Market 12/01: Not Much Volatility After Holiday Week

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If you missed the best recent articles:

Key highlights

ISM Manufacturing PMI November below forecast
China: November PMI disappointing
Who is the new Fed Chair?
What will Powell say tonight?
Black Friday revenue breaks record
Japanese Bonds Red Alert
OPEC+ confirms suspension of production increase in Q1
SOFR surges this morning
Micron, Nvidia heavily investing in AI
Market: Liquidity collapse worse than holiday week

ISM Manufacturing PMI November below forecast

ISM Manufacturing PMI: turns down from 48.7 → 48.2, below 49.0 expected

New orders drop to 41.4, from 49.4 previous month
Employment drops to 44.0, from 46.0 previous month
Prices rise to 58.5 below 59.5 forecast, above 58.0 previous month

S&P Global Manufacturing PMI: down 52.5 → 52.2, above 51.9 forecast

Input prices:
- Continue to rise due to impact of tariffs and import costs
- But pace of increase has slowed
Output prices: Businesses significantly increase selling prices to offset high costs, even as inflation is on a downward trend

→ US manufacturing continues to decline, small businesses (per S&P Global) holding up better, price pressures easing.

China: November PMI disappointing

Manufacturing PMI:
- Caixin: down to 49.9, below 50.5 expectations and 50.6 previous month
- NBS: slight increase to 49.2 in line with forecast, above 49.0 previous month

Non-manufacturing PMI for China drops to 49.5, below 50.0 forecast and 50.1 previous - lowest level since 2020

New orders and output remain almost stagnant
- Export orders increase fastest in the past 8 months
Employment decreases sharply due to extensive cuts
Input prices continue to rise due to high raw material costs (especially metals), but the rate of increase slows.
Output prices decrease more sharply than last month due to fierce competition and weak demand
Business confidence increases compared to last month

→ China's manufacturing activity in November declined slightly due to stalled production growth and slower new orders

→ Domestic consumption and investment remain under pressure. Local government financing policies for infrastructure investment have not yet shown clear effects, supply-demand imbalance expected to persist until 2026

Who is the new FED Chair?

Trump has decided who will replace Powell → Announcement before Christmas

Kevin Hassett is the highest expected with 57%
- Supports loose monetary policy and interest rate cuts
- Supports budget discipline and cutting wasteful spending
- Supports growth based on tax cuts and encouraging private investment

→ The 'loyal' choice raises big questions about FED independence and whether FOMC members will follow?

What will Powell say tonight?

Powell will speak at 8:00PM Central tonight but 99% will not break the rules and talk about monetary policy due to being in FED Blackout (10 days not allowed to talk about policy before FOMC)

If any, it will only go into the policy framework and past → present changes, e.g. SLR

Black Friday revenue breaks record

Black Friday revenue reaches $11.8 billion, up +9.1% YoY
- AI tools help find promotions, boosting online shopping
Adobe forecasts Cyber Monday up +4.1% YoY to $14.2 billion - surpassing Black Friday

Trump declares closure of Venezuela's airspace

Trump declares closure of Venezuela's airspace
Maduro demands airlines continue operations
- Venezuela has revoked operating rights of 6 major international airlines for not resuming operations by the required deadline last week
Maduro says he called Trump, US side confirms dialogue.

Venezuela's airspace now, no commercial flights operating

→ Continues economic pressure for Maduro to step down

80% BOJ will raise interest rates

BOJ announces “considering pros – cons” of raising rates in December.
- Strongest signal that December rate hike probability increases
- BOJ expected to clarify future interest rate policy direction after raising rates to 0.75%
BOJ pushes rate hike expectations to 81.9% from 20% last week

Japanese bond yields continue red alert after BoJ signals December rate hike.
- JPY +2.9bps to 1.029%, first >1% since GFC 2008

JP10Y continues to break highs +7.4bps to 1.876% - highest since GFC 2008

JP20Y +5.7bps - hits record level

USD/JPY -0.65% down to 155.06 JPY - largest drop since 10/10

→ Yen Carry Trade continues toward its end?

OPEC+ confirms suspension of production increase in Q1

OPEC+ announces suspension of production increase and maintains oil production level in Q1 2026

Due to concerns about supply surplus as demand decreases

Oil +1.13%

Bank liquidity concerns

SOFR up to 4.12% higher than 4.08% last Friday - highest since 10/30

SOFR - FED rate spread nears 23bps on Friday

Standing Repo up to $25B this morning - second highest after Covid

→ Maybe just end-of-month cash needs? Everything will be clear tomorrow

Micron, Nvidia heavily investing in AI

Micron plans to invest $9.6B to build a new factory in Hiroshima, Japan to produce AI HBM chips
MU +2.66% after news

NVDA invests $2B in Synopsys shares at $414.79/share
- To integrate NVIDIA's AI computing and acceleration capabilities with Synopsys' engineering solutions
- 7th largest shareholder of Synopsys
SNPS +7.57% after news

Market: Liquidity collapse worse than holiday week

After Thanksgiving break, traders probably haven't returned yet. US Futures red last night along with crypto breaking down in weak liquidity environment. By morning, heatmap overall quite mixed.

Internals actually balanced, extremely low liquidity. VIX up then broke back but yields rising along with pressure from Japan.

Lambo team still doubling down wherever it falls. After going from 3000 contracts on Wed → 1000 contracts on Fri, today up to 35,000 contracts both sides.