Institutions are bullish on the U.S. stock market's "Santa Claus rally"; Japan may intervene to curb yen depreciation

Goldman Sachs and Citadel Securities are bullish on the U.S. stock market's "Santa Claus rally," with investors actively buying call options. Japan's finance minister issued a warning about the yen's weakness, stating that appropriate measures will be taken.

Overnight Highlights

· U.S. stocks closed higher on Friday, with a rebound in tech stocks offsetting the sharp decline in consumer stocks like Nike. U.S. Treasury yields rose, and global bond yields climbed after the Bank of Japan raised interest rates. The yen weakened significantly against the dollar and other major currencies, as the Bank of Japan did not clearly signal future rate hikes. Oil prices rose, with potential market disruptions from the U.S. intercepting a Venezuelan oil tanker, while investors awaited news of a possible peace deal between Russia and Ukraine. Gold prices climbed, posting weekly gains, boosted by heightened expectations of a Fed rate cut.

International News

· White House National Economic Council Director Hassett said U.S. core inflation is at or below target levels, giving the Fed ample room to cut rates. Meanwhile, the presidents of the New York Fed and Cleveland Fed both stated there is no urgency for further rate adjustments. See: [Market Review] The Fed's Dilemma: Praising the Economy While Worrying About Jobs.

· U.S. President Trump announced an agreement with nine pharmaceutical companies aimed at lowering some drug prices in exchange for a three-year tariff grace period. Trump also said he would soon convene a meeting with insurers to discuss price reductions.

· Goldman Sachs and Citadel Securities are bullish on the U.S. stock market's "Santa Claus rally." Citadel Securities noted that historical data shows the S&P 500 has risen 75% of the time in the last two weeks of December, with both retail and institutional investors actively buying call options.

· Bank of America data showed nearly $78 billion in net inflows into U.S. stocks for the week ending December 17, the second-largest weekly inflow on record. Tech stocks saw net inflows for the first time in three weeks.

· Japanese Finance Minister Kameyama expressed "deep concern" over the yen's rapid unilateral decline and stated that appropriate measures would be taken against excessive exchange rate fluctuations based on the September U.S.-Japan joint statement. See: [Market Review] The Yen: Opportunities and Risks Amid Diverging Fed and BOJ Policies.

· Ukraine struck an oil tanker belonging to Russia's shadow fleet in the Mediterranean for the first time. Putin said the attack would not affect Russian oil exports.

· The U.S. intercepted a second oil tanker in its blockade of Venezuela on Saturday, with the oil reportedly owned by a Chinese company. Earlier, Trump told NBC he would not rule out the possibility of war with Venezuela.

Greater China News

· China introduced rules on pricing behavior for internet platforms to protect consumer and merchant rights, requiring platform operators not to impose unreasonable restrictions on pricing capabilities.

· The Shanghai and Shenzhen stock exchanges announced that foreign institutional investors can conduct bond repurchase business in their markets.

· China's National Financial Regulatory Administration solicited opinions on the "Insurance Company Asset-Liability Management Measures," aiming to prevent asset-liability mismatch risks, enhance insurers' management capabilities, strengthen constraints, and ensure stable operations.

· China's rare earth magnet exports to the U.S. fell 11% month-on-month in November, with no immediate rebound after the trade truce between the world's two largest economies.

· Vanke's (2202.HK) 2 billion yuan domestic bond grace period ends Monday. Bondholders must vote by 10 a.m. to decide whether to allow a 12-month extension or further grace. If Vanke neither repays nor reaches an agreement, it risks default.

· After the U.S. approved NVIDIA's (NVDA.US) H200 chip sales to China, House Republicans called for congressional oversight of AI chip exports similar to arms sales.

· Moore Threads (688795.CH) launched a new GPU architecture and chips to reduce reliance on NVIDIA hardware. Chinese AI unicorn Zhipu passed its Hong Kong IPO hearing.

· FT: Chinese chipmakers reportedly sourced parts from secondary markets to upgrade ASML's (ASML.US) DUV lithography machines and boost domestic AI chip production.

· U.S. House China Committee Republicans urged the Pentagon to add DeepSeek, Gotion High-Tech (002074.CH), Unitree Robotics, WuXi AppTec (2359.HK), and 13 others to a military-linked list.

· ByteDance's 2025 profit could hit $50 billion, marking a record year for the Chinese social media giant expanding into e-commerce and new markets.

Commodities & Forex

· The Bloomberg Dollar Index rose in thin trading, with the yen leading losses among G-10 currencies.

· Oil fell for a second week as oversupply concerns outweighed geopolitical risks. Gold rose, hovering near record highs.

Earnings & Data Watch

· UK Q3 GDP YoY Final (Prev: 1.30%, Est: 1.30%)

· UK Q3 Current Account (£bn) (Prev: -289.39, Est: -212.6)

Source: Golden Horse Capital Management (HK) Ltd.

Author: Terry Chow

Editor: Emily Zheng