Fed dominates, as investors continue to warm to Paramount offer for Warner Bros

Wednesday’s Fed meeting is dominating market action today. Stocks are wavering, bond yields are falling this morning, even though bets on Fed rate cuts in 2026 have been scaled back slightly in recent days. However, there could be more volatility in bond markets as we near the end of the year, as global central banks turn towards a more hawkish stance ahead of 2026.

US stocks dominate the market narrative

As markets digest fewer global rate cuts going forward, it may cause stock markets to stall, especially as US markets approach record highs. Other events are also in focus this week,  and there are several key drivers of market action, including big M&A news with Paramount launching a hostile bid for Warner Bros. Discovery under the nose of Netflix. US stocks are once again dominating the global market narrative.

Nvidia sales to China to boost revenue expectations

Nvidia’s stock price is higher by more than 1.7% in pre-market trading, after President Trump agreed to lift export restrictions on chip sales to China, which will allow Nvidia to sell its H200 AI chips to Beijing. We could see further gains for Nvidia’s share price, which has barely moved in the past month. Export restrictions were one reason why investors were holding back from Nvidia. In its Q3 earnings report, the company said that it was expecting zero revenue from China due to the export restrictions. Even though the chip maker could not sell to the world’s second biggest economy, it still managed to generate revenues of $57bn, and forecast Q4 revenues of $65bn. If it can sell into China, then future revenues could be much higher than current expectations, which should be reflected in a higher share price in the coming weeks.

Paramount’s path to Warner Bros. is easier than Netflix

Paramount’s hostile bid for Warner Bros. caused reverberations in the stock market on Monday, and its share price surged by more than 9%. It looks like it will extend gains on Tuesday, and its share price is higher by 1.7% in the pre-market. This ongoing saga could be a key source of volatility into year end. Paramount was the weakest performer on the S&P 500 last week; however, it has gone from zero to hero,  and was the top US stock on Monday. Warner Bros is also extending gains on Tuesday morning, while Netflix’s shares are stabilizing after falling more than 3% at the start of this week.

Politics could boost hopes for Paramount

The plot thickens in the drawn-out takeover of Warner Bros. Paramount has decided to go straight to shareholders in its battle to own Warner Bros. It has increased its offer, its sixth, and it has an easier regulatory route since it would still be smaller than Netflix, even if it does acquire Warner Bros. There is also a political element that may be helping the share price. The owner of Paramount, David Ellison, son of Larry, the owner of Oracle and staunch Trump ally, gave recent assurances to the President that if they bought Warner they would make changes at TV station, CNN, which takes an anti-Trump/ leftist stance. We have also learnt that the new bid is backed by three Middle Eastern sovereign wealth funds and President Trump’s son in law. Thus, Paramount could outwit Netflix, who may be hamstrung by its size.

Warner Bros. saga could drag on

Paramount certainly has more to gain from the deal, since it would cement itself as the world’s third largest streaming service. Even if Netflix does not buy Warner Bros, it would still be the world’s biggest streaming service. Thus, if Paramount can persuade Warner Bros, with this offer, then we could see its stock price take off. Its share price is already outperforming the S&P 500 so far this year, it is higher by 38%, and there could be further to go, depending on the outcome of the deal. One thing we do know, Warner Bros. will get sold. The company has been looking for bidders for months. If Netflix wants to get its hands on Warner Bros’s lucrative back catalogue, then it will need to increase its offer.  

Broadening out of stock market rally continues

The stock market rally continues to broaden beyond tech, on Monday, the equal-weighted S&P 500 outperformed the market cap-weighted S&P 500. The recent increase in bond yields is also a sign that the market is positioning for a rebound in US growth, which could help cyclical sectors continue to perform well into year end. Ultimately, if this trend continues, then US stocks could catch up with European indices, which have outperformed so far this year.

US payrolls more important than Fed for dollar

The dollar is giving back earlier gains on Tuesday, but the moves have been small so far. The greenback is likely to remain in a tight range until the Fed meeting; however, we think the bigger driver of the buck will be US labour market data. We will get the NFP data for November on 16^th December, which could have a bigger impact on yields and the dollar, since this data will shape the next steps for the Fed.

The prospect of a hawkish cut from the Fed later this week is also keeping the gold price contained. It has dipped below $4,200 at the start of the week, as we lead up to the Fed meeting, but ultimately, we think that the market will be loathe to push the yellow metal too much lower in case the Fed does take a step towards the dovish side at the same time as inflation remains elevated and price pressures are building.

Ahead today, Jolts job opening data will be watched closely, but we may see a quiet session as we lead up to the Fed.