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Global markets remain in shock: Nikkei, Dow Jones, Kospi at lows

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Japan’s Nikkei 225 stock index started the week down 12.4%, continuing the sell-off that has rocked global markets as investors fretted over the state of the US economy.

The Nikkei closed down 4,451.28 points at 31,458.42. The broader TOPIX index fell 12.8% as selling intensified in the afternoon.

Earlier on Monday, the S&P 500 Index fell 2.4% and the Dow Jones Industrial Average fell 2.6%, turning the trading outlook on Wall Street negative.

The report, which showed that hiring by US employers slowed much more than expected last month, according to AP, shook financial markets and destroyed the euphoria that had lifted the Nikkei to an all-time high above 42,000 in recent weeks.

The Nikkei 225 fell 5.8 per cent on Friday, its worst two-day drop ever. Its worst one-day drop was on 20 October 1987, the so-called “Black Monday”, when it fell 3,836 points, or 14.9%. That Monday was grim enough, with the benchmark falling as much as 13.4% at one point.

Tokyo stocks have been falling since the Bank of Japan (BoJ) raised its key interest rate on Wednesday. The Nikkei is currently down 3.8% year-on-year.

One of the factors that prompted the BoJ to raise rates was the ongoing weakness of the Japanese yen, which has pushed inflation above the central bank’s 2% target. Early on Monday, the dollar fell to 142.59 yen from 146.45 at the end of Friday, well below levels of over 160 yen a few weeks ago. The euro also fell from $1.0923 to $1.0914.

Stocks hit highs earlier this year on the back of developments in artificial intelligence.

The recent sell-off has also hit markets dominated by computer chip makers such as Samsung Electronics and other technology stocks: South Korea’s Kospi fell more than 9 per cent on Monday as Samsung’s shares fell 11.6 per cent. The Kospi closed down 8.8 per cent at 2,441.55.Taiwan’s Taiex also lost 8.4 per cent as the world’s biggest chipmaker Taiwan Semiconductor Manufacturing Co. fell 9.8 per cent.

Hong Kong’s Hang Seng index lost 2.2% to 16,579.97 and Australia’s S&P/ASX 200 index fell 3.7% to 7,649.60.

Double whammy on Borsa Istanbul

The Shanghai Composite Index, which has been somewhat isolated from other world markets by capital controls, initially rose but then fell 1.5 per cent to 2,862.56.

The S&P 500’s 1.8 per cent drop on Friday was the first consecutive loss of at least 1 per cent since April. The Dow Jones Industrial Average fell 1.5 per cent and the Nasdaq Composite Index fell 2.4 per cent, 10 per cent below the record it set last month. Investors call a decline at these levels a “correction”.

On the Borsa Istanbul, the circuit breaker system connected to the index was activated at 09:55:22 following a 6.72 per cent drop in the morning. Then, as the decline in the index deepened, the circuit breaker was activated for the second time. The BIST 100 index fell below the critical 10,000 points.

Stocks fell sharply on Friday after weaker-than-expected US payrolls data fueled fears that high interest rates to curb inflation could drag the US economy into recession.

The VIX, an index that measures how worried investors are about an impending drop in the S&P 500, jumped nearly 26% early on Monday. Eventually, the VIX rose to 34. The VIX, which is considered Wall Street’s “fear indicator”, last reached this level in June 2020. Bitcoin, which recently soared to nearly $70,000, fell 14 per cent to $54,155.

Oil prices also fell, with US benchmark crude down 74 cents to $72.78 a barrel. Brent crude, the international standard, lost 67 cents to $76.14 a barrel.

Artificial intelligence stocks plunge

Artificial intelligence stocks fell as much as 9.6%, with Apple down 6.1%. Microsoft, Meta and Tesla also lost more than 5%.

While the largest US companies fell on Tradegate in Germany, Nvidia led the “Magnificent Seven” group in the decline of US stock index futures.

Nvidia fell as much as 17% on Tradegate, while Apple fell 10%, Microsoft 9%, Alphabet 9.6%, Amazon 9.3%, Meta 10% and Tesla 10%.

According to Bloomberg, these moves are a sign that “the air is coming out of the equity markets, driven by big gains in a small number of stocks”.

It notes that if confidence in the AI trade continues to fall on weak earnings and the US economy really takes a hit, there could be more losses to come.

However, it points out that a “window of opportunity” could open for investors, especially if central banks take action to cut interest rates, which could support sectors that benefit from low borrowing costs.

Goldman Sachs: A healthy correction

In a report, IG’s Yeap Jun Rong said investors will be watching data on the US services sector from the Institute for Supply Management on Monday, which could help determine whether the global sell-off was an overreaction.

