Fed Flags Potential Risks Tied To Office Space, Capital Planning

Central Bank

Summary:

Federal Reserve bank supervisors are monitoring community and regional banks' commercial real estate portfolios amid concerns over "elevated interest rates, tighter underwriting standards, and lower commercial property values," the agency said.

The central bank said those factors may affect borrowers' ability to refinance or pay off their loans, according to a supervision and regulation report released Monday. Officials are monitoring commercial real estate loan trends in addition to closely reviewing underwriting practices and credit loss reserve levels.

Among Wall Street lenders, the agency's watchdogs are monitoring for weaknesses in capital planning and liquidity risk-management practices among such lenders. Still, the Fed report found that the vast majority of banks continued to report capital levels well above applicable regulatory requirements as of the second quarter.

"Stress test results showed that large banks are well positioned to weather a severe recession while maintaining minimum capital requirements and the ability to lend to households and businesses," according to the report.

These areas of focus come as Fed Vice Chair for Supervision Michelle Bowman has urged supervisors to shift their focus to material risks rather than become distracted by process-related items that do not impact a firm's safety and soundness.

US regulators have recently moved to ease several capital requirements and finalized changes last month to its supervisory rating framework for large banks.

Source: Bloomberg Europe

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Golden Gleam

Commodity

Economic

Gold prices rose to a six-week high on Monday, supported by growing expectations of U.S. interest rate cuts and a sliding dollar, while silver struck a record high ahead of key U.S. economic data.

Spot gold was up 0.3% at $4,244.29 per ounce, as of 09:21 AM ET (1421 GMT), its highest since October 21. U.S. gold futures for February delivery gained 0.6% to $4,278.40.Silver was up 1.8% to $57.39 per ounce, after hitting an all-time high of $57.86 earlier.

The U.S. dollar slipped to a two-week low, making gold more affordable for holders of other currencies.

"The underlying environment of expectations of further rate cuts, along with inflationary pressure still above the Fed target... is still the underlying support in gold and silver," said David Meger, director of metals trading at High Ridge Futures.

Traders have increased December rate-cut bets to an 87% probability, following softer U.S. economic data and dovish remarks from Fed officials, including Governor Christopher Waller and New York Fed President John Williams.

Lower interest rates tend to favor non-yielding assets such as gold.

Investors are also focusing on key U.S. data this week, including November ADP employment figures on Wednesday and the delayed September Personal Consumption Expenditures (PCE) Index, the Fed's preferred inflation gauge, due Friday.

Fed Chair Jerome Powell's remarks later on Monday are also expected to offer further policy clues.

Meanwhile, the expectation that the next Fed Chair is going to be more dovish than previous ones is also supporting gold and silver, Meger said.

White House economic adviser Kevin Hassett said on Sunday that, if chosen, he would be happy to serve as the next Fed chairman. Treasury Secretary Scott Bessent indicated a new chair could be named before Christmas.

"We still view gold and silver in a strong sideways to higher uptrend," Meger said.

Among other precious metals, platinu rose 0.3% to $1,677.28, while palladium fell 0.5% to $1,443.75.

Source: Kitco

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Adam

Economic

The appetite for downturns rests on a mix of emotions, media reflexes and attention (and money) gains for those who make a living from financial commentary. This cocktail explains why a red day always draws more attention than a calm, or even not-so-calm, upswing.

Falls always make for a better story. There is tension, drama, culprits, victims. Nobody is interested in a 0.7% gain, while a 5% loss mobilizes everyone. The media know it: red alerts trigger clicks. This is not a conspiracy, it is biology. Kahneman and Tversky theorized this brutal asymmetry: the pain of losing €1,000 is psychologically twice as intense as the pleasure of winning the same amount. Our reptilian brain is wired for survival, not serenity. A green arrow is information, a red arrow is a life-threatening danger. Threats always take priority. And fear sells, and not just shares.

