Breakfast | Interest rate cut expectations rise, Nasdaq and S&P 500 increase

Market Overview

On Tuesday, Trump hinted that the candidate for Federal Reserve Chairman would be Hassett, combined with the stabilization of Japanese government bond auctions, providing a temporary respite for global markets. The S&P 500 and Nasdaq rose, while Bitcoin surged. However, concerns about the competitive landscape of tech giants and cautious market sentiment remain, leading to a decline in Russell small-cap stocks; despite U.S. stock indices rising six times in the past seven trading days, most constituent stocks fell.

Apple led the large-cap stocks, but Tesla fell, with "big short" investors claiming its stock valuation is too high. Boeing rose nearly 10%.

U.S. Treasuries were mixed, with the 10-year yield essentially flat at 4.088%, and the 2-year yield down 1.6 basis points.

The dollar rebounded against the yen, rising nearly 0.5% at one point. Offshore yuan approached a 14-month high.

Bitcoin rose over 6%, reclaiming $90,000, while Ethereum surged over 8%, returning above $3,000, largely recovering from Monday's sharp decline.

Gold dipped 0.58%. Silver experienced a V-shaped reversal, initially dropping over 2.3%, then rising more than 3.6% from its daily low, nearing yesterday's historical high. Crude oil fell about 1.5%.

During the Asian session, A-shares fluctuated downwards, with the ChiNext Index down 0.69%. The commercial aerospace and pharmaceutical sectors surged, while the Hong Kong stock index showed mixed performance, with new energy vehicles broadly declining.

Key News

Trump stated that he would announce the Federal Reserve Chairman candidate in early next year, hinting at Hassett. New Federal Reserve News Agency: Hassett's selection as Federal Reserve Chairman has been "internally confirmed."

The U.S. holiday shopping season had a "strong start"! The National Retail Federation: The number of shoppers during the Thanksgiving holiday surged to over 200 million.

OpenAI has initiated a red alert, pausing its advertising business to fully optimize ChatGPT and "fight" against Google's Gemini. OpenAI is accelerating the development of a new model called "Garlic."

Amazon made a significant announcement challenging Google and Nvidia: AI chip Trainium 3 is faster and more energy-efficient, with four Nova 2 models, pioneering "open training."

Nvidia's CFO: $500 billion in chip orders does not include OpenAI collaboration, and a $100 billion agreement is still not finalized.

Big shorts are targeting Tesla, claiming its valuation is absurd and its compensation plan harms shareholders.

Eurozone's November CPI rose to 2.2%, with stubborn service prices, and the European Central Bank is "unlikely" to cut rates in December.

Market Closing

U.S. and European Stock Markets: The S&P 500 rose 0.25%, closing at 6829.37 points. The Dow Jones rose 0.39%, closing at 47474.46 points. The Nasdaq rose 0.59%, closing at 23413.674 points. The European STOXX 600 index closed up 0.07%, at 575.65 points.

A-shares: The Shanghai Composite Index closed at 3897.71 points, down 0.42%. The Shenzhen Component Index closed at 13056.70 points, down 0.68%. The ChiNext Index closed at 3071.15 points, down 0.69% Bond Market: The yield on the 10-year U.S. Treasury bond fell slightly by 0.23 basis points, refreshing the daily low to 4.0788%. The yield on the 2-year U.S. Treasury bond dropped by more than 2 basis points, refreshing the daily low to 3.505%.

Commodities: WTI January crude oil futures closed down 1.14% at $58.64 per barrel. Brent February crude oil futures closed down 1.14% at $62.45 per barrel. COMEX gold futures fell by 0.77% to $4241.90 per ounce.

News Details

Global Highlights

Global markets temporarily breathe a sigh of relief, liquidity anxiety eases, Japanese bond auction stabilizes, Bitcoin stops its decline. The Japanese 10-year bond auction became the key to market stabilization on Tuesday. Before the auction, the benchmark bond yield reached 1.88%, a 17-year high, and this relatively high yield level attracted investors, including pension funds. Strong demand for the Japanese bond auction and stabilization in the cryptocurrency market together alleviated investors' concerns about liquidity tightening.

