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ORACLE - Morning bid Europe - Reality check for Fed-inspired rally
Ankur Banerjee gives us a look at what the future holds for European and global markets While 'AI spending is not showing signs of slowing down, the sector faces a challenge in converting spending into profit. The relief that the Federal Reserve didn't sound more hawkish during its December meeting lasted only a short time, as stocks fell and futures pointed to a lower opening in Europe and America. Oracle, a U.S. cloud computing company, provided a profit and revenue forecast that fell short of expectations. It also said spending would increase by $15 billion over earlier estimates. Oracle's results can be used to determine if an AI bubble is present, as well as how much money it will need to raise in order for the infrastructure to be built. Oracle shares dropped?more? than 11% after-hours trading, weighing down on U.S.?futures and Asian?markets. Investor attention is now?shifting?to Broadcom which will report earnings on Thursday after the market close. The focus will be on European tech stocks, which could also see their gains for the year to date disappear after a paltry 4% increase so far. Bitcoin, a risk appetite barometer, fell more than 2% as a result of broader risk off moves. The markets got more than they expected with the Fed's 25-basis point rate cut and the fact that Fed Chair Jerome Powell sounded less hawkish. Powell stated that a rate increase is not the base case for anyone. This was enough to spark a short-lived rally in risky stocks before Oracle's earnings. The Fed's ?signals reinforced market expectations for two more rate cuts next ?year, against the Fed's median expectation for a single quarter-percentage-point cut next year. This put pressure on the dollar, causing some relief to the yen and lifting it near two-month highs. The dollar was able to provide some relief to the yen, and the euro rose to two-month highs. The following are key developments that may influence the markets on Thursday. Swiss National Bank Policy Meeting Weekly U.S. jobless claims Earnings of Costco, Broadcom, and Lululemon
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Silver reaches record high after Fed splits rates. Gold falls
Gold eased Thursday, pulling away from a near-one-week high, after the U.S. Federal Reserve announced a divided rate cut, leaving investors uncertain about next year's pace of easing. Silver, however, notched another new record high. As of 0523 GMT spot gold dropped 0.4% to $4210.72 an ounce after reaching its highest level since December 5, earlier in the session. U.S. Gold Futures for February Delivery gained 0.3% per ounce to $4,238.90. Tim Waterer, KCM Trade's Chief Market Analyst, said that "gold has not been able to kick-start things today... as the Fed's message was basically that any future rate cuts could be few and distant." The Fed cut rates by 25 basis points in a divided vote Wednesday, but indicated that it may not lower them further while waiting for clearer signs that the labour market is cooling and that inflation "remains elevated." Six officials, a record number, oppose even the quarter-point cut made on Wednesday. Fed Chair Jerome Powell has also refused to give any guidance about the timing of further rate cuts. Gold and other non-yielding investments benefit from lower interest rates. Investors are now awaiting the U.S. inflation and jobs data for November, followed by an in-depth report on third quarter economic growth. Spot silver remained steady at $61,77 per ounce, after reaching a record high earlier in the session of $62,88. This brings its year-to date gain to 113%, on the back of strong industrial demand and falling inventories, as well as its inclusion on the U.S. The critical minerals list. Silver has rallied all on its own, without paying attention to anything outside. Ilya Spivak is the head of global macro for Tastylive. He said that there was nothing here to suggest that silver would turn. Spivak said that silver's next significance level is when it approaches $64. Palladium dropped 0.3%, to $1471.94, while platinum fell 0.4%, to $1650.08. (Reporting and editing by Sumana Aich, Rashmia Aich and Ishaan arora in Bengaluru)
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Oracle knocks down stocks as Fed's message drags dollar