Sell everything

A bull market reassures, a bear market worries, and therefore engages. When indices plunge, news channels see their audiences surge, analysts are listened to more closely, experts are in higher demand, defensive products are bought in greater numbers. On MarketScreener, in-depth analysis pieces are read far more. With aggressive headlines, their audience can even multiply tenfold. "The market is falling" works well. But less well than "The stock market is collapsing". Which is less effective than "Huge stockmarket crash on Wall Street" or "Sell everything, the market is going to lose 50%". A downturn is a moment of frantic consumption of content, advice, opinions. Everyone has something to say. Especially those who have been calling for a meltdown for years.

Because every correction becomes an opportunity to replay the crash prediction. Some people are just waiting for that: for the market to finally tumble so they can say "I told you so". They make a lot of noise when markets fall, then disappear during the recovery phases. Their narrative survives only in moments of urgency and delivers catastrophic results over the long term.

I remember a panel discussion a few years ago. On my right sat an economist known for having started out in investment banking before making his money out of catastrophism (yes, that one). It is still his bread and butter today, thanks to a community whose size has mysteriously swelled over the years. Back then, already known for predicting all sorts of looming cataclysms, he boasted that he had avoided losing money for those who listened to him. A fund manager sitting opposite him, whose name I have forgotten, replied icily: "By encouraging them to stay out of the market for 15 years, sir, you have mostly cost them a lot of money."

A healthy dose of Schadenfreude

We also have to admit that many of those who revel in a downturn don(t have a penny in the market. Their relationship with the market is ideological or purely about spectacle. They see finance as an opaque, unfair or simply distant system. For them, a stockmarket decline is like a disaster movie: a show, not a loss. It is even a form of revenge against a world they do not belong to. There is, in this voyeurism, a dose of Schadenfreude, that guilty pleasure at other people's misfortune. When the market rises, the rich get richer and inequalities widen. When it collapses, everything is levelled. Watching "those at the top" panic provides a sense of rough justice, a kind of egalitarianism by way of emptiness. For the spectator, the crash is not a financial loss, it is a moral reward.

Finally, fear is contagious. During sell-offs, even outsiders are glued to the screens. Humans are wired to react to danger, and the media know how to play on this archaic reflex. It is also a platform for players who gain little from rising markets. It offers a window to short-sellers, crisis commentators, political parties predicting systemic collapse, or those who want to prove that "finance does not work".

This is not rational, it is human. That is why markets in the red always make more noise than those in the green.

Source: marketscreener

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Stocks

Fund managers are picking Chinese industrial stocks and holding volatile tech shares, betting a two-year-old equities rally can withstand an economic rough patch, as valuations and steady returns lure foreign investors back.

China's blue-chip index CSI300 <.CSI300> has matched the S&P 500 (.SPX) with a roughly 16% year-to-date gain, while Hong Kong's Hang Seng (.HSI) - up about 30% - is on course for its most substantial annual rise since 2017. The mood is far from the stimulus-triggered euphoria of a year ago, though the ride is becoming bumpier - especially as pressure on developer China Vanke (000002.SZ) reminds market participants that a prolonged property downturn is far from over.

But there seems to be little panic among investors and analysts who say the bull market is just taking a breather.

"We believe we are just at the beginning of a gradual reallocation process by foreign investors coming back into China," said Morgan Stanley's chief China equity strategist Laura Wang.

"I think what they have seen so far through the course of this year has already been encouraging enough for them to gradually change their mind," she said, adding that she had been spending less time talking with investors about U.S.-China tensions.

China stocks have also defied Sino-American trade friction and climbed thanks to state support, improved corporate governance and big gains for artificial-intelligence-linked stocks after the impressive release of DeepSeek's chatbot.

A record HK$1.38 trillion ($177 billion) was also poured from China into Hong Kong, where capital markets have been revived.

