Key Points

• Fed’s Hawkish Cut: The Federal Reserve delivered a quarter-point rate cut but signaled a slower path ahead, with a rare three-way dissent and projections showing only two additional cuts through 2027, reinforcing a more constrained policy outlook despite a positive market reaction.
• Asia Markets Reverse: Asia-Pacific equities surrendered early gains as investors digested the Fed’s cautious tone, with major indices in Japan, South Korea and China turning lower while a softer U.S. dollar and falling Treasury yields shaped regional trading dynamics.
• Oracle’s AI Setback: Oracle shares plunged 11% after missing revenue expectations, triggering weakness across AI-related stocks as investors questioned the sustainability of its aggressive cloud and AI infrastructure spending amid rising capex, negative free cash flow and heavier debt loads.
• Energy Outperformers: Goldman Sachs highlighted strong but underappreciated gains in Ceres Power, Vestas Wind Systems and SSE, driven by licensing deals, robust earnings, and major investment commitments, underscoring renewed momentum in clean energy and power infrastructure names.

Fed Delivers Divided ‘Hawkish Cut’ as Policy Path Narrows

The Federal Reserve approved a widely expected quarter-point rate cut to 3.5%–3.75%, but deep internal divisions signaled a slower path ahead for easing. In a rare 9–3 split vote, dissenting members pushed both for no cut and for a larger reduction, underscoring uncertainty over inflation progress and labor-market resilience. Updated projections showed only one additional cut expected in 2026 and another in 2027, while inflation is still not seen returning to 2% until 2028. The Fed also announced it will resume Treasury purchases, starting with $40 billion in T-bills, citing funding-market pressures. Markets initially welcomed the move, with equities rising and yields drifting lower, though the cautious tone reinforced expectations for a more restrained policy trajectory ahead.

Asia-Pacific Markets Slip as Investors Digest Fed’s Third Cut and Cautious Tone

Asia-Pacific equities turned lower after initially rising, as markets reacted to the Federal Reserve’s third rate cut of 2025 and Chair Jerome Powell’s signal that further easing is unlikely in the near term. The Fed lowered rates to 3.5%–3.75% and announced plans to resume $40 billion in Treasury bill purchases, a move that pushed short-term yields lower and weakened the U.S. dollar to its softest level since late October. The Nikkei, Kospi and Topix all reversed early gains, while Hong Kong’s Hang Seng edged higher and China’s CSI 300 slipped. Sentiment was also pressured by a report that ZTE may face a $1 billion U.S. penalty, weighing on Chinese tech shares. Overnight, U.S. markets closed firmly higher following the Fed decision, led by a 1.1% jump in the Dow.

Oracle Shares Tumble as Revenue Miss Sparks Selloff Across AI Stocks

Oracle plunged 11% after quarterly revenue narrowly missed expectations, overshadowing strong earnings and surging AI-related demand. The shortfall raised concerns over whether the company’s aggressive cloud and AI infrastructure buildout—funded by rising debt and sharply higher capital expenditures—can sustain long-term returns. Despite securing major commitments from Meta, Nvidia, OpenAI and others, investors reacted to weaker software revenue, negative free cash flow of $10 billion, and a full-year capex outlook that jumped to $50 billion. The disappointment weighed on semiconductor and AI infrastructure names, including Nvidia, AMD and CoreWeave, highlighting heightened sensitivity to signs of slowing monetization across the AI supply chain.

Goldman Flags Underappreciated Energy Winners Amid Strong November Outperformance

Goldman Sachs highlighted a group of outperforming yet underrecognized energy names in November, citing strong catalysts across clean-tech and power infrastructure. Ceres Power jumped 38% after signing a major licensing deal with Weichai Power, with analysts viewing the company as an underappreciated beneficiary of rising datacenter and AI-driven energy needs. Vestas Wind Systems climbed 16% on robust third-quarter results, strong cash generation and a new buyback program, with Goldman expecting continued upside as tariff and cost-related headwinds fade. SSE gained nearly 15% after unveiling a £33 billion investment plan that boosted visibility and regulatory confidence, though the stock was later removed from Goldman’s Conviction List.

Conclusion

Market sentiment remains cautious as investors weigh the Fed’s divided “hawkish cut,” signaling a slower and more uncertain policy path heading into 2026. Asia-Pacific equities reflected this hesitation, reversing early gains despite a softer dollar and easing bond yields. Corporate news added further complexity: Oracle’s sharp selloff raised questions about the durability of AI-infrastructure spending, while Goldman’s highlighted energy outperformers showed strength in parts of the clean-tech ecosystem. Together, these developments point to an environment where selective positioning, disciplined risk management and careful attention to policy signals will be essential for navigating the weeks ahead.

Investment Insights

• Policy-Driven Volatility: The Fed’s divided “hawkish cut” underscores a narrower and more uncertain easing path; investors should maintain flexible duration exposure and avoid overcommitting to a rapid normalization narrative.
• Asia Allocation Discipline: The post-Fed pullback across Asia highlights sensitivity to U.S. policy signals; balanced regional positioning remains prudent as currencies, yields and growth expectations recalibrate.
• AI Infrastructure Scrutiny: Oracle’s revenue miss reveals growing investor sensitivity to AI-capex sustainability; prioritize companies with clear monetization pathways, stable balance sheets and diversified AI demand rather than aggressive build-out stories alone.
• Clean-Energy Selectivity: Goldman’s highlighted winners show that overlooked energy and clean-tech names can outperform on strong fundamentals; selective exposure to firms with credible contracts, regulated visibility or operational momentum may enhance portfolio resilience.

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