
Despite the 10-year Treasury yield hitting its highest level since April after the Fed’s minutes were released, U.S. stocks managed to squeeze out a slight gain on Wednesday. On Thursday, most Asia-Pacific markets saw a decline in trading. According to data, Australia’s retail sales increased less than anticipated in November, which caused the S&P/ASX 200 to close 0.24% down.
Strong US Dollar Affects Asian Central Banks
Since Trump’s victory in the November presidential election, Asian currencies, including the Korean won, Japanese yen, and Chinese yuan, have depreciated against the US dollar. This presents a dilemma for Asia’s central banks. While a lower currency would encourage exports, it may also raise import inflation, making it more difficult for banks to direct domestic economic policy.
China’s Concerns Over Deflation
According to figures released Thursday by the National Bureau of Statistics, China’s consumer price inflation increased by 0.1% in December year over year. In contrast to November’s 0.6% drop, China’s CPI was flat monthly. Deflation fears are heightened by China’s consistently low consumer inflation, which suggests the country is dealing with weak internal demand.
Domestic Demand Is Weak, Fuelling Fears Of Deflation
Microsoft is reducing employment according to performance.
Microsoft confirmed to CNBC on Wednesday that it is cutting a small percentage of jobs across departments based on performance. The company’s ambitions were initially reported by Business Insider. According to a person with knowledge of the situation who asked not to be identified to protect confidential information, less than 1% of workers will be impacted by the layoffs.
Bernstein Warns Of This Taiwanese Semiconductor Supplier
Nvidia unveiled a desktop supercomputer at CES intended for data scientists and AI researchers. The computer will feature Nvidia’s Grace Blackwell Superchip, which it will manufacture in collaboration with a Taiwanese chip supplier. According to Bernstein, the partnership will yield substantial financial benefits for the supplier beginning in 2026.
Bottom Line
On paper, the Fed’s December meeting minutes were bad news for investors. While Trump was not specifically named, officials were concerned about the impact of his stated plans and inflation.
“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes stated. “Recent inflation readings that were higher than anticipated and the anticipated consequences of possible changes in trade and immigration policy were cited by participants.”
Fed officials believe that future interest rate decreases will go more slowly.
Inflationary upside risks, troublesome economic policies, and fewer rate decreases than anticipated: For investors, that is a strong and bitter brew. During intraday trade, the yield on the 10-year Treasury note reached its highest level since April, at 4.730%.
However, markets largely ignored the warning and increased slightly on Wednesday. The Dow Jones Industrial Average increased 0.25%, while the S&P 500 gained 0.16%. Although tech firms like Palantir, Advanced Micro Devices, and Micro Strategy had a difficult day, the Nasdaq Composite fell 0.06%, which is still near the flatline and not a significant decline.
The Fed’s most recent dot plot, which predicted only two quarter-point cuts in 2025, had already shaken markets when it was revealed in December, suggesting that investors had already factored in inflation concerns.
Investors also received some consolation from Fed Governor Christopher Waller. Speaking in Paris, he claimed that “observed” pricing for other products and services demonstrate disinflation, while “imputed” prices, such as housing services, have been the main cause of inflation’s recent persistence.
Waller said he would “support continuing to cut our policy rate in 2025” if he believed that the economy was doing well.
The U.S. jobs report for December, which is out on Friday, is less priced in. That might be the next market trigger.