"The next leg of the bull run will likely be driven by fundamental improvements and earnings growth," said Xia Fengguang, fund manager at Shenzhen Rongzhi Investment.

Like others, he is supportive of Beijing's campaign against industrial overcapacity and price wars, referred to as its anti-involution drive, betting it can improve corporate margins.

ANTI-INVOLUTION

Valuations of industrial stocks are also attractive, fund managers say, and they are helping to draw investment.

"Cyclical stocks are relatively cheap, so you can start building positions when prices are weak as anti-involution policies gradually take root," fund manager Wang An said.

Over the past three months, 13.5 billion yuan ($1.91 billion) in net inflows entered ETFs tracking the CSI Battery Thematic Index , while another 11.2 billion yuan went into funds tracking the CSI chemicals sub-industry index (000813.SZ) , according to financial data provider Datayes.

Funds tracking the tech-heavy STAR 50 Index (000688.SZ) experienced 31.1 billion yuan of net outflows during the same period.

Xu Jie, a Shanghai-based fund manager at Yuanzi Investment Management, has bought solar energy, steel-making and coal stocks.

"There is no question" that China's slow bull run will extend into next year, Xu said, citing potential inflows from foreigners and local depositors.

Currently, the Shanghai Composite Index (.SSEC) and Hong Kong's Hang Seng are both trading at roughly 12 times earnings.

That compares with a multiple of 28 for the S&P 500 (.SPX) , 21 for Japan's Nikkei 225 (.N225), and a price-to-earnings ratio of 21 for Europe's FTSE 100 Index (.FTSE) according to LSEG.

"Whether you look at valuation or liquidity, we are just halfway through the bull run," said Wang Wendi, distribution manager at Shanghai Intewise Capital, which has increased its holdings in steelmakers, chemical producers and express-delivery firms.

Another Chinese fund house, Zenith & Xenium Capital, said it also placed wagers on cyclical plays like photovoltaic firms, refiners and chemical processors and new energy sectors.

NEW CHINA

Foreigners have previously held concerns over policy risks in China and for the past few years have kept allocations relatively light while U.S. and global investments have performed strongly.

Some investors said they were not all in on China and, as factory activity slowed for an eighth straight month in October, there are headwinds.

"When I say China, we're on the fence," said Vincenzo Vedda, global chief investment officer at DWS.

China no longer publishes real-time data on foreign inflows and the latest central bank figures showed foreign holdings rose to 3.5 trillion yuan at the end of September, well below a 2021 peak of 3.9 trillion yuan, but it reflected some strength.

Florian Neto, head of investment for Asia at Amundi, Europe's biggest asset manager, is neutral but draws a distinction between the "old China," where exporters and developers faced economic headwinds and "new China" where AI and biotech firms can expect earnings growth.

"The market, in fact, is actually driven mostly by new China, by the innovation, tech and innovative drugs ... we are very, very much looking forward to adding further," he said.

And as investors take note of their full-year returns, they may become buyers in 2026.

"A number of other stock markets have performed better than the U.S. this year," said Kristina Hooper, chief market strategist at Man Group in New York.

"And that is, I think, a paradigm shift that most investors will recognise at least by January ... and I think that helps encourage looking outside the U.S. for opportunities, especially with valuations so stretched."

($1 = 7.0744 Chinese yuan renminbi)

($1 = 7.7874 Hong Kong dollars)

Source: reuters

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Adam

Forex

Stocks

India’s Nifty 50 index and its currency appeared to move in lockstep on Monday, weighing down a stock gauge that touched an intra-day record during morning trading.

The benchmark was up as much as 0.5% after the open, putting it on course to close at an all-time high. But the Indian rupee had its own record to set, plunging to yet another low — and the stock market went down with it. The Nifty 50 was roughly flat in afternoon trading, and remains up around 11% so far this year.

