Chip firms surge on hopes of strong AI-led demand

Shares of chipmakers jumped on Monday as Microsoft’s plan to invest USD 80 billion in AI-enabled data centers in fiscal 2025 spurred bets that semiconductor demand would remain strong.

Micron was the biggest gainer among semiconductor stocks with a 10.6% rise, while chip-making equipment companies like Applied Materials, Lam Research, and KLA Corp. rose between 5.1% and 5.5%.

The Philadelphia Semiconductor Index hit its highest since mid-October and was last up 3.9%. The index jumped over 19% in 2024.

The tech-heavy Nasdaq led Wall Street’s main indexes higher, while semiconductor stocks in
Europe and South Korea also surged earlier in the day.

Citigroup said Microsoft’s spending plan although in line with analysts’ estimates was a “modest positive” update as it removed the risk of a drop in capital expenditure.

“AI data centers are very chip hungry, that’s why you have people running towards the chip sector right now,” said Michael Matousek, head trader at US Global Investors.

Contract manufacturer Foxconn’s record revenue for the fourth quarter on the back of strong demand for AI servers also added to the overall euphoria in the chip sector.

Nvidia, a Foxconn customer, added 5.1%. The AI bellwether’s CEO, Jensen Huang, is set to deliver a keynote speech at the CES trade show later in the day. AI server maker Super Micro Computer jumped 10.3%.

Nvidia’s quarterly results in November signaled a slowdown in revenue growth but those worries were brushed aside by enormous demand for the company’s AI chips, which dominate the market.

(Reporting by Medha Singh and Purvi Agarwal in Bengaluru; Editing by Anil D’Silva)

Longer-dated yields rise amid supply

NEW YORK – The benchmark 10-year Treasury yield hit the highest since May on Monday while the 30-year yield posted a 14-month high before the Treasury’s auction of longer-dated debt over the next two days.

Demand was soft for the Treasury’s sale of USD 58 billion in three-year notes on Monday, leading to a high yield of 4.332%, more than a basis point above where they traded before the auction. Demand was 2.62 times the amount of debt on offer, the highest since September.

Auctions of USD 39 billion in 10-year notes will follow on Tuesday and USD 22 billion in 30-year bonds on Wednesday.

Yields briefly declined after a news report indicated that planned tariffs under President-elect Donald Trump would be less aggressive than previously feared.

Trump’s aides are exploring tariff plans that would be applied to every country but only cover certain sectors deemed critical to national or economic security, the Washington Post reported on Monday. Trump denied the report on Monday.

Trump is expected to cut taxes and business regulations, which analysts say should boost growth. Other policies including a clampdown on illegal immigration and tariffs are expected to boost inflation, which could weigh on the economy longer-term.

A number of leading economists, including advisers to past US presidents, however, said Trump’s plans may not prove as inflationary as early analysis had suggested.

Traders are unsure on exactly what policies are likely to be introduced and how they will affect US debt.

“There’s a big uncertainty of what happens when the new president is inaugurated and gets the shot at a budget reconciliation bill,” said Will Compernolle, macro strategist at FHN Financial.

“What is that going to do for implications of Treasury issuance? I think no one’s really sure what the net impacts will be, but there’s more upside risk to rates.”

Concerns over the fiscal trajectory are fueling the rise in longer-term yields, with the Treasury expected to continue to increase debt to pay for the budget deficit.

“A lot of that is coming from an impression that the new Treasury Secretary will be funding the Treasury with more focus on longer-dated stuff rather than shorter-dated stuff because Janet Yellen, secretary of the Treasury, has been really focused on bringing more T-bills and more front-end paper,” said Tom di Galoma, head of fixed income trading at Curvature Securities.

Interest rate sensitive two-year note yields were last down 0.9 basis points at 4.27%.

Benchmark 10-year yields rose 1.7 basis points to 4.612%. They earlier reached 4.644%, the highest since May 2.

Thirty-year yields increased 1.7 basis points to 4.8316%. They reached 4.861%, the highest since November 2023.