Stocks fell?on Friday after disappointing earnings from U.S. cloud computing company Oracle warned of AI profitability. Bonds were firm, and the dollar suffered losses after the Federal Reserve lowered U.S. rates. Oracle shares fell?more?than 11% in Asia trading, pulling down S&P futures by 0.9% and Nasdaq futures by 1.3%. AI-related stocks suffered the most in Tokyo as Oracle missed its profit and revenue forecasts, and executives cited higher spending as a sign that infrastructure investments aren't turning a profit as quickly as investors hoped. Japan's Nikkei Index fell by 1%, with the AI-exposed SoftBank Group, which is a partner of Oracle in the U.S. Stargate Data Centre Project, pulling on the index. The Hang Seng in Hong Kong rose only 0.06%. MSCI's broadest Asia-Pacific index outside Japan fell 0.5%. Khoon Goh, ANZ Asia Research Head, said that Oracle was overshadowing the initial positive tone of a Fed reduction. He said that the focus was primarily on capex spending, which rekindled last month's fears about AI investment returns. As expected, overnight the Fed lowered its benchmark fund rate by 25 basis points, from 3.5% to 3.75%. Fed Chair Jerome Powell, however, was able to sound balanced in his press conference on the outlook. This helped calm market nerves about a hawkish statement. Wall Street indexes rose after the rate reduction, and the S&P 500 grew by about 0.7%. Powell stated, "I do not think that a rate hike is the base case for anyone." The euro broke through the chart resistance to reach $1.17. Bonds received a boost after the Fed announced that it would begin buying short-term Treasuries on Friday in order to help support liquidity. Benchmark U.S. two-year yields have fallen by around 4 basis point to 3.52%. Money markets were volatile in recent week, leading to an increase on short-term interest rates due to the fact that liquidity was stretched. Jack Chambers, Senior Rates Strategist at ANZ, said: "The Fed does not want to see this type of thing continue as it hinders the transmission monetary policy." DOLLAR SLIDES The yen remained firm in anticipation of the Bank of Japan's meeting next week, where a hike will be expected. In Asia, the yen reversed its recent decline and rose to $155.62 on Thursday. The euro reached a two-month peak of $1.1707 after Christine Lagarde, the president of the European Central Bank, said that another upgrade to European growth projections could be possible. Analysts at ING said in a report that the next "big cue" will be released on 16 December by the U.S. Department of Labor. They asked if a low number could keep two more rate cuts in 2026 from being priced in. The EUR/USD may not be able to reach 1.1800, but it could still have a run up to that level. After a gain earlier on Thursday, oil prices fell after the U.S. seize a sanctioned tanker off Venezuela’s coast. This escalating tension and concern about supply disruption sparked by the seizure of a sanctioned tanker. Brent crude futures and U.S. oil futures both fell slightly to $62.15 a barrel and $58.44 per barrel respectively. (Reporting from Tom Westbrook, Hong Kong; Editing done by Shri Navaratnam & Jamie Freed).
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Oil prices remain unchanged as investors return to Ukraine peace talks
Oil prices were stable on Thursday, as investors focused their attention?back on the Russia-Ukraine talks and watched for any possible fallout after a U.S. seize of a sanctioned oil tanker off Venezuela's coast. Brent crude futures fell 5?cents or 0.08% to $62.16 a barge at 0400 GMT. U.S. West Texas Intermediate Crude was down one cent, or 0.02% at $58.45 a barge. The benchmarks were higher on Monday after the U.S. announced that it had seized an oil-tanker off the coasts of Venezuela. Escalating tensions between both countries have raised fears about possible supply disruptions. "So far the seizure hasn't trickled down to market but further escalation is going to impose heavy volatility in crude prices," said Emril jamil, a senior oil analyst with LSEG. The market is still in limbo as it awaits the progress of the Russian-Ukraine Peace Deal. On Wednesday, U.S. president Donald Trump said "we just seized a large tanker off the coast of Venezuela. It's actually one of the largest tankers ever." Officials from the Trump administration did not name the vessel. British maritime risk management company Vanguard reported that the tanker Skipper was believed to have been seized near Venezuela. Sources in the industry and traders say that Asian buyers are demanding steep discount on Venezuelan crude. They're under pressure from a surge