Global government bonds steady after selloff, big Fed meeting looms large

Bond

Summary:

Global bonds stabilized after a sharp selloff as markets focus on the Fed’s imminent decision. Central banks worldwide hold rates, ECB hawkish signals lift yields, Nvidia gains on China-export news, and oil steadies after a drop.

The global bond selloff paused for breath on Tuesday and stocks drifted, as traders' minds turned to the upcoming Federal Reserve meeting and the implications of the U.S. allowing Nvidia's second-best chips to be exported to China.

It is not just the Fed up this week, the Reserve Bank of Australia held rates steady as expected on Tuesday, but more notably it ruled out further policy easing and warned the next move could be up if inflation pressures prove to be stubborn.

That pushed the Australian dollar to trade just shy of a near three-month high.

The Bank of Canada and Swiss National Bank are both expected to hold rates steady when they meet on Wednesday and Thursday respectively, while comments by influential European Central Bank board member Isabel Schnabel created major waves, despite the ECB not setting policy until next week.

She said on Monday the next move in euro interest rates is more likely to be up - even if it is not on the immediate horizon - and warned leaving rates unchanged for too long could see a passive easing of monetary policy.

Those remarks caused yields on shorter and longer dated German government bonds to post their biggest daily rise in months on Monday, and also pushed U.S. Treasury yields higher as well.

Things were calmer on Tuesday, however, with the 10-year German benchmark yield down 2 bps at 2.84%, around a nine-month high, while the 10-year Treasury yield was down a similar amount at 4.15%.

Stocks were also fairly calm. European stocks (.STOXX) and U.S. share futures were both a fraction higher on the day, though Asian stocks slid. (.MIAPJ0000PUS)

FED IN FOCUS

Worries about Japan's fiscal health have been driving Japanese government bond yields higher, with global spillovers, making for an interesting setup for the Fed's meeting, which concludes Wednesday.

A 25 basis point rate cut is all but priced in, but there is plenty more for investors to be watching.

"Between the possible dissents, Fed chair Powell's tone, and the summary of economic projections, I think there's a lot of ways markets could be surprised," said Erica  Camilleri, senior global macro analyst at Manulife Investment Management.

These will also show whether the next Fed chair will take over a body nervous about further rate cuts, or happy to go along with President Trump's wishes for looser policy.

White House Economic Adviser and top contender for the Fed Chair role, Kevin Hassett, that the Fed should continue to lower interest rates.

And that will raise questions about how the Fed will operate in the medium term.

"What happens when we look at 2027 and 2028? Is this a Federal Reserve that will hike rates if we see a re-acceleration in growth? Or is this a Federal Reserve that has an easing bias, and so even if we see a re-acceleration in growth and inflation data, they stay pat?" said Camilleri.

NVIDIA RISES ON CHINA SALES NEWS

Investors were also trying to think through the implications of U.S. President Donald Trump saying Washington will allow Nvidia's (NVDA.O) H200 processors, its second-best artificial intelligence chips, to be exported to China and collect a 25% fee on such sales.

Nvidia shares rose around 2% in premarket trading but Chinese tech names slid both onshore, and in Hong Kong. Hong Kong's Hang Seng Tech index (.HSTECH) lost nearly 2%.

Currencies too were fairly steady. The euro last bought $1.1649, little changed as higher European yields were matched by higher U.S. ones, while sterling was 0.22% higher at $1.3347.

The yen was flat at 156.1 per dollar after weakening immediately in the wake of a powerful earthquake that rocked Japan.

In commodities, oil prices steadied after diving 2% in the previous session as market participants kept a close eye on peace talks to end Russia’s war in Ukraine.

Brent crude futures were 0.2% lower at $62.3 a barrel. U.S. West Texas Intermediate crude was at $58.69, down 0.3%.