Trump says he will announce the Federal Reserve chair nominee early next year, strongly hints at Hassett. Trump said during a Cabinet meeting at the White House on Tuesday, "We will announce someone as the new Federal Reserve chair early next year." Shortly after the Cabinet meeting on Tuesday, Trump hinted that the nominee would be Hassett: "I guess there is a potential Federal Reserve chair here. I don't know who qualifies to say 'potential.' I can tell you, he is a respected person. Thank you, Kevin."

• New Federal Reserve Communications Agency: Hassett's election as Federal Reserve chair has been "internally confirmed". Timiraos reported that Trump told reporters on Sunday, "I know who I want to choose," and when asked if it was Hassett, he just smiled and said nothing. White House National Economic Council Director Hassett meets Trump's two key criteria: loyalty and credibility in the market.
• Hassett's appointment as chair is "internally confirmed," will the Federal Reserve be "extremely dovish" next year? But can inflation hold up? It is generally believed that Hassett's election as Federal Reserve chair has been "internally confirmed," strengthening the market's dovish bets, but stronger growth and stubborn inflation in 2026 are challenging this narrative In the short term, signals of a policy shift have driven U.S. stocks and interest rate cut expectations to rise in tandem. However, if inflation rises again next year, the central bank's credibility will be put to the test, and the market may tighten financial conditions in reverse, leading to a significant increase in volatility.

The U.S. holiday shopping season kicks off with a bang! The National Retail Federation: Thanksgiving holiday shopping numbers soar to over 200 million . On Tuesday, the National Retail Federation (NRF) released data showing that approximately 202.9 million American consumers shopped during the five days from Thanksgiving to Cyber Monday. This not only exceeded NRF's previous forecast of 186.9 million but also broke all records since the organization began tracking this data in 2017.

OpenAI triggers a red alert, suspends advertising business, and focuses on optimizing ChatGPT, “going all out” against Google Gemini. In the face of a surge in Google Gemini users and the severe threat of technological overtaking, OpenAI announced the initiation of an internal "red alert." The company will delay new projects such as advertising and AI agents, concentrating all resources on optimizing the core experience of ChatGPT, including enhancing personalization, image generation capabilities, and response speed. This move aims to solidify the moat of over 800 million users and lay the groundwork for the next critical round of financing, expected to be around $100 billion.

• OpenAI accelerates the development of a new model “Garlic,” directly facing the pressure from Google's AI advancements. OpenAI is accelerating the development of a new model codenamed Garlic to respond to the competitive pressure brought by Google Gemini 3. Internal testing shows that it has surpassed Gemini 3 and Anthropic's Opus 4.5 in programming and reasoning tasks. The model integrates Shallotpeat's pre-training repair scheme, achieving more efficient knowledge injection at a smaller scale. Related technological iterations suggest that GPT-5.2 or GPT-5.5 may debut in early 2026. However, Garlic still needs to undergo further training and safety evaluations, and its actual performance in application remains to be seen.
• In the face of Google's challenge, who is more vulnerable: NVIDIA or OpenAI? Senior tech analyst Ben Thompson pointed out that under Google's comprehensive counterattack with the Gemini model and TPU chips, the two giants in the AI field are facing distinctly different crises: NVIDIA's business model is vulnerable because its profits heavily rely on a few large cloud customers capable of "breaking down the CUDA ecosystem wall"; while OpenAI holds a strong network effect formed by 800 million users, its biggest strategic mistake has been not adopting an advertising model to convert its user advantage into a sustainable business barrier, thereby weakening its moat Amazon's Major Release Challenges Google and Nvidia: AI Chip Trainium 3 is Faster and More Energy Efficient, Four Nova 2 Models, Pioneering "Open Training". Trainium 3 is the first 3nm AWS AI chip, offering 2.52 PFLOPs FP8 computing power, with memory capacity increased by 1.5 times and bandwidth improved by 1.7 times compared to the previous generation. The Trn3 UltraServer system equipped with it has improved energy efficiency by 40% over the previous generation. The upcoming Trainium 4 will support Nvidia's NVLink Fusion interconnect technology. The new models include Amazon's smartest inference model Nova 2 Pro and the industry's first unified multimodal inference and generation model Nova 2 Omni. The service Nova Forge, which pioneers the "open training" model, builds customized Nova models for enterprises. The new service Nova Act achieves breakthroughs in browser task automation.