in sanctioned oil coming out of Russia and Iran, and increased loading risks as the U.S. increases its military presence in Caribbean. Investors focused more on the developments in Russia-Ukraine talks. The leaders of Britain and France held a phone call with Trump in order to discuss the latest Washington peace efforts in an effort to end the conflict in Ukraine. They said that this was a critical moment in the process. IG analyst Tony Sycamore wrote in a recent note that reports of Ukraine attacking a vessel belonging to Russia's Shadow Fleet?supported prices for the time being. Sycamore stated that "these developments will likely keep crude oil above the $55 key support level until year's end, barring a surprise peace deal in Ukraine." A sharply divided Federal Reserve has reduced its benchmark rate. Lower rates reduce borrowing costs for consumers and can?boost the economy and oil demand. Prices were also supported by a decline in U.S. crude oil inventories, even though it was less severe than expected. The Energy Information Administration reported that crude inventories dropped by 1.8m barrels, to 425.7m barrels for the week ending December 5. This was compared to analysts' expectations based on a poll of a draw down of 2.3m barrels. Reporting by Ashitha shivaprasad from Bengaluru, and Jeslyn lerh in Singapore. Editing by Tom Hogue & Thomas Derpinghaus
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Oracle hits stocks after Fed message drags dollar
The dollar suffered losses following the Federal Reserve's interest rate cut. Bonds were also firm. Oracle shares fell more than 11% in Asia trading. S&P futures were down 0.9% and Nasdaq futures 1.3%. AI-related stocks suffered the most in Tokyo as Oracle missed its profit and revenue forecasts, and executives cited higher spending as a sign infrastructure investments aren't turning into profits at the rate investors had expected. Japan's Nikkei Index fell by 1%, with the AI-exposed SoftBank Group contributing 7.5% to the decline. The Hang Seng index in Hong Kong rose only 0.06%. MSCI's broadest Asia-Pacific share index outside Japan fell 0.5%. As expected, overnight the Fed reduced its benchmark funds rate by 25 basis point to 3.5-3.75%. Fed Chair Jerome Powell, however, was able to sound balanced in his outlook during a press conference. This helped calm the nerves of investors who were worried about a hawkish statement. Wall Street indexes rose after the rate reduction and the S&P 500 increased by about 0.7%. Powell stated, "I do not think that a rate increase is the base case for anyone." This 'left interest rate futures with two rate cuts already priced in for the next year, and helped the euro to break through the chart resistance and go above $1.17. Bonds received a boost after the Fed announced that it would begin buying short-term Treasuries on Friday in order to help support liquidity. Benchmark U.S. two-year yields have fallen by around four basis point to 3.52%. The money markets were volatile in the last few weeks. This led to an increase in short-term interest rates due to the tightening of liquidity. Jack Chambers, senior rates strategist at ANZ, said that the Fed is not keen on this type of activity because it hinders the transmission and implementation of monetary policies. DOLLAR SLIDES After a gain earlier on Thursday, oil prices have eased after the U.S. seizes a sanctioned tanker off Venezuela’s coast. This has escalated tensions and raised concerns over supply disruption. Brent crude and U.S. Crude futures both fell slightly to $62.15 a barrel and $58.44 per barrel respectively. The Fed's decision, and the policymakers' projections for a cut in 2026 or 2027 has opened up the foreign exchange markets to dollar selling. In Asia, the yen reversed its recent decline and rose to 155.62 for every dollar on Thursday. The euro reached a two-month peak of $1.1707 after Christine Lagarde, the president of the European Central Bank, said that an upgrade to European growth projections is possible. The Australian dollar, New Zealand dollar and Sterling all gained before settling in the Asia session. Analysts at ING wrote in a report that the next important indicator will be November's non-farm payrolls released on 16 December. They asked whether a low number could keep market pricing for two more rate cuts in 2020 intact. The dollar is weakening into the year-end season and now that the Fed event has passed, EUR/USD may be able to reach 1.1800. (Editing by Shri Navaratnam).
