Honda & Nissan Plan Merger, Dow Drops Historic 9 Days in a Row

Honda and Nissan stocks surged in Japan following reports of discussions to form a holding company to share resources. Meanwhile, the Dow dropped for a ninth straight session, marking its longest losing streak since 1978, as investors remained cautious ahead of the Federal Reserve’s rate decision. In the UK, unexpectedly high wage growth lifted sterling to $1.2710 and reduced expectations for significant Bank of England rate cuts in 2025.

Equities

The FTSE 100 dropped 0.8% to its lowest level in three weeks on Tuesday, with investor sentiment weighed down by stronger-than-expected wage growth in the UK, which dampened hopes of significant interest rate cuts by the Bank of England next year. The FTSE 250 also declined sharply, falling 1.3%, marking its largest one-day drop in five weeks.

Bunzl was among the most notable laggards on the FTSE 100, with its shares falling 5.7% after the business supplies distributor warned that low prices in continental Europe would marginally impact annual profit. The industrial sub-index slipped 2.3% as a result.

Chemring Group shares dropped 13% on the FTSE 250 after the defence and aerospace firm reported lower annual underlying pretax profit. Similarly, Hollywood Bowl Group lost 11.5% following the release of lower annual adjusted pretax profit figures. In contrast, Goodwin saw a 6.8% surge in its stock price after reporting a strong rise in first-half pretax profit, offering a rare positive performance amid widespread sectoral losses.

Across the Atlantic, US markets were similarly cautious ahead of the Federal Reserve’s anticipated policy announcement. The Dow Jones Industrial Average fell 0.61%, marking its ninth consecutive decline, while the S&P 500 slipped 0.39%, and the Nasdaq Composite edged down 0.32%.

Tesla saw a 3.6% rise in its share price after receiving upward revisions to its price target from both Mizuho and Wedbush, boosting investor confidence in the electric vehicle manufacturer.

Pfizer also bucked the downward trend in the US, with shares rising 4.7% after the pharmaceutical giant’s 2025 profit forecast aligned with Wall Street expectations. The small-cap Russell 2000 index fell by 1.2%, reflecting heightened sensitivity to interest rate concerns.

Forex & Commodities

The US dollar held steady ahead of the Federal Reserve’s policy announcement. Focus remains on the Fed’s updated projections for 2025, with markets pricing a 97% probability of a 25-basis-point rate cut this time around. Retail sales data for November surpassed expectations, increasing by 0.7%, driven by motor vehicle and online purchases, reinforcing confidence in the dollar.

The Australian dollar fell to $0.6310, its lowest since October 2023, while the New Zealand dollar reached a two-year low of $0.5310, as a strong US dollar pressured both currencies. Sterling traded at $1.27005, slightly down ahead of UK inflation data, with investors reassessing the Bank of England’s rate cut prospects after strong wage growth figures.

Gold slipped 0.2% to $2,647.81 per ounce as a strengthening dollar and rising US Treasury yields weighed on the metal. Gold’s upside could be limited given expectations of a slower pace of Fed rate cuts next year.

Oil prices inched higher on Wednesday morning after sliding on Tuesday, with Brent crude rising 0.44% to $73.51 per barrel and West Texas Intermediate climbing 0.46% to $70.40. The market balanced expectations of Fed rate cuts with the impact of the EU’s latest sanctions on Russian oil. Fresh measures targeted 33 Russian vessels involved in crude transport, with Britain sanctioning an additional 20 ships. Meanwhile, US crude stocks reportedly fell by 4.69 million barrels last week, according to industry data, while gasoline and distillate inventories rose.