Key Points

• Markets in Wait-and-See Mode: U.S. equity futures are steady as investors rotate out of mega-cap tech and brace for critical U.S. data on jobs, inflation and consumption that could recalibrate growth expectations and the Fed policy path.
• China’s Demand Drag: Weaker-than-expected Chinese retail sales, industrial output and fixed-asset investment underscore persistent domestic demand fragility, keeping pressure on policymakers to shift growth away from exports toward consumption.
• Copper Supply Shock: Copper prices are surging on tightening global supply, mine disruptions and U.S. tariff fears, reinforcing a structural deficit narrative driven by electrification, energy transition and data-center demand.
• Asia Risk-Off Tone: Asian equities slid as disappointing China data and a pullback in AI-linked stocks weighed on sentiment, with semiconductors leading declines despite pockets of resilience in Japan’s business outlook.

U.S. Futures Steady as Markets Brace for Key Economic Data

U.S. stock futures were little changed at the start of the week, reflecting cautious investor sentiment after a mixed period marked by a rotation out of large-cap technology and into lower-valuation sectors. Futures tied to the S&P 500 and Nasdaq edged modestly lower, while Dow futures were slightly higher, extending last week’s divergence in performance.

The S&P 500 and Nasdaq declined as heavyweight tech names such as Oracle and Broadcom fell sharply, while the Dow gained on its lower exposure to AI-driven stocks. Attention now turns to a heavy slate of U.S. economic data, including delayed nonfarm payrolls, retail sales, and November CPI, which are expected to shape expectations around growth, inflation, and the policy outlook.

China Data Misses Highlight Persistent Demand Weakness

China’s economic slowdown deepened in November as key activity indicators broadly missed expectations, reinforcing concerns over weak domestic demand. Retail sales growth slowed sharply to 1.3% year-on-year, less than half of forecasts, while industrial production rose 4.8%, its weakest pace since August. Fixed-asset investment contracted 2.6% over the first 11 months of the year, marking the steepest decline since 2020, driven by a prolonged property slump and falling home prices.

While policymakers have pledged additional fiscal support, including special bond issuance and trade-in programs, economists remain cautious, citing weak job prospects, subdued wage growth and fragile consumer confidence. Export strength has helped keep China on track for its annual growth target, but reliance on external demand underscores the urgency of rebalancing toward consumption-led growth.

Copper Rally Accelerates on Tariff Fears and Supply Strain

Copper prices have surged to record levels, driven by tightening supply and growing concerns over potential U.S. tariffs on refined copper imports. Spot prices on the London Metal Exchange have climbed about 36% this year, with analysts at Citi projecting prices could reach $13,000 per ton in early 2026 and potentially $15,000 later in the year.

The rally has been amplified by heavy inflows of copper into the U.S., where higher domestic prices have encouraged stockpiling and drained inventories elsewhere. Persistent mine disruptions, downgraded production forecasts from major producers, and falling exchange inventories are reinforcing expectations of a market deficit into early 2026. While demand from energy transition and data-center expansion remains strong, analysts caution that elevated prices may pressure margins across energy-intensive industries.

Asia Markets Slide as China Data Weighs on Sentiment

Asia-Pacific equities declined as investors digested weaker-than-expected economic data from China and extended a pullback from AI-linked stocks seen in U.S. markets. South Korea led losses, with the Kospi falling over 2% as heavyweight chipmakers SK Hynix and Samsung Electronics dropped sharply.

Japan’s Nikkei also retreated despite improved business confidence, with the Bank of Japan’s Tankan survey showing large manufacturers’ optimism at a four-year high. Hong Kong stocks slipped after China’s retail sales and industrial output missed forecasts, reinforcing concerns over soft domestic demand. The cautious tone followed a broad sell-off on Wall Street, where technology and AI-related shares dragged major indices lower.

Conclusion

Global markets are entering a more cautious phase as investors reassess growth momentum, policy trajectories and sector leadership. In the U.S., attention is firmly on upcoming economic data to validate expectations for a soft landing amid ongoing rotation away from crowded technology trades.

China’s weaker activity data continues to act as a drag on regional and global sentiment, reinforcing concerns around demand sustainability. At the same time, structural supply constraints in commodities such as copper highlight longer-term inflationary and margin pressures. Collectively, these dynamics point to heightened selectivity, increased volatility and a greater premium on macro resilience across asset classes.

Investment Insights

• Position for Rotation, Not Reversion: Ongoing rotation away from mega-cap tech toward cyclicals, defensives and value-oriented sectors suggests opportunities in diversified industrials, financials and quality small- to mid-caps.
• China Exposure Requires Selectivity: Weak domestic demand argues for caution on broad China-linked equities, with relative preference for exporters, state-backed infrastructure plays and firms aligned with targeted fiscal support.
• Commodities as a Structural Hedge: Copper’s supply-driven rally reinforces the case for selective exposure to energy-transition metals and low-cost producers as a hedge against longer-term inflation and capex cycles.
• Manage Volatility Proactively: With key macro data and policy signals pending, portfolios should emphasize balance—combining defensives, real assets and selective growth to navigate near-term volatility without sacrificing upside.

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