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Iron ore prices are high as the markets wait for China's decision
Iron ore futures prices moved in a narrow range on Thursday as traders and investors awaited the?political signals of another high-level China meeting. As of 0307 GMT, the?most-traded contract for iron ore on China's Dalian?Commodity Exchange (DCE) increased?0.26% to $769 yuan ($108.91). As of 0257 GMT, the benchmark January iron ore price on Singapore Exchange was down 0.34% to $102.4 per ton. After the U.S. Analysts at Jinyuan Futures stated that the Federal Reserve has lowered interest rates. China will continue to?expand domestic demand and support a broader economy in 2026 with more proactive policies,?state media Xinhua reported on Monday. The Politburo is the top decision-making organ of the ruling Communist Party. Investors and economists await the Central Economic Work Conference in the next few days, when Beijing will set its key growth targets for the year ahead as it seeks to launch the new five-year Plan with a strong start. The International Monetary Fund (IMF) urged China on Wednesday to make a "brave decision" and accelerate structural reforms, as the pressure on China's economy grows to move to a consumption model, and reduce its reliance on exports that are fueled by debt. IMF raised its China growth projection for 2025 from 4.8% to 5%, citing the 'production powerhouse's high outbound shipments. It also increased its forecast for 2026 to 4.5%, from 4.2%. Iron ore prices continued to be pressured by a combination of a growing supply and a weakening demand for steel. Coking coal and coke, which are used in steelmaking, have both dropped by?0.6% apiece. The Shanghai Futures Exchange has seen a decline in most steel benchmarks. The price of rebar fell by 0.35%. Hot-rolled coils dropped 0.12%. Stainless steel dropped 0.16%. Wire rod remained flat. Reporting by Amy Lv, Lewis Jackson and Sumana Nandy; Editing by Sumana Niandy. $1 = 7.0612 Chinese Yuan.
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Copper increases by more than 1% following Fed rate cuts
Copper's price rose more than 1% compared to its peers on Thursday, thanks to a weaker dollar following the U.S. Federal Reserve's decision to lower interest rates. By 0203 GMT the most-traded contract for copper on?the Shanghai Futures Exchange had risen 1.17%, to 92 730 yuan per metric ton ($13 1333.07), trading near the record high of 9 3300 yuan reached on December 8. Benchmark three-month Copper on the London Metal Exchange increased 1.33% to $11,710 per tonne. On December 8, it reached an all-time record high of $11,771. The?dollar eased on Wednesday after the Fed cut policy rates by a quarter-point, which was in line with most expectations. Dollar-priced goods are cheaper for buyers using currencies other than the U.S. dollar. The Fed said that it would also begin buying short-dated government bonds from Friday in order to manage the market liquidity and to maintain firm control of its interest rate target system. "It is not only the Fed's rate cut but its balance sheet expansion stance that boosted copper prices," Xiao Jing said, a Beijing based analyst with broker SDIC Futures. Investors will continue to digest this theme in the "short-term." The lower output of copper from Chilean miner Codelco also contributed to the price decline. Aluminium also posted gains, as global producers of aluminium sought premiums between $190 and $203 per ton for primary metal shipments from Japanese buyers. This is up 121%-136% compared to the current quarter. The benchmarks for SHFE and LME both rose by 0.55% et 0.66%. SHFE Nickel slipped 0.09%. Lead?gained 0.7 %. Tin jumped 1.14%. Zinc was flat. Other LME metals also gained. Nickel gained 0.6%, while lead advanced by 0.7%. Tin climbed 1.11 percent and zinc increased 0.65%.