Nvidia CFO: $500 Billion Chip Orders Exclude OpenAI Collaboration, $100 Billion Agreement Still Not Finalized. Nvidia Chief Financial Officer Colette Kress stated on Tuesday that the company's projected $500 billion in orders for Blackwell and Rubin AI chips by 2026 does not include any ongoing work with OpenAI regarding the next phase of collaboration. She also revealed that the $100 billion investment agreement announced in September between Nvidia and OpenAI has not yet reached a final version, with OpenAI intending to shift towards direct procurement, and both parties are still negotiating the final agreement.

Power Shortages, Labor Shortages, Equipment Shortages, Morgan Stanley: The Market Will Shift to Address AI Infrastructure Bottlenecks Next Year, Optimistic About Energy Infrastructure. Morgan Stanley stated that as the demand for AI computing power grows non-linearly, investors need to shift their focus from "chips" to "removing bottlenecks" by 2026, and have raised their forecast for data center power demand again. Based on the latest growth expectations for Nvidia's sales, the cumulative power shortfall for U.S. data centers from 2025 to 2028 is expected to reach 47 gigawatts.

The Big Short Targets Tesla, Calling Its Valuation Absurd and Compensation Plan Detrimental to Shareholders. Michael Burry estimates that Tesla's stock-based compensation plan will dilute shareholder equity by about 3.6% annually without buyback offsets. Burry specifically criticized Musk's proposed $1 trillion compensation plan, arguing that the scale of the plan and its potential dilution effects have become a focal point for institutional investors assessing the company's risks Vanke Bond Extension New Developments. According to Shanghai Securities Journal, a leaked screenshot of the "Initial Proposal for the Meeting of Holders of 22 Vanke MTN004" shows that Vanke intends to seek a one-year extension for the repayment of the principal and interest of the "22 Vanke MTN004" bond. An industry veteran stated that this extension plan is a specific scheme for a single bond and involves a one-time payment after one year. Currently, there are no signs from this plan indicating that the market is particularly concerned about Vanke potentially launching an overall debt restructuring plan in the future.

Eurozone November CPI Rises to 2.2%, Stubborn Service Prices, ECB Rate Cut in December "Highly Unlikely". Eurozone inflation accelerated from 2.1% last month to 2.2% in November, reinforcing market expectations that the European Central Bank will not cut rates this year. Service prices remain high, while energy prices continue to decline. The market has almost completely ruled out the possibility of the European Central Bank cutting rates at the December meeting and believes that the likelihood of any easing policy next year is only one in four.

Domestic Macro

China and Russia Hold Strategic Security Consultations: Agree to Firmly Counter the Resurgence of Fascism and Japanese Militarism. According to CCTV News, both sides conducted strategic discussions on issues related to Japan and reached a high level of consensus, agreeing to firmly uphold the results of the victory in World War II, which were achieved through life and blood, resolutely resist any erroneous words and actions that seek to overturn the history of colonial aggression, and firmly counter the resurgence of fascism and Japanese militarism. They will shoulder the common responsibility of China and Russia as major powers and permanent members of the United Nations Security Council to maintain world peace and security, uphold historical truth, and international justice.

Central Economic Work Conference Outlook: Policy Direction Expected to Be More Proactive. CITIC Securities expects that 2026, as the starting year of the 14th Five-Year Plan, will see a more proactive policy direction. This conference is expected to focus on pre-deployment around expanding domestic demand, technological innovation, coordination of fiscal and monetary policies, and resolving real estate risks.

