September PPI Rises 0.3%, Limited Market Reaction

Computer and printer maker HP announced on Nov 25 a sweeping restructuring plan that will eliminate about 10 per cent of its workforce globally as the company pivots toward artificial intelligence to boost efficiency.

According to its latest earnings report, the tech giant expects to reduce its global headcount by between 4,000 and 6,000 employees to focus on adopting AI to increase innovation and customer satisfaction.

HP's move reflects a growing trend across the tech sector, where companies are investing heavily in AI development while using the technology to reduce operational costs.

Major tech firms including Google, Microsoft, and Amazon have announced workforce reductions over the past two years, with many citing the need to reallocate resources, including jobs, toward AI initiatives.

Industry analysts say AI automation is particularly affecting roles in customer support, content moderation, data entry, and certain computer programming tasks.

HP said its AI plan aims to generate approximately US$1 billion in annual savings by the end of fiscal 2028.

The company has been working to transform its business model amid changing demand patterns in the PC and printing markets.

HP chief executive officer Enrique Lores told the Wall Street Journal that the company plans to raise the prices of its computers and work with new suppliers to help offset the higher costs of AI computing.

In its latest quarter, HP posted a profit of US$795 million, compared with US$906 million a year earlier.

Revenue rose 4.2 per cent to US$14.64 billion, topping analyst estimates with sales in PCs offsetting a decline in printer sales. AFP

Source: Straitstimes

This has been a good year for international stocks. In a turnaround from recent years, Europe and many emerging markets have outperformed US equities in 2025. The depreciation of the US dollar has magnified gains for US investors with global exposure.

How much global exposure US investors actually have in their portfolios is an open question. A protracted period of strength for US equities has led to a decline in market share for international-stock funds. The artificial intelligence boom is only the latest technology trend whose benefits have accrued disproportionately to US companies. As a result, the US share of global equity market value has climbed an incredible 20 percentage points since 2010. Despite representing approximately one-fourth of the global economy, US stocks exceed 62% of global equity market value, as measured by the US weight of the Morningstar Global Markets Index. It's a striking imbalance.

US Share of Global Equity Market Value

With AI dominating the investment conversation and contributing to strong gains for US stocks in 2025, I'd like to share an excerpt of a conversation I recently had with BlackRock's Mike Pyle for Morningstar's The Long View podcast. Pyle was talking about the diversifying potential of taking both long and short positions in stocks around the world. I followed up to get his views on global exposure within a portfolio.

Dan Lefkovitz: And I wanted to zero in on the global aspect of that strategy. Obviously, global equity investing has paid off this year, but going back 10, 15 years, the US market has really been the place to be. I'm curious what you're thinking in terms of allocations to international equities?

Mike Pyle: I would say this is one of those points where market neutrality actually really matters a lot. So, yes, 100% right that at some level, the trade of the last, not just a couple of years, the last 15 years has been to be overweight the United States versus the rest of the world. But that's different than saying that there isn't alpha in other markets elsewhere in the world when you're going long and going short in a market-neutral way. So, investors aren't exposed to the beta of the rest of the world. But what they're able to gain access to is alpha insights that make accurate forecasts about companies that are going to outperform, companies that are going to underperform, and generate return from the difference between those two things. And importantly, to the point I was making earlier, having a bigger investment opportunity set, being able to reach across global markets, just not US markets, expands the reach of the strategies that the systematic team has developed over time and expands the number of alpha opportunities that are available to generate return for clients, again in this market-neutral way. So, 100% right, the US has outperformed. We can talk about the outlook for that. But this strategy is benefiting by being neutral to the market, but capitalizing on the expanded number of opportunities that come from being invested globally, not just in the US.

Lefkovitz: Well, I'll take you up on your offer to share the outlook. A lot of folks are wondering if this is the time to increase their allocations to international.