The global rout began just days after US stock indexes had their best day in months after Federal Reserve Chairman Jerome Powell gave the clearest sign yet that inflation is slowing enough to start cutting interest rates in September.

Now there are growing concerns that the Fed may have increased the risk of recession in the world’s largest economy by keeping its key interest rate at a two-decade high for too long.

On the other hand, Christian Mueller-Glissmann of Goldman Sachs told Bloomberg that the market situation shows a “somewhat healthy correction”. He also argued that while the weakness in US data was a surprise, Goldman Sachs economists were “not that worried”.

Bets on an immediate rate cut: Will the Fed cut in a week?

The market turmoil is fuelling bets on an immediate policy response from the Fed.

Investors are currently pricing in a 60% chance of a 25bp cut within a week.

Given that the central bank announced its last decision just a few days ago, this is seen as a real sign of concern.

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Biden plans to write off Ukraine’s $4.6bn debt ahead of Trump

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President Joe Biden’s administration has officially notified Congress of its intention to forgive Ukraine’s $4.65 billion debt, a move tied to ongoing efforts to support the country amid its conflict with Russia.

This debt represents half of the $9 billion provided to Kyiv as part of the $61 billion aid package approved by Washington in April. Unlike other forms of assistance, this funding was issued as conditionally repayable loans, with provisions allowing the United States President to cancel up to 50% of the debt if deemed necessary.

In a statement, the U.S. State Department explained that the debt cancellation is intended to “help Ukraine win” and serves the national interests of the U.S., the EU, G7+, and NATO.”

According to Bloomberg, President Biden is determined to maximize aid to Ukraine before President-elect Donald Trump assumes office. However, the decision to write off the debt has drawn sharp criticism from Republicans.

Republican Senator Rand Paul argued that the Biden administration’s decision places undue financial burden on the American public. He pledged to demand a vote in the Senate to challenge the proposal.

Despite this, Bloomberg notes that any effort to overturn the debt cancellation would require approval from both houses of Congress, a scenario that appears unlikely given the Democratic majority in the Senate. Furthermore, President Biden holds veto power, making reversal of the decision even more challenging.

Earlier, U.S. Secretary of State Antony Blinken announced plans to exhaust all remaining aid approved by Congress before President Trump’s inauguration on January 20.

National Security Advisor Jake Sullivan emphasized that one of the administration’s key goals is to position Ukraine as strongly as possible—both militarily and at the negotiating table.

Pentagon officials reported that $9.3 billion in military aid is currently in the pipeline. Pentagon spokeswoman Sabrina Singh confirmed plans for weekly arms deliveries to Kyiv, with the aim of expediting aid distribution before the presidential transition.

On November 20, the Pentagon unveiled an additional $275 million military aid package for Ukraine, further underscoring the administration’s commitment to strengthening Ukraine’s defense capabilities.

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Donald Trump taps Howard Lutnick to lead Commerce Department

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Donald Trump has announced his intention to nominate Wall Street investor and campaign donor Howard Lutnick as the new head of the U.S. Department of Commerce, placing the billionaire at the forefront of implementing the sweeping tariffs promised during his presidential campaign.

Lutnick, who co-chaired Trump’s transition team, had previously been considered for the role of Treasury Secretary. He is also the CEO of Cantor Fitzgerald, a prominent investment firm.

In a statement on Tuesday, Trump declared that Lutnick would be “directly responsible” for leading the Commerce Department and overseeing the Office of the U.S. Trade Representative (USTR).

The USTR, established in 1974 to manage negotiations with U.S. trading partners, traditionally reports directly to the president. If confirmed by the Senate, the 63-year-old Lutnick will play a pivotal role in aiding U.S. businesses and executing Trump’s proposed tariffs on international trade partners.

Trump has outlined plans for a 60% tariff on imports from China and a global tariff of up to 20%, signaling a major shift in U.S. trade policy.

Lutnick, despite lacking prior government experience, has been a steadfast advocate for Trump’s economic agenda. During a New York campaign rally, Lutnick remarked, “When was America great? At the turn of the century, our economy was floundering! That was 125 years ago. We had no income tax and all we had were tariffs.”

While Lutnick has emerged as a major donor to Trump, he has also supported establishment Democrats and Republicans in the past, including Chuck Schumer and Jeb Bush. He contributed to both Hillary Clinton’s 2008 and 2016 campaigns, hosting a fundraiser for her in 2015. Lutnick maintains a personal friendship with the Clintons, noting their attendance at a Cantor Fitzgerald fundraiser in September 2022.