The Federal Reserve is expected to make fewer interest rate cuts this year as inflation remains above its 2% annual target.

Fed Governor Lisa Cook said on Monday the US central bank can be cautious with any further rate cuts given a solid economy and inflation proving stickier than previously expected.

Economic releases this week will include Friday’s jobs report, which is expected to show 154,000 jobs added in December.

(Reporting by Karen Brettell; Editing by Mark Potter and Richard Chang)

Trump tariff doubt swirls, JGB yields in rarified air

Risk appetite in Asia should get a lift on Tuesday, as the feel-good factor sparked the previous day by a report that US President-elect Donald Trump’s tariff agenda won’t be as aggressive as feared continues to ripple through world markets.

Trump denied the Washington Post story, but investors seem to want to believe it – European and world equities rallied on Monday, US stocks rose for a second day, and the dollar fell against developed and emerging currencies alike.

If US tariffs are broadly lower than Trump promised on the campaign trail and aimed only at “critical” sectors, then the outlook for global growth should improve and the dollar should weaken.

On the face of it, this is bullish for Asian and emerging markets. But if Trump is true to his pre-election word and ‘Truth Social’ media post on Monday, risky assets will come back under pressure.

Wall Street’s gains melted a bit as Monday’s session progressed and Trump’s denial kept Treasury yields elevated ahead of this week’s debt auctions. The 30-year yield is the highest in over a year and closing in on 5.00%.

That will give investors grounds for caution on Tuesday. In addition, political uncertainty persists in South Korea and is flaring up in Canada too following Prime Minister Justin Trudeau’s announcement on Monday that he will step down.

In Asia, developments in Japanese markets bear monitoring, with yields hitting multi-year highs after Bank of Japan Governor Kazuo Ueda signaled interest rates will be raised again, but the yen still anchored near 160.00 per dollar.

The 10-year Japanese Government Bond yield on Monday hit 1.1350%, the highest since July 2011. Japan’s finance ministry will auction 10-year bonds on Tuesday, and recently said it will raise the amount of five-year bonds to be sold early in the new fiscal year.

Japanese stocks, which last week touched their highest level since July last year, are feeling the heat from higher JGB yields. The Nikkei 225 index fell 1.5% on Monday, the biggest fall since Nov. 13.

Will Japanese stocks on Tuesday take their cue from the weak, export-friendly yen, or the multi-year peak in long-dated borrowing costs?

Investors in China will focus their attention once again on the two-year bond yield’s flirtation with 1%, the weakening exchange rate, and Beijing’s efforts to support the currency and stock markets in the face of slumping yields and persistent deflationary pressures.

The spot yuan is now through 7.33 per dollar for the first time since September 2023, getting closer to a break below 7.35 per dollar which would signal a new 17-year low.

Asia’s economic calendar on Tuesday is light. The main releases will be inflation data from the Philippines and Taiwan, and China’s latest FX reserves.

Here are key developments that could provide more direction to markets on Tuesday:

– Japan 10-year bond auction

– China FX reserves (December)

– Taiwan inflation (December)

(Reporting by Jamie McGeever; editing by Deepa Babington)

US jobs report poses first big stocks test of 2025

NEW YORK – The stock market faces its first major test of the year this week, with investors counting on the US jobs report to show a stable but not overheated economy that underpins expectations for equity gains in 2025.

Stocks wobbled at the end of December and the start of January, cooling off after a torrid run. The benchmark S&P 500 closed 2024 with a 23% rise and posted its biggest two-year gain since 1997-1998.

Prospects for a third straight standout year hinge in part on the strength of the economy, with labor market data among the most important reads into the economy’s health. The data could also help clarify the Federal Reserve’s interest rate plans after the central bank last month rattled markets by reducing its projected rate cuts for 2025.

“Investors are going to want to see confirmation that labor trends remain solid, which means the economic outlook probably remains firm,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial.

