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Chart of the Week:
Market Grows More Sensitive to AI Tech Revenue, Profit Momentum, and Cash-Flow Pressure
Bloomberg estimates indicate that the four major cloud providers (Amazon, Microsoft, Google, Meta) continue to raise future capex. Although growth is slowing, absolute spending remains high. In this environment, investor focus for AI-led tech stocks is shifting from capex scale toward the ability of such investment to generate revenue and earnings, and increasingly toward free cash flow as a measure of monetization strength.
Market Recap 1:
Fed Rate Cut Supports Markets, but Oracle Results Narrow Tech Gains
Ahead of the Fed decision, markets traded cautiously. Still, U.S. equities outperformed on strong AI-related flows and the Fed’s unexpected early liquidity injection. However, gains narrowed after Oracle reported weaker-than-expected revenue and cash flow. European markets were mixed: Germany outperformed on stronger industrial production, while the U.K. and France softened on muted news flow. Japan rebounded on semiconductor and defense strength. China and Hong Kong initially rose on better-than-expected export data but retreated as sentiment turned cautious ahead of the Central Economic Work Conference.
Market Recap 2:
Fed Liquidity Injection Pulls Yields Back After Initial Rebound; USD Weakens, Gold Supported
At the final meeting of the year, the Fed cut rates by 25 bps as expected. The surprise came from announcing USD 40bn in monthly Treasury purchases under the Reserve Management Purchase (RMP) program starting in December—earlier and larger than the market’s expected USD 15–20bn from January. This eased short-end rate pressures and reversed the prior rebound in U.S. Treasury yields, while other bond markets were mixed.
What’s Trending:
Fed Cuts Rates as Expected; Labor-Market Conditions Now in Focus
On Dec 10 (U.S. time), the Fed cut rates by 25 bps to 3.5%–3.75% as expected, marking the third cut this year. However, three dissenting votes—the most in six years—highlighted internal division and uncertainty over the economic outlook. After the decision, Powell voiced deeper concerns about the labor market, noting “clear downside risk,” which strengthened expectations for further easing and pushed U.S. equities toward record highs by the close.
In Focus 1:
BOJ Likely to Hike Again, Supporting Further Upside in Japanese Bank Stocks
Japan’s latest wage data show annual growth accelerating to 2.6%, a near one-year high, suggesting wages may provide stronger support for consumption. However, despite signs of improvement, consumption has not fully kept pace with wage gains, largely because inflation remains elevated and continues to dilute purchasing power.
In Focus 2:
Fiscal Stimulus to Support Japan’s Domestic Demand and Semiconductor Strength
Soon after taking office, the Kishida cabinet introduced a ¥21.3tn fiscal package focused on three pillars: inflation relief, strategic investment, and stronger national defense. Inflation measures include tax cuts, gas and electricity subsidies, child cash allowances, and rice-purchase vouchers. Strategic investment centers on boosting AI and semiconductor-related industries, while the defense component expands Japan’s defense budget and supports domestic defense manufacturing amid a shifting security environment.