Source: reuters

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Glendon

Forex

Economic

President Donald Trump said he might consider lowering tariffs on some US goods while reiterating that his broad use of import taxes is helping lure investment and revive long-suffering industries like auto and semiconductor manufacturing.

Asked in an interview with Politico whether he'd rule out cutting tariffs on more goods than coffee, beef and bananas, Trump said he would "on some, and on some I'll increase tariffs." He said the breaks he approved recently amid a voter outcry against elevated prices on groceries in particular were "very small carveouts. It's not a big deal."

Under the same line of questioning about levies, Trump said "we've got $18 trillion coming into our country," an apparent reference to investment pledges by companies and countries looking for tariff relief have made to the Trump administration.

"You know what happens is because of tariffs, all of the car companies are coming back," Trump said, adding that the government's equity stake in Intel Corp. earlier this year was also a win. "In about 10 minutes, I made $40 billion. Nobody talks about that."

Source: Bloomberg Europe

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Winkelmann

Political

Stocks

Economic

In carbon dioxide removal, collecting the Earth-warming gas that makes up only 0.04% of the atmosphere is not the most difficult part. Doing it at a scale that can have an impact on climate and at a reasonable cost is.

That's where Japan Inc. can come in, says Shashank Samala, CEO of Heirloom Carbon Technologies. The California-based carbon removal company is building a commercial-scale plant on America's Gulf Coast to remove 1 million tons of CO2 from the air.

"We need to reduce costs, and Japanese companies are really good at continuous improvement, bringing down costs incrementally, and continuous refinement," Samala told Nikkei Asia in an interview. "And that's what our industry needs."

It would, he argues, be a win-win situation.

"Japan was making low-cost, high-quality, efficient cars and built this huge export-led economy, creating a huge boom for 20 years, 30 years," he said. "Now it's an opportunity to figure out where the next automotive [industry] comes from. ... I think it could be carbon capture and a few other climate technologies, because direct air capture is in a similar place."

Heirloom is developing a technology that replicates the carbon dioxide mineralization process. In nature, atmospheric CO2 dissolves in sea water, combines with calcium ions and forms shells and skeletons, eventually turning into limestone. In Heirloom's facility, calcium hydroxide -- commonly known as lime -- is used to capture CO2 and turn it into limestone. This limestone is then heated up to 900 Celsius to release the CO2. The remaining lime is then ready to absorb more CO2. The company likens the process to repeatedly soaking and wringing a sponge.

Heirloom has been in procurement talks with Japanese suppliers as part of its efforts to ramp up operations: Hitachi for CO2 compressors and electrical systems like transformers and switch gears; air conditioner maker Daikin for humidity sensors; ceramics maker NGK Insulators for filters and heat insulators; engineering company Chiyoda for plant engineering services; and trading houses Mitsubishi Corp. and Mitsui & Co. for possible project financing and offtake deals.

Six Japanese companies have invested in Heirloom. Japanese companies have also partnered with other carbon capture startups, such as Switzerland's Climeworks, the world's largest.

Japanese companies have an incentive to work on carbon capture, too. Japan is a manufacturing-led economy and a big user of fossil fuel, especially for production processes such as welding, paint-drying, casting and smelting. Carbon capture is a way to off set emissions from manufacturing activities.

NGK, the world's largest maker of automotive exhaust filters, is looking to direct air capture as a new growth driver to replace automotive operations, which currently make up 60% of its revenue. Automotive exhaust filters take out soot, gunk and harmful substances like nitrogen oxide or carbon monoxide produced by cars. It's good business, as each fossil fuel car requires three to six such filters in its exhaust system. But as electric vehicles become more common, such filters are less necessary. Fortunately for the Nagoya-based company, the transition is happening in phases. NGK expects 30% of new car sales will be battery electric by 2030, the year it has set as its target for mass-producing DAC filters.