Lutnick has also maintained a long-standing relationship with Trump, even appearing on The Celebrity Apprentice in 2008. He disclosed to the Financial Times in October that he has donated over $10 million to Trump’s 2024 campaign and another $500,000 to the transition team, totaling approximately $75 million.

Treasury Secretary selection process still uncertain

The position of Treasury Secretary, one of the most significant roles in Trump’s administration, remains undecided. Lutnick’s name has been floated for the role, though he faces competition from hedge fund manager Scott Bessent, private equity billionaire Marc Rowan, and former Federal Reserve governor Kevin Warsh.

Marc Rowan, the CEO of Apollo Global Management, has emerged as a leading contender and is expected to meet with Trump to present his case. Rowan’s supporters cite his extensive expertise in financial markets, though competition remains fierce.

Forecasting site Polymarket currently lists Warsh as the favorite for Treasury Secretary, followed by Bessent, Rowan, and William Hagerty. If unsuccessful in his bid for Treasury Secretary, Bessent is reportedly vying for the chairmanship of the National Economic Council.

Trump names Mehmet Oz to run Medicare and Medicaid

Trump also announced on Tuesday his nomination of Dr. Mehmet Oz to lead the Centers for Medicare and Medicaid Services (CMS). Describing Oz as “one of the most talented physicians” capable of “making America healthy again,” Trump expressed confidence in Oz’s ability to reduce waste and fraud within the nation’s largest government agency.

Dr. Oz, a former heart surgeon and Columbia University professor, rose to prominence as Oprah Winfrey’s health expert before hosting his own popular talk show. However, his career has been controversial, with critics accusing him of promoting scientifically dubious theories and unproven treatments.

Oz’s political experience includes a 2022 Senate race in Pennsylvania, where he was endorsed by Trump but ultimately lost to Democrat John Fetterman.

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U.S. may start its plan to separate Google from Chrome

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The Department of Justice (DOJ) may move forward with plans to force the sale of Google’s Chrome web browser as part of its ongoing antitrust case against Alphabet (Google).

According to sources familiar with the case, the department intends to ask the judge—who ruled in August that Google illegally monopolized the search market—to address concerns related to artificial intelligence (AI) and the Android smartphone operating system. This information was reported by Bloomberg.

Antitrust officials, along with participating state attorneys, are expected to recommend that federal Judge Amit Mehta impose data licensing requirements on Google. These officials have indicated that Chrome, the world’s most widely used browser, is a critical gateway for many users accessing Google Search. For this reason, they are urging the judge to mandate the sale of Chrome.

Officials stated that a Chrome sale could be considered later if other settlement measures fail to foster a more competitive market. Currently, Google Chrome commands a dominant 61% share of the U.S. browser market, according to StatCounter, a web traffic analysis service.

Over the past three months, state attorneys interviewed numerous companies to prepare their recommendations. Officials noted that some recommendations are still under review, and details may evolve before submission.

While a proposal to force Google to sell its Android platform was considered, officials have since stepped back from this more aggressive option.

If Judge Mehta adopts these recommendations, the ruling could significantly reshape the online search market and influence the emerging artificial intelligence industry.

The case, originally filed during the Trump administration and continued under President Joe Biden, represents one of the most aggressive efforts to regulate a major tech company in decades. The last comparable attempt was Washington’s unsuccessful bid to break up Microsoft in the early 2000s.

Chrome plays a crucial role in Google’s advertising business by providing user data that enhances ad targeting, a primary revenue source. Additionally, Google has been leveraging Chrome to promote Gemini, its new AI bot. Gemini has the potential to evolve from a simple answer bot to a comprehensive assistant, supporting users across the web.

Bloomberg Intelligence analyst Mandeep Singh estimates that Chrome could be worth $15–20 billion if sold, considering its more than 3 billion monthly active users. However, Bob O’Donnell of TECHnalysis Research notes that Chrome’s value depends on its integration with other services, stating: “It’s not directly monetizable. It acts as a gateway to other things. Monetization would depend on how buyers link Chrome to their services.”

Google has strongly opposed the DOJ’s recommendations. Lee-Anne Mulholland, Google’s vice president of regulatory affairs, criticized the move as government overreach, arguing: “This agenda goes far beyond the legal issues in this case and will harm consumers, developers, and American technological leadership at a critical time.”

Former Google CEO Eric Schmidt echoed this sentiment in an interview with CNBC. He emphasized the value of Chrome in enhancing the Google ecosystem, stating: “Singling out these companies won’t fundamentally solve the broader issues.”

In a blog post, Google warned that under new ownership, Chrome might no longer remain free or receive the same level of investment, potentially leading to a shift in its business model.

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