Yongmei Impact Difficult to Reproduce, Bond Market Hard to Mirror End of 2020 Market. Dongfang Securities believes that this time, due to the limited extent of risk diffusion, the pressure from the funding environment and negative feedback in the bond market is not significant. Most importantly, this incident is unlikely to change market expectations for the macro environment, and it will not prompt investors to reassess economic trends and monetary policy directions as Yongmei did, nor will it accelerate the entry of banks, insurance, and other institutions into the bond market Domestic Companies

The AI battle in China will "intensify comprehensively" in 2026: "Traffic entry" becomes a "must-fight" area for major companies, and AI going overseas will also accelerate. Citigroup stated that the Chinese internet sector will surge by 36.5% in 2025, but the real battleground will be the comprehensive AI competition in 2026. Alibaba, Tencent, and ByteDance will compete around AI cloud, chatbots, and vertical intelligent agents. ByteDance's AI applications have already risen to third place globally in monthly active users. The efficiency improvements brought by AI will also benefit stable profit industries such as gaming and tourism.

Doubao AI Assistant "Ideal is Full, Reality is Slim"? Morgan Stanley: Major smartphone manufacturers prefer self-research, making implementation very difficult. Morgan Stanley believes that although the demo version of Doubao showcases a rich functional ecosystem, its implementation faces significant challenges. This is because it involves modifications at the operating system level, which undermines the bargaining power of smartphone manufacturers in the supply chain. Giants who control hardware entry will never easily hand over the keys, and Morgan Stanley remains optimistic about "super applications" like WeChat, Taobao, and Meituan.

V3.2 approaches Gemini 3, DeepSeek boldly declares: Next, I will stack computing power. In response to the Scaling Law failure theory, DeepSeek released V3.2 and Speciale as a strong counterattack, approaching Gemini 3 in reasoning performance. Addressing the current shortcomings of the model in the breadth of world knowledge, DeepSeek stated in its technical report that it is due to insufficient training FLOPs and boldly announced that it will "expand pre-training computing power" to bridge the gap.

Benchmarking OpenAI, Zhiyu AI races for "the first domestic AI stock," with ARR for developer and model business exceeding 100 million! Zhiyu AI's CEO revealed that the company's software tools and model business (GLMcoding plan) aimed at developers have already achieved over 100 million RMB (approximately 14 million USD) in annual recurring revenue (ARR). The company has attracted over 2.7 million paying customers through its API platform and expects sales to double by 2025.

Overseas Macro

OECD: The interest rate cuts by major global central banks will end next year, and the room for easing is very limited. The latest report from the OECD shows that the room for further monetary policy easing in most economies is very limited. It is expected that the Federal Reserve will only cut interest rates twice more before the end of 2026, with the federal funds rate remaining in the range of 3.25% to 3.5% until 2027. The Eurozone and Canada are expected to have no further room for interest rate cuts, while Japan's inflation continues to stabilize near policy targets, which is expected to promote a steady tightening of monetary policy QT officially ends, surge in repo facility usage, what does this mean for overall liquidity? Although the Federal Reserve's quantitative tightening (QT) has officially ended, the usage of the standing repo facility (SRF) has reached the second-highest level since 2020, indicating that liquidity in the financial system has not shifted towards easing; this suggests that the market will enter a new phase dominated by the Federal Reserve—central banks will need to provide liquidity to the market through targeted bond purchases, a process that will also lead to selling pressure on mortgage-backed securities (MBS), complicating the overall liquidity outlook.

Global supply extremely tight, silver experiences an epic short squeeze. The global physical supply shortage is igniting a "perfect storm" for silver. Silver prices have recently soared to a historic high of $58.84, with gains far exceeding those of gold. Traders are betting on a continued global shortage. With strong industrial demand in China, a surge in speculative activity, and potential trade tariff risks, this epic short squeeze continues, amplifying market vulnerabilities.

Oil prices surge rapidly during trading, Putin states will strengthen strikes on Ukrainian ports. On Tuesday, WTI crude oil futures rose from $58.40 to $59.20, narrowing the decline to 0.3%. Russian President Putin stated that he would strengthen strikes on Ukrainian ports. If attacks on Ukraine continue, Russia may target Ukrainian tankers. On the same day, President Putin met with a U.S. envoy. Zelensky stated that there is no simple solution to the Russia-Ukraine peace agreement.