Founded in 1919, NGK has a history of transformation, starting as a maker of ceramic insulators for electric utilities, transitioning to automotive ceramic filters in the 1980s. In the last 10 years, a new business has grown making ceramic heaters -- a flat ceramic plate on which a silicon wafer is placed during fabrication steps, making NGK the global leader in the field.

A ceramic filter is a cylinder around 15 centimeters in diameter with thousands of tiny holes running lengthwise, each a millimeter wide or less. They can be coated with CO2-absorbent materials, such as amine, or made with ceramics that contain such substances.

Ceramics are durable, heat-resistant and non-conductive, properties desirable not just for cars and chipmaking but also for DAC, which involves use of chemicals and heat for CO2 absorption and regeneration.

NGK says the production lines for exhaust filters can be quickly converted to those for DAC. The company has supplied product samples to some 30 DAC companies.

Economics is the biggest challenge. Capturing CO2 is easier the higher its concentration is. Major energy-related companies such as Mitsubishi Heavy Industries, Shell Cansolv and SLB Capturi are focusing on capturing CO2 at the point of emission, such as those from flue stacks, which have CO2 concentrations of 10% to 20%.

"CO2 removal is very costly," said Tatsuto Nagayasu, MHI's head of carbon capture, utilization and storage. "Cost-effective technologies will be chosen first."

"MHI probably understands the challenge of making carbon capture commercially viable so well that it is steering clear of DAC," said Hidetaka Yamada, a professor at Kanazawa University and an expert on carbon capture technologies.

But people like Heirloom's Masala and his backer, Microsoft founder Bill Gates, believe that the world will eventually need negative emissions, or carbon dioxide removal, as human activities continue to add CO2 to the atmosphere. The Intergovernmental Panel on Climate Change estimates that humans have emitted 2.4 trillion tons of CO2 between 1850 and 2019 and continue to release more than 40 billion tons a year. This leaves a remaining "carbon budget" of only 400 billion to 500 billion tons to keep temperature rises from the pre-industrial period to 1.5 C, a critical threshold to avoid climate catastrophes such as ice sheet collapse, coral reef extinction, island nation disappearance and more frequent heatwaves, floods and draughts, according to the panel.

Microsoft is Heirloom's biggest customer, and Bill Gates-backed Breakthrough Energy Ventures is its biggest investor. In 2020, Microsoft announced a plan to go carbon negative -- remove more CO2 than it emits -- by 2030, remove all the CO2 they've ever emitted since its founding in 1975 by 2050 and keep going negative thereafter.

"Right now when you look at the climate, there are billions of tons of CO2 in the air, but there are ways to remove it very cheaply. There are ways to improve it, reduce cost, and build at scale over time," Samala said. "Most people overestimate what they can do in one year and underestimate what they can do in 10 years," he added, quoting a remark made by Gates.

The International Energy Agency also sees carbon capture as critical. "Removals are indispensable not only to reach net zero emissions by 2050 but also to achieve net negative emissions in the second-half of the century and thus bringing warming back below 1.5 degrees by 2100," it said in its World Energy Outlook 2025.

Not all methods of carbon capture involve use of lime to absorb CO2. Some use alkaline materials like amines, an ammonia derivative. But whatever material is used, the challenge remains the high cost of separating CO2 from the material that absorbs it.

Industry and government sources estimate there are some 140 startups globally trying to commercialize DAC technology.

Samala says that it currently costs "several hundred dollars" to capture a ton of CO2, adding that his goal is to bring it down to $100, competitive with the higher end of carbon credit prices. There is no incentive to use DAC unless it can reduce CO2 emissions less expensively than other carbon offsets such as reforestation and carbon capture and storage.

"We are in the mid-few hundred dollars per ton right now. We need to go down to 100," Samala said. The company's immediate goal is to hit $300 per ton. "I think within 10 years, $100 per ton is possible."

Source: Asia_Nikkei

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Adam

Commodity

Oil steadied after the biggest drop this month as traders look to reports coming this week to assess the extent of an oversupply.

