【True Insight Finance】Fed cuts interest rates and restarts bond purchase program; Goldman Sachs bullish on RMB
The Federal Reserve cut interest rates by 25 basis points and announced it would purchase $40 billion in Treasury bills monthly starting Friday. Goldman Sachs' model shows the yuan is undervalued by 25%.
Overnight Highlights
U.S. stocks closed higher on Wednesday as the Federal Reserve cut interest rates by 25 basis points as expected, with investors betting on further policy easing in the future, even as the Fed signaled a pause in further rate cuts for now. U.S. Treasury yields fell. The dollar weakened against major currencies including the euro, Swiss franc, and yen. Oil prices closed higher after officials said the U.S. seized a tanker off the coast of Venezuela, heightening concerns about near-term supply.
International News
The Federal Reserve cut interest rates by 25 basis points for the third consecutive time as expected, with two hawkish and one dovish official dissenting. The median dot-plot projection suggests one more rate cut next year, though traders are still betting on two cuts in 2026.
The Fed removed the aggregate cap on standing repo operations and announced it would begin purchasing $40 billion in Treasury bills monthly starting Dec. 12, with Chair Powell saying purchases will remain elevated in the coming months.
Trump criticized the Fed for cutting rates too little and said he would interview former Fed Governor Kevin Warsh for the chair position.
Jeffrey Gundlach, known as the "Bond King," predicted this could be Powell's last rate cut during his tenure.
U.S. employment cost growth in Q3 hit its slowest pace in over four years, reflecting a cooling labor market that could help ease inflation pressures.
Trump said he would oppose any Warner Bros. Discovery (WBD.US) sale deal that doesn't include CNN, potentially complicating Netflix's (NFLX.US) proposed acquisition of Warner.
The U.S. military intercepted and seized a sanctioned oil tanker near Venezuela's coast, marking a serious escalation in tensions between the two countries.
U.S.-Indonesia trade talks have reportedly stalled over Indonesia's concerns about sovereignty and relations with China and Russia.
ECB President Christine Lagarde said the bank's new forecasts next week may upgrade the economic outlook.
The Bank of Canada kept rates steady at 2.25%, saying the economy has shown resilience to tariff shocks.
Brazil's central bank held rates at a near 20-year high, citing "high uncertainty" and the need for caution.
Meta (META.US) is shifting focus to AI models that can be commercialized, with plans to launch a new model next year that will be closed-source, trained using tools like Google's Gemma and Alibaba's Tongyi Qianwen.
Oracle (ORCL.US) sharply raised its fiscal-year spending outlook for AI data centers and other equipment, sending shares down over 10% after hours. See: [Market Review] Oracle (ORCL.US): Not Yet Time to Bet on a Turnaround, No Need to Rush Back In
Wall Street giants like Goldman Sachs and Citigroup believe the oil sell-off is far from over, with prices set to keep falling next year due to oversupply.
Greater China News
The IMF urged China to enhance exchange rate flexibility, warning that continued reliance on exports could exacerbate trade tensions.
Goldman Sachs' weighted average model shows the yuan is undervalued by 25%, ranking it among the bank's "highest conviction" trades.
Amid conflicting claims between China and Japan over a "radar lock-on" incident, the U.S. ambassador to Japan said State Department spokespeople called China's actions detrimental to regional peace and stability.
DeepSeek reportedly accessed Nvidia's (NVDA.US) Blackwell chips—banned from export to China—via overseas data centers to develop next-gen AI models. Nvidia denied the "ghost data center" claim.
Reuters: ByteDance and Alibaba (9988.HK /$Alibaba(BABA.US)) $BABA-W(09988.HK) are planning large orders of Nvidia's H200 chips, pending Beijing's approval.
JD Industrial (7618.HK) $JD INDUSTRIALS(07618.HK) will list in Hong Kong on Thursday, with its IPO priced at HK$14.1 and oversubscribed nearly 60 times.
China's smartphone shipments rose 12.4% YoY in October, according to the China Academy of Information and Communications Technology.
Several Chinese polysilicon giants, including Tongwei (600438.CN) and GCL Technology (3800.HK) $GCL TECH(03800.HK), have formed a joint venture, Beijing Guanghe Qiancheng Technology, to address overcapacity.
TSMC (2330.TW /$Taiwan Semiconductor(TSM.US)) reported a 24.5% revenue increase in November, indicating resilient demand for AI chips.
Commodities & Forex
The Bloomberg Dollar Index fell after the Fed's 25-basis-point rate cut and its projection for one more cut next year.
Crude futures rebounded after the U.S. seized a sanctioned tanker off Venezuela's coast. See: [Market Review] Crude Oil 2026 Outlook: Bottoming Out, But With Support
Gold rose on the Fed's rate cut decision and plans to start Treasury bills purchases.
Earnings & Data Watch
U.S. Fed Rate Decision (Upper Bound) as of Dec. 10 (Prev: 4.00%, Est: 3.75%, Actual: 3.75%)
U.S. Initial Jobless Claims (Week Ending Dec. 6) (Prev: 191K, Est: 220K)
Source: Golden Horse Capital Management (Hong Kong) Limited
Author: Terry Chow
Proofreader: Penny Yang
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