“Any kind of data that suggests things are weakening a little bit more than expected I think could create volatility,” Saglimbene said.

Investors enter the year generally upbeat about the US economy. A Natixis Investment Managers survey conducted at the end of last year found 73% of institutional investors said the US will avoid a recession in 2025.

Labor market data has been volatile in recent months following aerospace industry strikes and hurricanes. November data showed growth of 227,000 jobs that rebounded from a tepid rise in October.

The three-month average gain of 138,000 “suggests that hiring continues to slow gradually,” Capital Economics analysts said in a note.

The report for December, due out on Jan 10, is expected to show growth of 150,000 jobs with the unemployment rate at 4.2%, according to a Reuters poll of economists.

Following the prior two reports, “this is going to be probably the first clean read of what is the underlying trend in the labor market,” said Angelo Kourkafas, senior investment strategist at Edward Jones.

Investors are also wary of the jobs report revealing an overly strong economy, with a revival of inflation seen as one of the key risks to markets early in the year.

The Fed at its December meeting lifted its forecast for expected inflation in 2025, paving the way for higher interest rates than it previously forecast.

After lowering its benchmark rate at three straight meetings, the Fed is expected to pause its easing cycle when it next meets at the end of January before making further cuts of about 50 basis points over the rest of the year.

For the jobs report, the market is “looking for that Goldilocks number — neither too hot, nor too cold,” Kourkafas said.

OTHER EMPLOYMENT DATA

While the payrolls data will be the most closely followed release, the coming week brings other market-sensitive employment figures, as well as reports on factory orders and the services sector.

Despite a strong 2024, stocks were weak in December, with the S&P 500 falling 2.5%. December had only five days with more stocks in the index gaining as opposed to declining, the lowest share of such relatively positive days for any month going back to 1990, according to Bespoke Investment Group.

Following the end-of-year holiday period, “next week probably ushers in more robust volumes, which would certainly be a better indication of directionality for the market,” said Art Hogan, chief market strategist at B. Riley Wealth.

“A solid jobs report would certainly help turn things around in this market that has otherwise been pretty soft to end the year and start the new year,” Hogan said.

(Reporting by Lewis Krauskopf in New York; Editing by Nia Williams)

Global equity fund inflows drop on higher US bond yields

Demand for global equity funds shrank in the week through Jan. 1, as higher US Treasury yields led to caution and investors took profits during the year-end trading lull.

Data from LSEG Lipper showed that investors added a net USD 4.93 billion worth of global equity funds, an 86% drop in inflows compared with about USD 35.1 billion worth of net purchases in the prior week.

The MSCI World index, which made a gain of over 15% in 2024, is down 1.5% this week after investors booked some profits following last year’s surge in stock valuations.

The increase in bond yields also dampened interest in equities, as the US 10-year Treasury yield rose to 4.641% last week, reaching its highest point since May 2.

By region, European, Asian, and US equity funds garnered net purchases of USD 2.25 billion, USD 1.64 billion, and USD 490 million, respectively, though inflows decreased from the previous week in all three regions.

Sectoral equity funds experienced outflows for a fourth consecutive week, totaling USD 2.35 billion. The largest withdrawals from tech, healthcare, and industrial sectors amounted to USD 453 million, USD 375 million, and USD 346 million, respectively.

Safer money market funds remained popular for a second successive week as they attracted USD 72.99 billion, the largest weekly inflow in four weeks.

Global bond funds experienced modest inflows as investors purchased government bond funds worth a net USD 878 million. Loan participation funds also attracted USD 320 million, whereas corporate bond funds saw net outflows of USD 573 million.

In commodities, investors ditched USD 141 million worth of energy sector funds, the fourth consecutive week of selling. Gold and precious metals funds also witnessed outflows of about USD 149 million, in contrast to purchases of a net USD 1.25 billion, the previous week.