Pyle: The principal driver of the US equity market since its lows in April, just as it has been for the last couple of years, a strong performance, really, is that those exposures that are giving you access to the theme around AI transformation, the mega trend around AI transformation. And importantly, this goes to the point around a more uncertain, more unstable macro environment. In some ways, we think diversification is obviously no less important than it ever has been. But getting diversification, not just across geographies, but also mega trends like the AI transformation, is vital for building portfolios that are going to generate the outcomes that investors want.

What does that mean? It means, bottom line, that continuing to be exposed to the US equity market, because the US equity market is providing the exposure to this underlying theme of AI transformation that really no other equity market globally can do, still needs to be a core part of portfolios. But again, whether you're looking at geographic diversification or thematic diversification, being sure you're being thoughtful about just how much of the US you want, just how much AI you want, is a really important question as well. And building balance around that is going to be the right way of thinking about building a portfolio that can generate return, but also resilience.

Lefkovitz: What about currency diversification? You mentioned the dollar weakening earlier in our conversation. Do you think it's important for investors to diversify their currency exposure?

Pyle: I think that this is a particularly important point for global investors and a conversation that I regularly have when I'm abroad, whether that's in Europe or Canada or Asia. A number of investors globally allowed their hedge ratios to move considerably lower over the past couple of years as the US has outperformed. And so, increasingly, they were taking US equity exposure, exposure to US assets generally, on an unhedged basis. And this year, that's been a difficult spot to be. Even as the S&P is up a little more than 13%, the dollar is down a little more than 10%. And so the experience this year for a Europe-based investor, for example, of those US exposures, hasn't been the most favorable one. And so I think what it's causing investors to do is to say, not, is this the end of the dollar? Not, am I going to bail on the dollar? But do I want to move away perhaps from the extended degree of unhedged exposures I had to the US back toward something that looks more historically normal in terms of that hedging ratio, that balance between having US exposure, but hedging out some of the currency?

Source: Morningstar

Australian consumer prices rose at a faster-than-expected pace in October, a new monthly report showed on Wednesday, suggesting a pick-up in inflation that reinforced bets that the current policy easing cycle could well be over.

The Australian dollar edged 0.2% higher to $0.6480, while three-year government bond futures slumped 7 ticks to 96.17. Investors pared bets that the Reserve Bank of Australia could deliver one last rate cut in May next year to 27%, from 40% before.

Data from the Australian Bureau of Statistics showed its monthly consumer price index (CPI) rose 3.8% in October compared with a year earlier, up from 3.6% in September and above median forecasts of 3.6%.

The trimmed mean measure of core inflation ran at an annual 3.3% in October, up from 3.2% in September, also not going in the RBA's desired direction.

This is the first complete monthly CPI report published by ABS, replacing the old and partial monthly series. However, the RBA has said it still prefers the quarterly prints for a better gauge of inflation trends given the new data can be volatile.

Headline inflation surged in the last quarter to 3.2%, back above the target band of 2-3%, fuelling concerns that monetary policy might not be restrictive after three rate cuts this year. Home loans jumped and the consumer mood turned optimistic for the first time in four years.

Details of the report suggested some elevated price pressures in the services sector, which ran at an annual rate of 3.9% last month, up from 3.5% in September.

Housing inflation picked up to 5.9% in the 12 months to October, up from 5.7% before.

Source: Investing

New Zealand's central bank cut its benchmark official cash rate by 25 basis points to 2.25% on Wednesday, its lowest level since mid-2022, as policymakers extended their efforts to revive a struggling economy and mitigate global headwinds.

The decision matched a Reuters poll in which all but four of the 36 economists surveyed forecast the Reserve Bank of New Zealand would cut the cash rate by a quarter point.

The central bank, which surprised markets by slashing rates by a bigger-than-expected 50 basis points in October, has delivered 325 basis points worth of easing since August 2024 to shore up an economy that has contracted in three of the last five quarters.

Source: Investing

Key Points:

USD/JPY traders brace for a crucial mid-week session on Wednesday, November 26, as markets adjust bets on BoJ and Fed monetary policy stances.

Early updates from Japan's annual wage negotiations for 2026 suggest another substantial pay hike, supporting a December BoJ rate hike. BoJ Governor Kazuo Ueda recently underscored the importance of annual wage negotiations, commonly known as Shunto. He stated that more data would be needed from wage discussions to assess whether US tariffs would force firms to limit wage hikes.