Brent crude traded held above $62 a barrel after tumbling 2% on Monday. The Energy Information Administration is set to release its Short-Term Energy Outlook on Tuesday, with reports due from the International Energy Agency and OPEC later this week.

The IEA has predicted a record surplus next year, and the volume of oil sailing the oceans is rising. Prices for refined fuels have softened in recent days, removing one factor that has supported crude during the last few weeks. Still, Brent ultimately remains in the tight $4-a-barrel range it has traded in since the start of November.

“Eventually, the current huge blob of oil at sea will move onshore where the sensation of rising crude oil stocks will be more tangible,” said Bjarne Schieldrop, chief commodities analyst at SEB AB. “The only reason why Brent crude hasn’t fallen faster and deeper is because of the US sanctions related to Rosneft and Lukoil.”

Source: Bloomberg

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Warren Takunda

Economic

The Federal Reserve faces an unusually contentious meeting this week that will test Chair Jerome Powell’s ability to corral the necessary support from fellow policymakers for a third straight interest rate cut.

The Fed’s 19-member rate-setting committee is sharply divided over whether to lower borrowing costs again. The divisions have been exacerbated by the convoluted nature of the economy: Inflation remains elevated, which would typically lead the Fed to keep its key rate unchanged, while hiring is weak and the unemployment rate has risen, which often leads to rate cuts.

Some economists expect three Fed officials could vote against the quarter-point cut that Powell is likely to support at the Dec. 9-10 meeting, which would be the most dissenting votes in six years. Just 12 of the 19 members vote on rate decisions. Several of the non-voting officials have also said they oppose another rate cut.

“It’s just a really tricky time. Perfectly sensible people can reach different answers,” said William English, an economist at the Yale School of Management and a former top Fed staff member. “And the committee kind of likes to work by consensus, but this is a situation where that consensus is hard to reach.”

The debate, which has also been fueled by a lack of official federal data on employment and inflation during the government shutdown, could be a preview of where the Fed is headed after Powell’s term as chair ends in May. His successor will be appointed by President Donald Trump and is widely expected to be Kevin Hassett, the top White House economic adviser. Hassett may push for faster cuts than other officials would be willing to support.

English said the potential for greater disagreement could be seen as a sign of healthy debate between different views. The Fed’s tradition of reaching unanimous or nearly-unanimous decisions has often been criticized as evidence of “groupthink.” Yet some Fed officials warn that there are downsides to sharp splits. If the committee votes end up as 8-4 or even 7-5, then financial markets could lose confidence in where the central bank is headed next.

Fed Governor Christopher Waller, for example, has said that in the case of a 7-5 vote, if just one official changed their view, it could bring about a significant shift in Fed policy.

For now, however, most economists expect what’s called a “hawkish cut” — the Fed will reduce rates, while also signaling that it may stand pat for some time to assess the economy’s health. (“Hawks” refer to officials who generally support higher rates to combat inflation, while “doves” more often support lower rates to boost hiring).

The president of the Kansas City Federal Reserve Bank, Jeffrey Schmid, is expected to dissent for a second straight meeting in favor of keeping rates unchanged. He may be joined by St. Louis Fed president Alberto Musalem. Fed governor Stephen Miran, who was hurriedly appointed to the Fed’s board by Trump in September, will likely dissent for a third straight meeting in favor of a larger, half-point reduction in the Fed’s key rate.

After the Fed’s last meeting Oct. 28-29, several policymakers said they would prefer to keep rates unchanged at the December meeting, leading Wall Street investors to briefly downgrade the odds of a third rate cut to less than 30%. But then John Williams, president of the New York Fed, said that this year’s uptick in inflation appears to be a temporary blip driven by Trump’s tariffs that would likely fade by the middle of 2026.