Data covering 29,579 emerging market funds indicated that investors extended withdrawals into a eighth straight week, with about USD 1.39 billion worth of net sales during the week. Bond funds also witnessed a net USD 870 million worth of outflows.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; editing by Barbara Lewis)

Yields edge higher ahead of labor market data, supply

NEW YORK – US Treasury yields held steady near recent highs on Friday, ticking upward after encouraging manufacturing news but marking time in holiday-deadened trade before key employment data and a wave of note and bond issuance next week.

Yields were down slightly before the Institute of Supply Management purchasing managers index surprised to the upside by gaining 0.9 points to 49.3, its highest reading since March, nudging ever closer to the 50 expansion/contraction reading.

The reaction was muted, with many traders stretching out their Christmas and New Year breaks, especially since Manufacturing makes up a far smaller portion of the US economy than the consumption side.

The market will be more focused on the string of labor market data coming out next week, culminating in Friday’s December employment report.

“In a quiet market like this without any huge factor in the immediate term, the market just moves to flows and the flows could be for any sort of reason, whether it’s an arbitrage or just portfolio flattening,” said Lou Brien, market strategist at DRW Trading in Chicago.

Given low unemployment and stubborn inflation, the Federal Reserve is expected to refrain from easing again this month, with traders in Fed funds futures putting the odds of it standing pat near 90% and chances of the first 25 basis-point cut of 2025 coming in March at 50/50.

The Fed reduced interest rates by a full percentage point from September to December, beginning a more accommodative monetary policy after hiking rates from zero to about 5.25% to combat runaway inflation in 2022 and 2023.

A selloff in government debt as the market repriced expectations for Federal Reserve policy in 2025 hoisted the 10-year yield above 4.64% on Dec. 26, its highest level since early May. The two-year yield is not far from its November-December levels above 4.36%, which were last seen in July’s rate decline as markets were pricing in the start of Fed easing.

There is also uncertainty over how President-elect Donald Trump’s promised tariffs, tax cuts and immigration crackdown might affect the economy and an already enormous fiscal deficit.

Republican Mike Johnson won a close vote on Friday to retain the speakership in the US House of Representatives.

The vote highlighted Republican divisions and the speaker will have a big job taking on Trump’s sweeping legislative agenda. Congress must address the nation’s debt ceiling later this year with the federal government more than USD 36 trillion in debt and many congressional Republicans are expected to demand significant spending cuts.

Another reminder of the government’s budget challenge comes with next week’s Treasury auctions of USD 119 billion of coupon securities to help fund the excess spending: USD 58 billion in three-year notes on Tuesday, USD 39 billion in 10-year notes on Wednesday and USD 22 billion of 30-year bonds on Thursday.

“The 10s are still the interesting one to watch,” Brien said. “I mean, we’re higher than we started this easing cycle at and that usually indicates some concern over the Fed’s stance versus inflation. But we have stabilized.”

The yield on benchmark US 10-year notes rose 1.4 basis points from Thursday’s late level to 4.589%. The 30-year bond yield rose 1 basis point to 4.8079%.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, went up 2 basis points to 4.268%.

The closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 31.9 basis points, slightly steeper than +31.5 bp late on Thursday.

The implied breakeven inflation rate on 10-year Treasury Inflation Protected Securities (TIPS) rose to 2.3438% from 2.3387 late on Thursday.

The five-year TIPS breakeven inflation rate was at 2.4149% compared with Thursday’s 2.4069%, suggesting that investors think annual inflation will average above the Fed’s 2% target rate for the next five years.

(Reporting by Alden Bentley in New York; Editing by Dan Wallis and Matthew Lewis)

Dollar on track for best week in a month

NEW YORK – The dollar dipped on Friday but was on track for its strongest weekly performance in a month on expectations that the US economy will continue to outperform its peers globally this year and that US interest rates will stay relatively higher.

A still solid labor market and stubbornly high inflation have lifted Treasury yields in recent weeks and boosted demand for the US currency.

New policies under the incoming Donald Trump administration, including business deregulation, tax cuts, curbs on illegal immigration, and tariffs, are also expected to boost growth and add to price pressures.

