Honda, Nissan shift gears for mega merger, says Nikkei

Good morning. Here's what happened overnight and what you need to know today.

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1.

Motor merger: Honda and Nissan are preparing to begin merger negotiations, Nikkei reported, as the automakers face mounting competition from Tesla and Chinese EV rivals like BYD. The talks could result in a single holding company, with Mitsubishi Motors—24% owned by Nissan—potentially joining to form one of the world’s largest auto groups. Both companies issued identical statements denying the report was announced by either firm, saying they are exploring collaboration and will update stakeholders when appropriate. Nikkei said a memorandum of understanding is expected soon, though details, including equity stakes, remain undecided. Honda and Nissan have been deepening ties since March, working on EV technology amid weak demand and declining profits, particularly for Nissan. Combined, they sold 7.4 million vehicles in 2023, trailing Toyota. If finalised, the deal would mark the largest auto merger since Fiat Chrysler and PSA combined in 2021. (Bloomberg)(Reuters)(Nikkei)

2.

General killed: Ukraine’s security service (SBU) claimed responsibility for the bombing that killed Russia’s head of nuclear, chemical and biological defence forces, Lieutenant General Igor Kirillov, in Moscow early Tuesday morning, in the most high-profile killing of its kind. A bomb hidden in an electric scooter exploded as Kirillov and his assistant exited an apartment building on Ryazansky Prospekt, killing both, media reported citing Russia’s Investigative Committee. Dmitry Medvedev, deputy head of Russia’s Security Council, vowed “inevitable retribution” against Ukraine’s leadership. An unnamed SBU official told media it was behind the attack. The AP said the source described Kirillov as a “war criminal and an entirely legitimate target.” Ukraine accuses Kirillov of directing the use of banned chemical weapons, including over 4,800 alleged cases since the beginning of the war. Kirillov had been sanctioned by the UK over chemical weapons use and had been charged in absentia by Ukraine a day before the attack. Russia denies the allegations. (Capital Brief)(AP)(FT)(Reuters)

3.

MYEFO update: The Albanese government’s mid-year economic and fiscal outlook (MYEFO) today will show the government is on track for a $200 billion improvement in the budget position through to 2027-28 compared to pre-election forecasts. Gross debt is projected to be $177 billion lower in 2024-25, although the budget will be forecast to stay in deficit for the next decade, fuelled by growing spending, The Australian Financial Review noted. Economist Chris Richardson expects the underlying budget deficit will hit $31.2 billion in 2024-25, compared to the $28.3 billion forecast. It comes amid reports Treasurer Jim Chalmers on Tuesday reaffirmed his commitment to raising taxes on superannuation accounts exceeding $3 million, a measure stalled in the Senate that could generate $2.3 billion annually by 2027-28. Treasury estimates superannuation tax concessions will cost $55.2 billion in 2024-25, The Australian noted, with benefits skewed towards higher income earners. (Capital Brief)(AFR)(The Australian)

4.

Retail drive: US retail sales rose 0.7% in November, beating forecasts driven by the strongest car sales in over three years amid lower interest rates and year-end discounts. The data highlights continued consumer resilience despite inflation pressures, supported by a strong labour market with low layoffs and solid wage growth. Record stock market gains and high home values seem to also be helping. The Commerce Department’s Census Bureau data surpassed forecasts of a 0.5% rise (Reuters) and 0.6% rise (Bloomberg), with October’s increase revised to 0.5%. Bloomberg noted auto sales surged due to discounts and easing interest rates. Excluding autos and parts, sales rose 0.2%, while core retail sales—excluding autos, gasoline, building materials and food services—climbed 0.4% after a drop in October. E-commerce sales jumped 1.8% as Black Friday promotions drove gains on platforms like Amazon. Spending at restaurants and bars fell for the first time since March. (Capital Brief)(US Census Bureau)(Bloomberg)(Reuters)

5.

Hamas ceasefire: Israel and Hamas are reportedly moving closer to a ceasefire agreement after months of deadlock, mediated by the US, Egypt and Qatar. Egyptian, Palestinian and Hamas officials described a three-phase deal that could begin with a six-to-eight-week ceasefire, the BBC and AP reported. Hamas would release about 30 hostages – roughly half of them believed alive – including US-Israeli dual citizens, while Israel would free Palestinian prisoners. Israeli troops would withdraw from city centres but remain along Gaza’s border with Egypt. The agreement would also see significant increases in humanitarian aid, including reopening Gaza's Rafah crossing with Egypt. Subsequent stages would then involve the release of remaining hostages, troop withdrawals and talks on Gaza’s governance and rebuilding, according to the reports. Mediators cite growing willingness on both sides, though key details remain unresolved. It comes amid Trump’s warning that a deal should be reached before his 20 January inauguration.(AP)(Reuters)(BBC)

6.

TikTok timeout: TikTok filed an emergency appeal at the US Supreme Court to block a law requiring its Chinese parent, ByteDance, to divest the app by 19 January or face a nationwide ban. The platform filed the emergency request after a lower court upheld the law, arguing it violates free speech protections under the First Amendment. The US Justice Department considers TikTok a national security threat due to its access to American user data and potential for content manipulation. But TikTok claims a shutdown would cause significant user loss and harm its operations. Meanwhile, President-elect Donald Trump, who previously sought to ban TikTok, met CEO Shou Zi Chew at Mar-a-Lago. When asked about the matter, Trump said he has “a warm spot in my heart” for the platform and indicated he would “take a look” at the matter. TikTok asked the court to decide by 6 January to allow for the “complex task of shutting down” the app if the appeal is rejected. (Reuters)(The Hill)

7.

Vanuatu shaken: A magnitude 7.3 earthquake struck Vanuatu’s capital, Port Vila, on Tuesday, causing major damage and casualties. Local media reported at least six deaths and more than 50 injuries, while the UN said the quake affected over 116,000 people and damaged two water reservoirs and the hospital. The hospital’s operating theatre was unusable, with triage tents set up outside. Buildings collapsed, Port Vila’s airport was closed due to runway damage, and landslides disrupted recovery efforts, including at a shipping terminal. Diplomatic staff from the US, UK, French and New Zealand embassies were evacuated from the heavily damaged La Casa D’Andrea E Luciano building, where their missions were located. The status of the Australian high commission was unclear but the SMH reported sources saying nobody there had been injured. Caretaker Prime Minister Charlot Salwai declared a state of emergency, imposing a seven-day curfew in the worst-affected areas and requesting international assistance. Australia announced it would deploy search and rescue and emergency medical teams, and Starlink services were helping response efforts. The earthquake, described by locals as “the most violent” in decades, was followed by multiple aftershocks. (SMH)(Reuters)

8.

Pain relief: Pfizer shares jumped over 4.5% after the drugmaker forecast 2025 revenue of USD61 billion ($96.23 billion) to USD64 billion, aligning with Wall Street estimates despite a USD1 billion hit from Medicare drug benefit changes. It comes amid mounting pressure from activist investor Starboard Value, which has criticised the company’s USD70 billion in acquisitions and declining post-pandemic performance as the drugmaker struggles to compete with rivals thriving on weight-loss drugs. At an analyst briefing, CEO Albert Bourla defended the company's strategy, pointing to USD4 billion in net operating expense cuts in 2024, and an additional USD500 million to come in 2025. Bourla played down concerns about vaccine policy shifts under Trump and HHS secretary nominee and vaccine sceptic Robert Kennedy Jr, saying he had developed a good relationship with Kennedy. "If he's confirmed, we will work with him to make sure that we advance the right policies," Bourla said. (Capital Brief)(Pfizer statement)(WSJ)(Reuters)