Saxo Bank's "outrageous" 2026 predictions: gold price at $10,000, quantum computing breakthrough triggers panic, AI triggers a comprehensive crisis. Saxo Bank released its "outrageous predictions" for 2026, including a quantum computing breakthrough that triggers panic in financial markets, pushing gold prices to $10,000; large-scale failures of AI automation systems leading to trillion-dollar cleanup efforts. Some of the bank's 2025 predictions have already begun to materialize, such as an 8% decline in the dollar and Nvidia's market value surpassing Apple's.

Overseas Companies

Consulting giants like McKinsey freeze starting salaries for the third consecutive year, AI allows "fewer junior employees to extract greater value"! AI is forcing top consulting firms (such as McKinsey and BCG) to freeze starting salaries for graduates for the third consecutive year, as AI technology can "extract greater value" from fewer junior employees. This is not just a salary issue, but also signifies a disruption of the traditional "pyramid" talent model in the industry, with a contraction in hiring scale and a shift in talent structure towards experienced professionals, indicating a fundamental transformation in the knowledge services industry is underway NVIDIA announces new collaboration achievements: Mistral open-source model accelerates, improving efficiency and accuracy at any scale. Through optimization techniques customized for large advanced mixture of experts (MoE) models, Mistral Large 3 achieves best-in-class performance on NVIDIA's GB200 NVL72 system, with a 10-fold performance increase compared to the previous generation H200 chip, achieving a processing speed of over 5 million tokens per second per MW of energy consumption. The Mistral 3 series small models can achieve a maximum inference speed of 385 tokens per second on NVIDIA's RTX 5090 GPU.

Valued at $4 billion, Luma AI, backed by NVIDIA, announces large-scale expansion plan, targeting "world models"! NVIDIA-supported startup Luma AI has completed $900 million in financing, surpassing a valuation of $4 billion, and announced its expansion in London, planning to hire 200 employees. As North American AI labs flock to Europe, Luma AI is intensifying competition with giants like Google and Meta in the generative video and "world model" space.

Accelerating to catch up with SK Hynix, Samsung's HBM4 reportedly passes internal testing, ready to supply NVIDIA. Samsung Electronics' HBM4 chips have passed internal production readiness certification (PRA) and are accelerating the supply process to NVIDIA. If successful in entering its supply chain, Samsung's position in the AI chip sector will significantly improve. Previously, SK Hynix had leveraged its dominant position in HBM4 supply to raise chip prices by over 50%, further consolidating its market pricing power. As NVIDIA's next-generation GPUs approach mass production, competition between the two South Korean semiconductor companies in the high-end storage market is expected to intensify.

Aiming at key EUV technology! The U.S. government bets on laser startup xLight: up to $150 million for major shareholder status. xLight is not building an entire lithography machine but is targeting the most difficult and critical component in extreme ultraviolet (EUV) lithography systems—the laser. Currently, only ASML can produce EUV lithography machines, each costing hundreds of millions of dollars, with its core being the laser system that generates a 13.5-nanometer wavelength light source.

U.S. military "addicted" to stock and cryptocurrency trading, even recommending stocks on aircraft carrier decks! A strong investment culture is sweeping through the U.S. military. From aircraft carrier decks to air force bases, soldiers are keen to share investment insights on stocks and various assets. Data shows that during the 2021 cryptocurrency market cycle, the participation rate of taxpayers at some military bases was more than four times the national average in the U.S This phenomenon, born from the unique combination of investment and military life, has created wealth while also raising concerns about its sustainability due to its high-risk and centralized investment model.

Bank of America significantly raises Eli Lilly's target price, optimistic about drug development pipeline. Bank of America is optimistic about Eli Lilly for several core reasons: the launch date of the oral GLP-1 drug orforglipron has been moved up to early 2026, and the progress of new drug development has exceeded expectations; weight loss and diabetes drugs Zepbound and Mounjaro maintain market leadership. The bank has significantly raised Eli Lilly's target price to $1,286, believing there is still a 22% upside potential, and reiterated its buy rating.

Today's News Preview

French President Macron will visit China.

Final November services and composite PMI for China, the United States, the Eurozone, the United Kingdom, and Japan.

U.S. November ADP employment change.

Eurozone October PPI.

Salesforce and Snowflake to announce earnings.

Launch event for Li Auto's AI glasses Livis.

U.S. EIA crude oil inventory change last week