The dollar index was last down 0.28% on the day at 108.91, after hitting a two-year high of 109.54 on Thursday. It is on track for a weekly gain of 0.85%.

Despite recent dollar gains there remains considerable uncertainty over when policies will be introduced by the new US government, and what their ultimate impact will be. That could pause the dollar rally in the near-term.

“We’re likely to see a bit of a dollar pullback as the administration comes in because all these proposed tariffs – they’re going to take some time to implement and we don’t actually know if all of these proposals are going to be implemented or not,” said Helen Given, FX trader at Monex USA in Washington.

“As we move through the second half of this calendar year I think we’re going to see some more dollar strength,” Given said.

The dollar briefly pared losses after data on Friday showed that US manufacturing moved closer to recovery in December, with production rebounding and new orders rising further.

The euro faces a weaker growth outlook and may be hurt by US tariffs, with the European Central Bank expected to cut rates further than the Federal Reserve this year.

Traders are pricing in 100 basis points rate cuts by the ECB by year-end, and only a less than certain chance of 50 basis points of cuts by the Fed.

Uncertainties including the French budget battle and German elections are also weighing on the single currency.

The euro was last up 0.39% at USD 1.0305 but was headed for a 1.22% weekly decline, its worst since early-November.

Sterling gained 0.41% to USD 1.2431. It was on track to lose roughly 1.15% for the week, the most since early November.

The dollar slid 0.26% to 157.11 Japanese yen, holding just below a five-month high of 158.09, reached in December.

The Japanese currency has suffered from the wide interest rate differential between the US and Japan, with the Bank of Japan’s caution over further rate increases spelling more pain for the yen.

China’s onshore yuan hit its weakest level in over a year at 7.3199 per dollar, as falling yields and expectations of more domestic rate cuts continued to weigh on the currency.

In cryptocurrencies, bitcoin gained 1.59% to USD 98,658.

(Reporting by Karen Brettell; Additional reporting by Rae Wee and Greta Rosen Fondahn; Editing by Sonali Paul, Kim Coghill, Chizu Nomiyama, and Sandra Maler)

Gold slips from three-week high as strong dollar weighs

Gold prices retreated from a three-week high on Friday, pressured by a robust dollar, while markets braced for potential economic and trade shifts under US President-elect Donald Trump.

Spot gold eased 0.6% to USD 2,641.52 an ounce at 01:41 p.m. ET (1841 GMT), after hitting its highest level since Dec. 13 earlier in the session. Bullion is up about 0.8% for the week so far.

US gold futures settled 0.5% lower at USD 2,654.70.

The new president’s agenda that supports higher tariffs has boosted the dollar and created significant underlying pressure on metal markets, said Nitesh Shah, commodity strategist at WisdomTree.

The dollar index was set for its strongest weekly performance since mid-November, making gold pricier for overseas buyers.

“For most of the metals, the slowing of global trade has typically been coupled with a slowing economy and therefore slowing demand for metals,” Shah said, referring to the potential impact of Trump’s proposed trade tariffs.

A headwind from a stronger dollar is likely to persist for gold, but it looks like debt will continue rising in the US and other countries, and geopolitical issues aren’t going to end soon, so it should stay supported, he added.

Trump is set to take the oath of office on Jan. 20. His proposed tariffs and protectionist policies are expected to fuel inflation.

This could slow the US Federal Reserve’s interest rate cuts, limiting gold’s upside. After three rate cuts in 2024, the Fed projects only two reductions in 2025 due to persistent inflation.

Gold, which thrives in low-rate environments, is currently benefiting from seasonal demand.

“January has been consistently seeing the best price gains over the last 20 years as investors and asset allocators open fresh new long positions, coupled, of course, with good jewelry offtake for the festive season,” independent analyst Ross Norman said.

Spot silver rose 0.2% to USD 29.63 per ounce, platinum added 1.9% to USD 940.80, and palladium gained 1.7% to USD 926.51.