Rupee Selloff Weighs on Nifty 50 After Index Briefly Hits Record_1

The pair has witnessed similar movement in recent sessions, when the rupee’s fall against the dollar worsened. Market participants aren’t sure what’s driving the tight move, but they said a sense of uncertainty in the market is hitting both stocks and the currency.

“Equities are already trading close to all-time highs and sharp movement in the rupee is making some investors jittery,” said Abhishek Shah, a Mumbai-based proprietary trader. Shah also mentioned that lack of any communication on a tariff deal with the US is weighing on market sentiment.

There can be a feedback loop between a country’s currency and its stock market, although the correlation between the two is often unpredictable. For example, foreigners selling Indian stocks put pressure on the rupee, which could in turn encourage other foreigners to sell before the currency tumbles further.

Foreigners bought a net $430 million of Indian stocks in November, a big drop from the $1.2 billion they purchased in October, according to Bloomberg-compiled data. Data for foreigners’ net purchases on Monday isn’t yet available.

Source: Bloomberg

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Commodity

Oil prices rose $1 a barrel on Monday following drone attacks by Ukraine, the closure of Venezuelan airspace by the United States, and OPEC's decision to leave output levels unchanged in the first quarter of 2026.

Brent crude futures advanced $1, or 1.6%, to $63.38 a barrel by 9:14 a.m. CDT (1514 GMT). U.S. West Texas Intermediate crude gained 94 cents, or 1.61%, to $59.49 a barrel.

"Ukrainian drone attacks on Russian shadow fleet as well as a commitment by OPEC to maintain current production levels has the market in an optimistic state," wrote Phil Flynn, senior analyst for the Price Futures Group, in a note. "This comes as global oil demand continues to rise despite the negativity that we continue to hear on the demand side of the equation."

ATTACKS ON CPC TERMINAL BOOSTS PRICES

The Caspian Pipeline Consortium, which carries 1% of global oil, said on Saturday that one of the three mooring points at its Novorossiysk terminal had been damaged, halting operations. But Chevron, a CPC shareholder, said late on Sunday that loadings were continuing at Novorossiysk. Usually, two moorings are engaged in loadings, while one is used as a backup.

The attacks on the CPC export terminal drove oil prices higher, UBS analyst Giovanni Staunovo said.

They came as Ukraine stepped up its military operations in the Black Sea and hit two oil tankers, which were heading to Novorossiysk.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies initially agreed on a pause in early November, slowing a push to regain market share with looming fears of a supply glut.

LSEG senior analyst Anh Pham said the market was reacting positively to the news.

"For some time, the narrative has centred on an oil glut, so OPEC+'s decision to maintain its production target provided some relief and helped stabilise expectations for supply growth in the coming months."

Brent and WTI crude futures settled lower on Friday for the fourth straight month, their longest losing streak since 2023, as expectations for higher global supply weighed on prices.

On Saturday, U.S. President Donald Trump said "the airspace above and surrounding Venezuela" should be considered closed, sparking fresh uncertainty in the oil market, as the South American nation is a major producer.

Trump on Sunday said he had spoken to Venezuelan President Nicolas Maduro but did not give details.

Source: Reuters

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Devin

Russia-Ukraine Conflict

Russian President Vladimir Putin declared on Tuesday that Russia is prepared for war with European powers if they seek conflict, while emphasizing that Moscow does not want such an outcome.

During his address, Putin stated that European nations have made "absolutely unacceptable" demands regarding a potential peace settlement for Ukraine.

"If Europe wants to fight war, we are ready now," Putin said, escalating his rhetoric against European nations.

The Russian leader claimed that Europeans have "detached themselves" from peace talks and are hindering the U.S. administration and President Trump's efforts to achieve peace through negotiations.

"Europeans do not have peaceful agenda, they are on the side of war," Putin asserted.

Putin highlighted the strategic importance of Pokrovsk in Ukraine, describing it as "a great base for fulfilling goals" and reiterating that it is now "fully in Russia's army control," a statement Ukrainian officials have rebuffed.