Stocks Hit a Trump Bump: Dec. 27, 2024

Anxiety over expected trade disaccords alongside weaker data from the international economic calendar has sparked a Trump bump in US stocks. The economic calendar was emblematic of this point, with Beijing manufacturing profits weakening for the fourth month in a row. And China’s future isn’t looking rosy either as household and corporate sentiment trend lower against the backdrop of what can be four very painful years ahead. Meanwhile, Moscow is apparently ready for Ukraine talks following a failed truce offering. 

Industrial Profits Weaken in China

Chinese industrial profitability slid further in November as weak domestic demand, heavy financing costs and waning business confidence weighed on revenues. The decline marks the fourth-consecutive month of lighter earnings, as a 4.7% year-to-date contraction accelerated from the 4.3% slip in October. Furthermore, prospects are bleak over the medium-term, as Beijing searches for new customers ahead of the beginning of the incoming Trump administration, which maintains an adversarial stance against the world’s second-largest economy.

South Korea Business Sentiment Plunges

A combination of ongoing political instability among South Korea’s leaders and proposed tariffs by US President Donald Trump has caused business sentiment in the Asian country to plummet the most in a single month since the Covid-19 pandemic. The outlook component of the Bank of Korea’s Composite Business Sentiment Index for January dropped 7.3 points to 82.4. The country, which has been struggling with limping export activity driven by slow semiconductor demand, began a descent into turmoil when President Yoon Suk Yeol declared martial law on Dec. 3, which caused the opposition party to pass articles of impeachment against the leader. The saga is continuing, however, with acting President Han Duck-soo also being slapped with impeachment in response to his refusal to appoint judges needed to complete the actions against his predecessor. The turmoil has sent the South Korean won to its lowest level relative to the US dollar in more than a decade.

Singapore Producer Prices Drop

Singapore’s Producer Price Index declined for the fourth-consecutive month in November, with cheaper oil having the biggest impact on the overall result. After falling 6.2% year-over-year (y/y) in October, the manufacturing benchmark contracted 3.8% last month. The oil component tanked 13.2% while non-oil items fell only 2%. Overall domestic prices were 3% lower. Export and import prices also weakened, with 5% and 5.1% lower stickers, respectively. On a month-over-month (m/m) basis, overall prices rose 1.9% in November compared to 1.5% drop in October.

Tokyo Core Prices Rise

The Tokyo Consumer Price Index this month was mixed, with services prices climbing only 0.1% y/y while the core category, which excludes volatile fresh food prices, moved north by 2.4%, slightly below the 2.5% analyst forecast. Without fuel and fresh food, prices rose 1.8%. On a broader level, most of the CPI gain was attributed to higher utility bills and food. In a separate report, Japan’s factory output retreated 2.3% m/m in November. Weakness in chip manufacturing and the automobile sector drove the change. Meanwhile, November housing starts were 1.8% lower than in the same month last year, a moderation from the -2.9% y/y change in October but worse than -0.15% rate anticipated by analysts. Just one day ago, Japan reported that overall construction orders sank 10.2% in November.

Mag Seven Lead Downturn

US stocks are slipping as investors pocket gains in case there’s opportunities for lower prices in the first quarter of next year. The leaders of the year-to-date rally, the magnificent seven names, are leading the charge lower as their global revenues could be negatively affected by trade conflicts. But all major equity benchmarks are plunging, with the Nasdaq 100, Russell 2000, S&P 500 and Dow Jones Industrial indices losing 1.8%, 1.4%, 1.3% and 0.8%. Treasurys and the greenback are near the flatline, however, with the 2- and 10-year maturities changing hands at 4.31% and 4.59%, while the Dollar Index is at 107.99. The US currency is appreciating against the franc, yuan and Aussie and Canadian tenders, but it is depreciating relative to the pound sterling, yen and euro. Commodities are tilted bearishly with silver, gold, copper and lumber down 1.1%, 0.6%, 0.4% and 0.1%, but crude oil is up 1.1%.

A Bump in the Trump Trade

Markets don’t like uncertainty, a characteristic that was underscored by today’s market decline as Japan, Singapore, South Korea and China all reported less than ideal economic data at a time when President Donald Trump is proposing protectionist policies. Despite concerns over sweeping trade policy changes, however, Trump’s pledge to cut business taxes and ease regulations are likely to help strengthen corporate fundamentals, a development that is likely to be cheered by investors. Having said that, today’s market activity is likely a bump in the overall rally as many investors remain confident that the president policies, over the long-term, will support capital markets.