(Reporting by Sherin Elizabeth Varghese and Anjana Anil in Bengaluru; Editing by Shreya Biswas and Mohammed Safi Shamsi)

Gold climbs to over two-week high on safe-haven demand; Trump’s policies in focus

Gold hit a more than two-week high on Thursday, fuelled by safe-haven buying, while the market took out positions ahead of the Federal Reserve’s rate outlook and the potential impact of President-elect Donald Trump’s proposed trade tariffs.

Spot gold rose 1.2% to USD 2,654.24 an ounce by 02:57 p.m. EST (1957 GMT), hitting its highest since Dec. 16. US gold futures settled 1.1% higher at USD 2,669.

“I can’t see anything market-moving in the news, but geopolitical forces (international tensions as well as financial uncertainties, not less ahead of the inauguration of President-elect Trump) are supportive,” said StoneX analyst Rhona O’Connell in an email.

Bullion thrives in low-interest-rate environments and acts as a hedge against economic and geopolitical risks.

Russia launched a drone strike on Kyiv early on Wednesday, causing damage in at least two districts, while the Israeli military struck a suburb of Gaza City.

Traders await next week’s US job openings data, the ADP employment report, the Fed’s December FOMC meeting minutes, and the US employment report to gauge the interest-rate outlook for 2025.

In 2024, rate cuts, central-bank buying, and geopolitical tensions drove gold to record highs with an over 27% annual gain, its biggest since 2010.

“Corrections or consolidations in the early part of the year could set the stage for a renewed rally,” Fawad Razaqzada, market analyst at Forex.com said, adding that a gold-price target of USD 3,000 an ounce was feasible.

“The unwinding of the ‘Trump trade’ – a phenomenon characterized by a strong US dollar and robust equity markets – could weaken the dollar and bolster gold prices.”

Trump’s inauguration on Jan. 20 has heightened uncertainty, with his proposed tariffs and protectionist policies expected to be inflationary and potentially spark trade wars.

Among other metals, spot silver rose 1.9% to USD 29.43 an ounce, palladium was steady at USD 910.64 and platinum climbed 1.9% at USD 920.72.

(Reporting by Sherin Elizabeth Varghese and Anjana Anil in Bengaluru; editing by Barbara Lewis, Rod Nickel, and Mohammed Safi Shamsi)

Nvidia’s market value gets USD 2 trillion boost in 2024 on AI rally

Nvidia emerged as the biggest global gainer in market capitalization for 2024, driven by surging interest in artificial intelligence and the robust demand for its AI-centric chips across various industries.

The chipmaker’s market value increased by over USD 2 trillion last year, reaching USD 3.28 trillion at the close of 2024, making it the second-most valuable listed company in the world. Its market value was USD 1.2 trillion at the end of 2023.

Meanwhile, Apple continued to lead global companies in market value, nearing a historic USD 4 trillion valuation. This surge was fuelled by investor enthusiasm for the company’s anticipated AI enhancements, aimed at revitalizing sluggish iPhone sales.

At the end of 2024, Microsoft ranked third with a market value of USD 3.1 trillion, followed by Alphabet Inc. and Amazon, each valued at approximately USD 2.3 trillion.

These tech companies significantly boosted their respective global indexes in 2024, with the S&P 500 index surging 23.3% and the Nasdaq climbing 28.6%.

Despite the shares’ higher valuations, looming US-China tariff tensions, and potentially slower US interest rate cuts, analysts remain optimistic about the sustained strong performance by tech firms in 2025.

Daniel Ives of Wedbush predicts a 25% gain in tech stocks in 2025, attributing potential growth to a less regulatory environment under Donald Trump, forthcoming strong AI initiatives, and a stable foundation for Big Tech and Tesla in 2025 and beyond.

“We believe tech stocks will be robust in 2025 on the shoulders of the AI Revolution and USD 2 trillion+ of incremental AI cap-ex over the next 3 years,” he said.

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Mrigank Dhaniwala)

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