As a result, “I still see room for a further adjustment” in the Fed’s short-term rate, Williams said. As president of the New York Fed and vice chair of the rate-setting committee, Williams gets to vote on every interest rate decision and is close to Powell. Analysts said it was unlikely Williams would have made such a statement without Powell’s support. Investors rapidly lifted the odds of a cut, which now are at 89%, according to CME Fedwatch.

“You’re seeing the power of the chair,” said Nathan Sheets, chief global economist at Citi and also a former top Fed staffer. “Members of the committee, my instinct is, are wanting to underscore their support for Powell.”

Powell has come under relentless attack from Trump, who just last month said he would “love to fire his ass” and called Powell “this clown.”

The Fed is required by Congress to seek low inflation and maximum employment, two goals that are potentially in conflict.

For now, Powell and many other Fed officials are more concerned about hiring and unemployment rather than inflation. While the official government jobs reports have been delayed, in September the unemployment rate ticked up to 4.4%, the third straight increase and the highest in four years.

Payroll provider ADP, meanwhile, reported that in November, its data showed companies shed 32,000 jobs. And many large firms have announced sweeping layoffs.

Worries that the job market could get worse are a key reason a rate cut in December is likely — but not necessarily beyond that. Fed officials will have up to three months of backlogged jobs and inflation data to consider when they meet in late January. Those figures could show inflation remains stubbornly high or that hiring has rebounded, which would suggest further cuts aren’t needed.

“What they may end up agreeing to do is cut rates now, but give some guidance ... that signals that they’re on pause for a while after that,” Kathy Bostjancic, chief economist at Nationwide, said.

Source: AP

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Michelle

Stocks

Economic

Wells Fargo said in a note Tuesday that the Trump administration's decision to lift export controls on Nvidia's H200 GPU shipments to China could soon extend to rivals AMD and Intel.

Analyst Aaron Rakers called the move "an incremental positive," adding that investors could view it as a "$25-$30B/annum+ revenue and +$0.60-$0.70/sh EPS impact" for Nvidia.

The announcement, disclosed on Truth Social, revealed that the U.S. has informed China's President Xi that Washington will allow Nvidia to ship its H200 into China, easing restrictions that had blocked sales of the H20 chip since April.

Wells Fargo notes that the administration will not include Blackwell GPUs in the deal, though reports in October suggested approval for the B30A.

Nvidia had previously reported export-control impacts of roughly $4.6B in fiscal Q1 and $4.0B in fiscal Q2, with China historically representing 20–25% of its data center revenue.

The bank flagged several open questions, including "incremental capacity allocation," the approval process for Chinese customers, whether Nvidia can repurpose written-down H20 inventory for H200, and the "25% of revenue paid to US Gov't" under export-control rules.

Crucially, Wells Fargo says the policy shift also covers AMD and Intel, with both expected to benefit.

AMD's MI308X had already been granted licenses, but the ban had cut revenue guidance by about $700M for Q2 2025 and $1.5B for 2025.

Wells Fargo now expects AMD to receive licenses for its higher-performance MI300X and MI325X accelerators, the latter delivering "20,919 TPP."

With AI-chip demand booming and export barriers falling, Wells Fargo suggests Nvidia may not be the only winner, and that AMD and Intel could soon see similar tailwinds.

Source: Investing

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Adam

Economic

Futures tied to the largest U.S. stock indices point broadly higher. A major -- and possibly contentious -- Federal Reserve interest rate decision on Wednesday looms large, while traders are pouring through the details of a new twist in the potential acquisition of sections, or even all of, Warner Bros Discovery. Elsewhere, the White House says it will let Nvidia begin shipping its second-most advanced H200 processors to China, and Bitcoin edges lower.

Futures inch up

U.S. stock futures were hovering just above the flatline on Tuesday, as investors geared up for a much-anticipated Federal Reserve interest rate decision later in the week.

By 02:55 ET (07:55 GMT), the Dow futures contract had risen by 26 points, or 0.1%, S&P 500 futures had risen by 8 points, or 0.1%, and Nasdaq 100 futures had gained 26 points, or 0.1%.

