Tale of Two Sectors: China's New Plan Makes Miners Dance

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Welcome to Equity Espresso’s Market Recap.

The S&P/ASX 200 index closed down 0.36% (30 pts.) to 8,393.0 on Tuesday, in a volatile session marked by sharp swings in both directions. The decline was primarily driven by weakness in the Financial and Technology sectors, which fell 1.74% and 4.04%, respectively.

The tech sell-off mirrored Wall Street's performance and was influenced by news of China's investigation into Nvidia. Notable growth stocks like Pro Medicus (-8.96%), Megaport (-5.35%), and WiseTech (-4.36%) experienced sharp declines.

The market's losses were partially offset by a strong performance in the Materials (+3.04%) sector, which jumped following China's announcement of a "moderately loose" monetary policy for the coming year. BHP Group (+3.33%), Fortescue (+6.49%) and Rio Tinto (+4.85%) all saw significant spikes.

The Chinese Politburo announced plans for more aggressive fiscal policies and a moderately looser monetary approach in 2025, focusing on boosting domestic consumption and stabilising property and stock markets. The announcement came during a key Politburo meeting led by President Xi Jinping, which emphasised "unconventional counter-cyclical" adjustments as part of their economic strategy.

Lastly, the Reserve Bank of Australia (RBA) maintained the cash rate at 4.35%, adopting a more dovish stance as it expressed increased confidence in falling inflation rates. The central bank notably removed its previous warning about potential rate hikes while acknowledging that economic and wage growth had been weaker than anticipated since its November meeting.

Company News

• Perpetual Limited (-8.40%) revealed that ATO's tax assessment of KKR's proposed acquisition of its Wealth Management and Corporate Trust businesses could dramatically increase its tax liability from A$106-227 million to A$493-529 million.

• IAG (-1.39%) faces a new class action lawsuit from Slater and Gordon in Victoria's Supreme Court, following similar proceedings in May 2024. The case concerns loyalty discounts for NRMA insurance policies, which IAG's subsidiary IAL denies misrepresenting to customers.

• The merger between healthcare companies Integral Diagnostics (+1.21%) and Capitol Health (+2.70%) has secured both ACCC and Federal Court approval, following Integral's agreement to divest Capitol's clinic in Melton, Victoria. Initially announced in June, the deal faced regulatory scrutiny before the competition watchdog cleared the transaction. The merger is expected to be implemented on December 20, 2024.

Wall Street

U.S. stock markets experienced a broad decline on Monday, with major indices closing lower as tech stocks faced pressure, particularly from Nvidia's 2.55% drop following an antimonopoly investigation in China. The S&P 500 fell 0.61%, the Dow Jones decreased 0.54%, and the Nasdaq lost 0.62%.

Nine of eleven S&P 500 sectors ended in negative territory, with Financial (-1.41%) stocks leading the losses, while Health Care (+0.22%) was the day’s best performer.

Positive developments in Chinese markets partially offset the market downturn, as the iShares MSCI China ETF surged 7.8% following Beijing's announcement of increased monetary and fiscal stimulus for the coming year.

Mondelez (-2.26%) has made a preliminary takeover bid for Hershey (+10.85%), causing the chocolate maker's shares to surge. This follows a previous $23 billion offer in 2016 that Hershey rejected. The company has hired advisors to evaluate the proposal.

Apollo Global Management and Workday will join the S&P 500 before the start of trading on Monday, December 23. The stocks are replacing Qorvo and Amentum as part of the index's rebalancing.

S&P500 Sector Performance

Economic Data

• Australia’s NAB business confidence index plunged to -3.0 in November 2024 from a near two-year top of 5 in the prior month, falling below its long-term average due to declines across most industries.

• The Reserve Bank of Australia (RBA) retained its cash rate at 4.35% during its final meeting of 2024, keeping borrowing costs unchanged for the ninth consecutive meeting, in line with market forecasts.

• China's Trade Surplus surged to US$97.44 billion in November 2024 from US$69.45 billion in the same period a year earlier, surpassing expectations of US$95 billion.

• Chinese Exports grew by 6.7% year-on-year to US$312.31 billion in November 2024, softer than the forecasted 8.5% and easing sharply from a 12.7% surge in October.

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Quick Singles

🌎️ Around The Globe

• Donald Trump indicated he would not try to replace Federal Reserve Chair Jerome Powell despite their past disagreements over interest rates. Powell's term continues until 2026.

• Dorothy's ruby slippers from "The Wizard of Oz" sold for a historic $32.5 million at Heritage Auctions, setting a new record as the most expensive movie memorabilia ever sold.

• India's foreign minister, Subrahmanyam Jaishankar, stated at a Doha event that BRICS countries are uninterested in weakening the U.S. dollar.

• Reddit says it is testing "Reddit Answers," an A.I. feature that searches through platform posts to answer user queries. The tool aims to improve information accessibility while helping Reddit compete with search engines and A.I. companies.

• Starbucks CEO Brian Niccol has set an ambitious goal: serving customers their coffee in under 30 seconds. He wants the plan implemented within the next five years.

• Super Micro Computer has received an extension from the Nasdaq until February 25 to file delayed financial reports. The A.I. server maker previously appointed BDO USA as its auditor and submitted a compliance plan following its failure to file annual reports in August.

• TikTok Shop has seen significant user spending during the holiday shopping season, suggesting growing market share in U.S. e-commerce.

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