Meanwhile, US economic data and FOMC members have fueled speculation of a December Fed rate cut, signaling a potential narrowing of US-Japan rate differentials, and favoring the yen. Monetary policy divergence could materially alter USD/JPY's recently bullish trajectory, placing a greater emphasis on incoming data.

Japan Leading Economic Index in Focus

On Wednesday, November 26, Japan's Leading Economic Index (LEI) will provide insights into business and consumer sentiment at the end of the third quarter. Economists expect the LEI to rise from 107.0 in August to 108.0 in September.

A higher LEI reading could point to increased business investment and higher wages, aligning with updates from wage negotiations. Crucially, higher wages could boost households' purchasing power, leading to higher spending and rising demand-driven inflation. Furthermore, improving consumer sentiment may also translate into an upswing in private consumption.

For context, the LEI dropped to 104.2 in April, its lowest level in two years before edging higher. LEI trends reflected trade developments. These trends suggest a September pickup, given that the US lowered tariffs on Japanese goods to 15% in September. The softer yen could also lift sentiment, given that USD/JPY strength would offset the effect of tariffs on company profit margins.

FX Empire – Japan Leading Economic Index

With the BoJ's focus on wages and inflation, improving sentiment would support a more hawkish BoJ rate path and a stronger yen. Notably, USD/JPY briefly dropped below 156 this week. Traders reacted to updates from Japan's wage negotiations and softer US economic data.

USDJPY – Daily Chart – 261125 – Fiscal Stimulus and Dovish Fed

Pre-US Holiday and Fed Speakers Expose US Dollar to Potential Reversal

Amid rising bets on a December BoJ rate hike, US jobs data could boost bets on a December Fed rate cut, potentially sending USD/JPY sharply lower.

Economists forecast initial jobless claims to rise from 220k (week ending November 15) to 227k (week ending November 22). A larger-than-expected increase could bolster bets on a December rate cut, weighing on demand for the US dollar. A potential narrowing in US-Japan interest rate differentials could push USD/JPY toward 155.

For context, the ADP reported a 13.5k 4-week average drop in employment, signaling a cooling labor market. A third consecutive decline in the 4-week average sent USD/JPY lower, highlighting the pair's likely response to higher jobless claims.

Beyond the data, traders should monitor FOMC members' speeches. Reaction to US economic data and views on the timeline for cutting rates will influence USD/JPY trends. Growing calls for a December cut could accelerate the pair's fall toward 150.

USD/JPY Scenarios: Diverging Monetary Policies

USDJPY – Daily Chart – 261125

Key Market Drivers to Watch Today:

Source: FX Empire

Australia's core inflation came in stronger than anticipated in October, suggesting the Reserve Bank will remain on the sidelines as it tries to assess whether the economy is running beyond its speed limit.

The currency gained as the closely-watched trimmed mean gauge of consumer prices, which shaves off volatile items, advanced 3.3% from a year ago, data from the Australian Bureau of Statistics showed Wednesday. That's above the top of the RBA's target band and compared with a forecast 3% increase.

The headline number came in at 3.8%, also exceeding a forecast 3.6% increase.

The Australian dollar advanced 0.2% and the yield on policy sensitive three-year government notes climbed 6 basis points. Money markets see a slim chance the RBA will cut next year while economists generally expect a reduction around mid-2026. Goldman Sachs Group Inc. and Commonwealth Bank of Australia are among a handful that reckon the easing cycle has ended.

The data supports the RBA's assessment that its efforts to rein in core inflation have hit an airpocket at a time when the economy is showing signs of gaining momentum. The central bank aims to keep inflation around the midpoint of its 2–3% range.

This is the inaugural release of monthly inflation data, replacing a previous partial monthly CPI indicator. Still, the quarterly inflation report is set to remain the key reading for policymakers until they're confident that any bugs in the new monthly release have been ironed out.

Source: Bloomberg Europe