Market Report.
📊 So far, we close the week better than We finished the previous one. Managing to recover the declines in the technological sector, although we have not yet returned to the peak levels of late October.
🤖 However, fears of excessive leverage in the technology sector—particularly in areas linked to AI—had raised concerns about a potential bubble. For the moment, those worries seem to be fading. In reality, the true threat to the US technology sector may lie elsewhere.
🌏 As we have mentioned in our reports over the past few weeks, what if the real risk comes not from inside the sector, but from China’s new AI initiatives? These projects could potentially undercut US tech giants and even overtake them—much like BYD did with the once‑revolutionary Tesla, arriving later but rapidly conquering global markets.
🕶️ Alibaba Group has launched its first smart glasses product, the Quark S1, marking a rare foray into consumer hardware for the company. The Quark S1 glasses include built-in translucent displays that superimpose contextual information on the user’s view of their surroundings. The glasses are equipped with cameras, bone conduction microphones, and swappable batteries rated for 24 hours of use.
📱 This new product aims to offer the Chinese market something similar to Meta Platforms’ Ray-Ban smart glasses. The launch of the Quark S1 is part of Alibaba’s broader reorganization into an AI-first business, leveraging its Qwen AI models and services.
⚡ Europe’s fragmented markets and constraints, particularly around energy access and grid congestion, may actually give it an edge in future-proofing the critical data centers that power the AI boom. Europe is expected to continue building data center capacity at a “pretty meaningful rate” to nearly double its existing capacity by 2030, even as the U.S. leads the global build-out.
🔌 The defining bottleneck for Europe is access to affordable and reliable electricity, with the Nordics and Spain having an advantage due to their surplus of renewable energy, while Germany and the UK face supply constraints. Europe’s slower pace of change allows developers to be more deliberate about what and where they build, potentially leading to a greater focus on state-of-the-art, sustainable facilities.
💶 Paradoxically, investors could see Europe as a “safer investment case” compared to the U.S. due to the difficulty in replicating data center builds, which increases the long-term value and resilience of assets.
🏛️ But the technological issue in Europe may not be the most urgent one at present. If you thought that one of the problems that suffers the EU is centralized bureaucracy, and its disconnection with the citizenship of the different European states, which vote more and more for anti-European political options, you may not have seen anything. Now the central bank calls for even more isolation of democratic participation of states, and greater centralization.
👩⚖️ European Central Bank (ECB) President Christine Lagarde calls for reform the European Union’s (EU) decision-making process: Lagarde said the EU’s governance has become “too slow, too complex and too much of a hostage to individual member-states wielding vetoes.”
🗳️ She suggested using the “passarelle” clauses in the EU treaties to allow for more decisions to be made by qualified majority voting, rather than requiring unanimity. She noted that single-country vetoes, especially by Hungary’s Prime Minister Viktor Orban, have made it harder for the EU to speak with one voice on global issues.
📉 The article also cites similar remarks by Bank of Italy Governor Fabio Panetta, who said the EU must overcome “institutional rigidities” to maintain its economic weight and relevance in the world.
🏦 European central bankers, led by ECB President Christine Lagarde and Bundesbank head Joachim Nagel, are stepping beyond their traditional role as guardians of price stability and wading into high-stakes political issues like defense and EU decision-making reform.
🛡️ Nagel has labeled this shift as “modern central banking”, proposing reforms like joint EU borrowing to fund militaries and calling for majority voting procedures to stop single member-states from hijacking key initiatives.
⚠️ This expansion of central bank remit is a “tricky balancing act” as it risks undermining their hard-won independence, which is already under threat in some countries. There are concerns that if central bankers become too involved in political discussions, politicians may retaliate by interfering in monetary policy decisions.
🧑🏭 The current trajectory of migration policy in the United States could be a prelude to a structural shift in the US labour market. With the integration of AI, the country now sees the opportunity to boost productivity without relying on migration as a source of low‑cost labour—a resource heavily used by Western nations in recent years.
🌍 This model is still defended by some European politicians, who justify their open‑border policies as a source of “economic growth”, despite growing public opposition within their own countries. The argument is often summarised as: “They come to pay our pensions, clean our homes, and drive our Ubers.” which ultimately reflects a hypocritical, almost neo‑colonial mindset toward migrant populations.
🧩 In short, a possible reconfiguration of work where AI reduces migration dependency on low-cost jobs but requires proactive policies to avoid structural unemployment and inequality.