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Oracle stocks fall as Fed message affects dollar
The stock market in Asia was teetering on Thursday, after disappointing earnings from U.S. cloud computing company Oracle sent a warning about AI profitability. Bonds were strong and the dollar suffered losses following a Federal Reserve interest rate cut. Oracle shares fell more than?11% in Asia trading. S&P futures were down 0.3% and Nasdaq futures about 0.5%. AI-related stocks suffered the most in Tokyo as Oracle missed its profit and revenue forecasts, and executives cited higher spending as a sign infrastructure investments aren't turning into profits at the rate investors hoped. Japan's Nikkei Index traded between flat and slightly higher in the morning session, with a 5% decline in the AI-exposed SoftBank Group holding the index back. Hong Kong's Hang Seng gained 0.8% in the early trading to push MSCI's broadest Asia-Pacific share index outside Japan up by 0.5%. Overnight, the Fed, as anticipated, lowered its benchmark fund rate by 25 basis point to 3.5-3.75%. Fed Chair Jerome Powell, however, was able to sound balanced in his outlook during a "news conference", calming market nerves over a hawkish statement. Wall Street indexes rose after the rate reduction and the S&P 500 gained about 0.7%. Powell said: "I don't believe a rate increase is anyone's baseline case." The euro was able to break through the chart resistance, and move above $1.17. Bonds received a boost after the Fed announced that it would begin buying short-term Treasuries on Friday in order to help support liquidity. Benchmark U.S. two-year yields have fallen by around seven basis point to 3.54%. The money markets were volatile in the last few weeks. This led to an increase in short-term interest rates due to the tightening of liquidity. Jack Chambers, senior rates strategist at ANZ, said that the Fed is not keen on this type of thing continuing because it hinders the transmission of monetary policies. DOLLAR SLIDES The price of oil rose on Thursday for the second consecutive session after the U.S. seize a sanctioned tanker off the coast of Venezuela, increasing tensions and raising concerns over supply disruption. Brent crude futures and U.S. oil futures both rose more than 30 cents, to $62.53 a barrel and $58.85 per barrel respectively. The Fed's decision to cut interest rates and the policymakers' median projection of a rate cut in 2026 or 2027 has opened the door for dollar sellers on the foreign exchange market. In Asia, the yen recovered from a recent drop and rose to 155.66 against the dollar on Thursday. The euro reached a two-month peak?of $1.1707, boosted by comments from Christine Lagarde, President of the European Central Bank. She said that another upgrade to European growth projections is possible. All three currencies, the Australian dollar, New Zealand dollar and the sterling made gains in the Asia session before settling. Analysts at ING wrote in a report that the next important indicator will be November's non-farm payrolls released on 16 December. They asked whether a low number could keep market pricing for two more rate cuts in 2020 intact. The dollar is weakening into the year-end season and now that the Fed event has passed, EUR/USD may be able to reach 1.1800. (Editing by Shri Navaratnam).
Silver reaches record high after Fed splits rates. Gold falls.
Gold eased on Thursday after the U.S. Federal Reserve announced a divided rate cut, leaving investors unsure about next year's pace of easing. Silver also hit a new record high.
As of 0300 GMT spot gold dropped 0.2% to $4.221.49 an ounce after reaching its highest level since December 5, earlier in the session. U.S. Gold Futures for February Delivery gained 0.6% per ounce to $4,249.70.
Tim Waterer, KCM Trade's Chief Market Analyst, said that "gold has not been able to kick on with the things today... Because the Fed's message essentially was that any future rate cuts would be few and far in between."
The Fed cut rates by 25 basis points in a divided vote Wednesday, but indicated that it may not lower borrowing costs 'further' as they wait for clearer signs that the labour market is cooling and that inflation "remains somewhat high."
Six officials, a record number, oppose even the quarter-point cut made on Wednesday. Fed Chair Jerome Powell has also refused to give any guidance about the timing of further rate cuts.
Gold and other non-yielding investments benefit from lower interest rates.
Investors are now awaiting the U.S. inflation and jobs data for November, followed by an in-depth report on third quarter economic growth.
Spot silver increased 0.8%, to $62.25 an ounce, after reaching a record high at $62.88 in the previous session. This brings its year-to date gain to 113%, on the back of strong industrial demand and falling inventories, as well as its inclusion in the U.S. The critical minerals list.
Silver has been rising all on its own, without any external influences. Ilya Spirak, global macro head at Tastylive, said that there is nothing here to suggest that silver will turn.
Spivak said that silver's next significance level is when it approaches $64.
Palladium, on the other hand, fell 0.2%, to $1.479.70, and platinum increased 0.3%, to $1.660.50.
(source: Reuters)