US shutdown looms amid Trump drama

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

1.

US shutdown: The US government is hours away from a potential shutdown as Donald Trump, cheered by Elon Musk, derailed a bipartisan funding deal designed to keep federal operations running through March, plunging Congress into chaos. The President-elect threatened political retribution against GOP members who support the bill with what he called “Democrat giveaways,” also demanding a debt ceiling hike. The deal, backed by Republican House Speaker Mike Johnson, would have funded the government until 14 March, including USD100 billion ($159.75 billion) for disaster relief and farm aid. After Trump’s intervention, the agreement collapsed, with Democrat House Minority Leader Hakeem Jeffries accusing Republicans of harming Americans by reneging on their commitment. Without a resolution, federal funding expires at 12:01am Saturday (4:01pm AEDT), halting government operations and pay. Meanwhile, Trump told NBC News Congress should eliminate the debt ceiling entirely, calling it “the smartest thing” it could do. (Capital Brief)(TNYT)(WaPo)(FT)

2.

M&A year: Dealmakers are gearing up for a surge in global M&A activity, with volumes projected to exceed USD4 trillion ($6.40 trillion), fuelled by optimism around Donald Trump’s policies such as deregulation and tax cuts. That follows a rebound in 2024, with volumes rising 15% year-on-year to USD3.45 trillion, according to Dealogic, driven by a 20% surge in technology deals (USD534 billion) and private equity buyouts climbing 35% to USD600.8 billion. Trump’s appointment of Andrew Ferguson to head the FTC is anticipated to ease regulatory hurdles, boosting US M&A, which reached USD1.55 trillion, while Europe saw a 20% rise. Asia’s growing focus on Japan and India also points to sustained momentum in 2025, as firms capitalise on expected improved IPO conditions in 2025. (Reuters)(FT)

3.

Resilient economy: US economic growth in the third quarter was revised higher to 3.1%—the fastest pace in over a year—driven by robust consumer spending, which grew at 3.7%. The Bureau of Economic Analysis previously reported a 2.8% growth rate. Meanwhile, jobless claims fell 22,000 to 220,000 last week, hinting at a still-resilient economy despite revived inflation concerns. Continuing claims, a proxy for those receiving benefits, eased slightly to 1.874 million. The fresh data comes after the US Fed cut its benchmark rate for the third time this year to 4.25%-4.50% and signaled fewer rate cuts for 2025, citing the economy’s surprising strength. Treasury yields steepened, with the 10-year rising to 4.58%, as investors reacted to Fed chair Jerome Powell’s hawkish remarks, policy uncertainty ahead of Donald Trump’s second administration and chaos in Congress after Trump and Elon Musk sank a bipartisan funding bill hours before a potential shutdown. (Capital Brief)(DOL)(BEA)(Bloomberg)(Reuters)

4.

Holiday strike: Thousands of Amazon workers staged strikes at seven US facilities during the crucial pre-Christmas shopping period, protesting stalled contract negotiations. The Teamsters union, which claims to represent nearly 10,000 workers, called it the largest strike against Amazon in US history. Amazon employs over 800,000 warehouse workers across more than 600 facilities nationwide. Workers in New York City, Atlanta, San Francisco, Southern California and Skokie, Illinois are demanding higher wages, better benefits and safer conditions. The union argues that Amazon contractors’ drivers should be classified as employees, citing a National Labor Relations Board rule that designates both Amazon and delivery services as joint employers. Amazon and other business groups dispute this rule. The Teamsters say Amazon missed a December 15 deadline to negotiate a contract, but Amazon disputes the Teamsters' claim of representing its employees and dismissed the strike as a "PR play" with no operational impact. (Capital Brief)(CNN)(Reuters)(WSJ)(CBS News)

5.

Wall Street rebound: US stocks bounced back Thursday after their steepest fall since August, as the Federal Reserve’s hawkish outlook sent ripples through global markets. The S&P 500 was trading 0.8% higher in late afternoon, while the Nasdaq Composite was 1% higher, led by six of the Magnificent Seven tech giants, though Tesla lagged. Bond markets reacted sharply, with 10-year Treasury yields hitting 4.58%, a seven-month high and the dollar extending gains to 2022 levels. The Fed unsettled investors by cutting its 2025 rate-cut projections and raising inflation forecasts, citing lingering price pressures. Globally, Europe’s Stoxx 600 dropped 1.5%, and Japan’s yen weakened after the Bank of Japan held rates. China acted to bolster its yuan via its daily reference rate after the Fed’s caution sent the offshore yuan to a fresh one-year low. (FT)(Bloomberg)

6.

Rate fog: The Bank of England (BOE) kept its key interest rate at 4.75%, with three of nine policymakers dissenting in favour of a 0.25% cut to 4.5%. The unexpected support for a cut raised expectations for rate reductions next year. Governor Andrew Bailey emphasized a “gradual approach” to rate changes amid economic uncertainty, as the central bank economists downgraded Q4 growth forecasts to stagnation. While Reuters polling last week predicted four BOE rate cuts in the next year, this week’s rapid wage growth and higher inflation data had tempered those expectations. However, Thursday's vote split and Bailey’s remarks were seen as dovish, prompting investors to price in two quarter-point cuts with a strong chance of a third. Following the decision, gilt yields dropped and the pound trimmed earlier gains to settle near USD1.26 ($2.01). (Capital Brief)(BOE statement)(WSJ)(Bloomberg)

7.

Putin talk: Vladimir Putin defended Moscow’s actions in Syria and Ukraine, and signalled readiness for talks with US President-elect Donald Trump during his yearly press conference that lasted four hours. “We came to Syria 10 years ago to prevent a terrorist enclave from being established there... overall, we achieved our goals,” Putin said, adding Moscow had evacuated 4,000 pro-Iranian fighters to Tehran and was in contact with groups in Syria. “They all say that it would be better if we kept our bases there,” he said, though further discussions were needed. On Ukraine, Putin stated, “What we need is not a ceasefire ... we need a lasting peace with guarantees for the Russian Federation.” He said that, with hindsight, “systemic preparation” for the 2022 invasion should have begun earlier. Touting Russia’s hypersonic “Oreshnik” missile as unstoppable, he challenged Western defenses to intercept it. He expressed readiness to meet Trump, saying he hadn’t spoken with him in four years. (CNN)(Reuters)(The Hill)

8.

Chip slip: Micron Technology shares fell by as much as 18% on Thursday after its forecast pointed to weak demand for personal computers and smartphones, overshadowing growth in AI-related chip sales. Analysts attributed the slump to a lingering supply glut and slow consumer demand since the pandemic. Flash memory chip revenue is projected to decline in fiscal 2025 due to reliance on PC and mobile phone shipments. The transition to Windows 11 has also been slower than expected. However, revenue from high-bandwidth memory (HBM) chips, used in advanced AI systems, more than doubled sequentially. Micron, alongside SK Hynix and Samsung, is positioned to benefit from data centre investments in 2025. At least 10 brokerages reduced their price targets after the weaker-than-expected revenue forecasts. (Reuters)