🇺🇸 Former President Donald Trump announced sweeping plans to crack down on immigration, saying he would “permanently pause migration from all Third World Countries” to allow the U.S. system to fully recover. Trump cited the recent attack on National Guard members in Washington D.C. by an Afghan national as justification for these immigration policy changes.
🚫 Trump said he would terminate “millions” of admissions under the Biden administration, “remove anyone who is not a net asset to the United States, or is incapable of loving our Country,” and “denaturalize migrants who undermine domestic tranquility.”
💸 The president also said he would “end all Federal benefits and subsidies” to non-citizens, with the goal of achieving a “major reduction in illegal and disruptive populations.”
🇨🇳 China tries to rally international support and widen the dispute with Japan beyond just a bilateral issue. Top Chinese diplomat Wang Yi used a call with his French counterpart to seek diplomatic backing for China during its spat with Japan over Taiwan. The call with France’s diplomatic adviser comes ahead of French President Macron’s state visit to China next week, where economic and commercial matters are expected to be discussed.
🗣️ Wang said Japanese PM Sanae Takaichi had made “provocative remarks related to Taiwan” and urged France to “firmly support” China on issues involving its “core interests.” Wang called on France to “continue to firmly abide by the one-China principle,” referring to China’s stance that Taiwan is an integral part of its territory.
🪖 Let us recall that Japan has announced the deployment of missiles on one of its islands facing Taiwan. Japan’s foreign policy is often closely aligned with that of the United States, partly because the US maintains a significant military presence in Japan under long‑standing security agreements established after World War II.
💴 And speaking of Japan, the yen could be headed for significant moves in the very near future.
🥢 Core consumer inflation in Tokyo, Japan’s capital, remained well above the Bank of Japan’s 2% target in November, driven mainly by rising food prices. Separate data showed retail sales and factory output rose in October, while the jobless rate was steady at 2.6%, suggesting the economy is weathering the impact of higher U.S. tariffs for now.
📅 The data will be among factors the Bank of Japan (BOJ) will consider in deciding whether to raise interest rates in December or wait until next year. The BOJ has said price rises must be driven by solid wage gains and robust domestic demand for inflation to durably hit its 2% target and meet the conditions for further rate hikes.
💹 The recent decline in the yen may further push up food prices and broader underlying inflation, which could prompt the BOJ to raise rates sooner to prop up the currency and ease the burden on households. However, reflationist advisers of the Prime Minister have warned against an early rate hike, pointing to weak consumption and data showing the economy shrank in the third quarter.
🛢️ According to Bloomberg, OPEC+ must restore transparency, credibility and production discipline urgently to regain market control. OPEC counts only “crude” under quotas, excluding other liquids (condensates, NGLs); members have used this loophole to boost non-quota output. Last year: 40.9 mbd under quotas + 8.5 mbd of other liquids; outside-the-quotas output expected to rise to 8.8 mbd.
📉 Many members routinely exceed quotas (Kazakhstan, Iraq, UAE, Kuwait, Gabon); the “compensation” system for overproduction has become ineffective and self-defeating. The solution could be to publish accurate, total-production data (crude + other liquids); enforce adherence to realistic quotas; ideally return to a single unified quota system covering all members.
🗓️ An output audit is planned for 2027 but should be fast-tracked to 2026 (H1 or Q1) to manage the impending surplus, though sanctions make some audits politically sensitive.
📊 Market View
📈 US futures made only limited progress due to yesterday’s holiday. Mini S&P 500 futures remain above 6,800 points, currently at 6,835, while Nasdaq 100 futures are trading around 25,350 points, aligning with a significant resistance level established since early October.
💱 The DXY dollar index has inched higher in recent hours after pulling back to 99.50 following several weeks of gains; it now stands at 99.70. This allowed EUR/USD to briefly break above 1.16 early yesterday, but with the dollar’s latest rebound, the pair has slipped back to 1.1575.
📉 In Europe, yesterday was a constructive session, consolidating the bullish rebound that began earlier this week. DAX 40 futures are slowly approaching the 24,000‑point level, currently at 23,810, while EuroStoxx 50 futures traded sideways throughout the day, unable to move beyond 5,675, and are now at 5,660.
🛢️ Crude oil advanced yesterday, with Brent approaching $63 per barrel, where it is trading now.
🥇 Gold continues its strong performance, with futures trading above $4,220 per ounce, marking another exceptional week.
🪙 Bitcoin held relatively stable yesterday but failed to break above $92,000. After last week’s sharp declines, the market remains calmer, with the cryptocurrency currently trading at $91,010.