The main averages on Wall Street ended lower in the prior session, weighed down by a climb in Treasury yields, in a sign that caution may be prevailing ahead of the Fed’s upcoming announcement on Wednesday (more below).

Benchmark 10-year Treasury yields, which tend to move inversely to prices, also gained upward impetus from a powerful earthquake which struck off the coast of Japan.

Beyond the Fed and bonds, traders were preparing for the release of earnings reports from tech giants Oracle and Broadcom this week, which come as markets have fretted over massive, and often debt-driven, spending on artificial intelligence.

In individual stocks, shares of Confluent jumped after IBM said it would buy the data-infrastructure firm, while a bearish outlook from Morgan Stanley sent Tesla’s stock price down by 3%.

Paramount’s hostile bid for Warner Bros Discovery

The battle in Hollywood to acquire Warner Bros Discovery and potentially reshape the media landscape in the process has taken another turn.

Just days after streaming titan Netflix was named the winner of a bidding war for the studio behind hits like "The Godfather," Paramount Skydance said it had launched a hostile bid worth $108.4 billion.

The amount would surpass the $72 billion equity deal Netflix had secure for Warner’s television, film studios and streaming assets -- and represent a 139% premium over the company’s value from before the buyout negotiations began. Notably, Paramount’s rival bid would be for all of Warner, including its cable television properties.

Warner’s board of directors said on Monday that it would review Paramount’s offer, although it did not change its position on the Netflix transaction and told the company not to take any action on the rival proposal.

Trump allows Nvidia to export H200 chips to China

Nvidia will now be allowed by the U.S. to export its H200 AI chips to China, while Washington will rake in a 25% fee on these sales, President Donald Trump has said.

It marks a modest departure from some export restrictions the U.S. had placed on sending cutting-edge AI processors to China. Previously, the most advanced semiconductor Nvidia was able to ship to the country was its prior-generation H20 model, reflecting long-time concern among some U.S. lawmakers around advances in China’s military and industrial capabilities.

The H200 stands to be around six times more powerful than the H20, according to Reuters, citing research from the non-partisan Institute for Progress think tank.

Still, given Beijing’s recent crackdown on domestic companies using U.S. technology, it is not yet clear if the White House’s new policy will boost sales for Nvidia.

Shares of Nvidia, a darling of the AI boom, ticked higher in extended hours U.S. trading, adding to a 1.7% rise in the stock on Monday.

Fed to begin two-day meeting

Attention is beginning to shift to the start of the Fed’s latest two-day policy meeting, which investors are expecting will end on Wednesday with a cut to U.S. interest rates.

Bets on a 25-basis point reduction by the U.S. central bank have increased following a slate of relatively tepid economic data which underlined pressure on the American job market, a marginal increase in consumer spending and stable -- albeit elevated -- inflation.

The chances of such a drawdown now stand at roughly 89%, CME FedWatch has shown. The Fed’s current target rate is now at 3.75% to 4%.

Still, there is an outside chance that officials choose to leave rates unchanged at that level, with some policymakers recently flagging concerns around unveiling a third cut since September during a time when fresh economic data has been scarce because of a record-long government shutdown.

Analysts have suggested that the decision may prove to be one of the most contentious in years.

Bitcoin edges lower

Bitcoin was showing signs of consolidation, with traders refraining from taking fresh positions ahead of the Fed gathering.

Lower interest rates typically weaken the U.S. dollar and reduce returns on cash and fixed-income assets, possibly making alternative, non-yielding assets like Bitcoin more attractive.

Amid these expectations of a prolonged cutting cycle, the world’s most popular cryptocurrency has had a rollercoaster 2025, notching fresh all-time peaks and sliding lower as debate over rates, tariffs, and AI rocked stock markets.

This has in turn underpinned a growing sense that a correlation between Bitcoin and risk-assets like stocks has strengthened.