Devon Funds Morning Note - 4 December 2025

Thursday 4th December 2025

Jobless Jitters

Global

US equities remain positive despite a soft ADP employment print, sealing expectations for a Fed rate cut next week. In late afternoon trading, all the major indices are continuing their positive run, with the S&P 500 +0.5%, Dow Jones +1.0%, and Nasdaq +0.3% all higher.

US ADP data showed private payrolls unexpectedly fell by 32k in November, the fourth negative print in six months, versus expectations for a modest gain. The weakness was concentrated in small firms with fewer than 50 staff, which shed around 120k jobs, while larger employers added workers, and pay growth for job switchers slowed to 6.3% year on year, the softest since early 2021. With many Fed officials focused on labour market cooling, the report reinforced market conviction that a 25bp cut next week is effectively locked in.

The ISM services index edged up to 52.6 in November, modestly beating forecasts and signalling ongoing expansion in the sector. Beneath the headline, the employment component improved slightly to 48.9. Still, it stayed in contraction territory, while the prices paid gauge fell to 65.4, a seven month low, suggesting some easing in input cost pressures.

In rates, the US 10 year Treasury yield briefly dipped to about 4.04% after the ADP release but quickly retraced, last trading near 4.07%, broadly unchanged from the New Zealand close.

Peace in Europe doesn’t look imminent. After a five-hour meeting at the Kremlin between President Putin and US envoys Steve Witkoff and Jared Kushner, ended the without a deal to stop the war, though Russian officials described the talks as “useful” and “constructive.” The core sticking point remains territory: Moscow is insisting on control over the whole of the Donbas, while Kyiv refuses to concede areas that Russian forces do not currently occupy.

Separately, the EU has floated a legally contentious plan to raise up to €210bn for Ukraine using revenues backed by frozen Russian state assets, including emergency measures that would effectively override vetoes from Hungary and other holdouts. Oil prices firmed on the geopolitical headlines, with Brent crude up about 1% to roughly US$63 a barrel.

New Zealand

The Kiwi market has extended its rebound as the NZX 50 rose 0.6% to finish on a high late in the session. Dairy-related stocks firmed following the Global Dairy Trade results, with A2 Milk (+1.4%), Synlait (2.2%), and Fonterra (+1.2%) all seeing gains. Weighing down the index saw weakness in retailers, Briscoes slipping 2.9% and KMD Brands falling 1.8%.

Air New Zealand has announced that the upcoming strike action due for next Monday has now been called off for many staff. Monday’s planned strike will now affect a smaller slice of its network after reaching “agreements in principle” with unions representing most cabin crew. However, around half of the crew on domestic and short‑haul narrowbody aircraft are still set to proceed with industrial action, with some disruption on those routes likely to remain unless a broader deal is reached in the coming days.

Scales Corporation (+0.8%) has guided FY26 underlying earnings slightly below the previous range of $54-59m, implying around a 7% year on year decline at the midpoint. Even so, earnings still represent solid growth versus pre-cyclone levels as the company has a track record of conservative guidance that it has typically beaten, especially heading into the key risk period for its horticulture business.

Lastly, analysts are expecting a “two-speed” year for the New Zealand economy in 2026, with different drivers in each half. The first half is expected to be led by a rebound in household spending and a pickup in housing market activity, as lower interest rates and improving confidence feed through. In the second half, growth is likely to be shaped more by the election, shifts in migration policy, and a gradual recovery in the labour market. Overall, the central case is for a steady, rather than spectacular, upturn through 2026, setting the stage for solid, broader‑based growth in 2027.

Australia

The Australian market has been steadying this week, inching up another 0.2%, extending its cautious rebound as investors digested softer-than-expected Q3 GDP data and pushed out expectations for any further RBA tightening. Across the market, Utilities traded the highest, supported by AGL Energy (+3.0%), while Energy names followed closely behind, led by uranium heavyweights Boss Energy (7.0%), Paladin (+5.2%), and Deep Yellow (+4.7%).

Australia’s Q3 GDP grew 2.1% year on year (0.4% q/q), a touch below both house and consensus forecasts, but still the strongest quarterly expansion since 2022 and driven by robust domestic demand. The softer headline briefly lifted hopes that the RBA might consider cuts in 2026, but given firm underlying activity and sticky inflation, economists still see the next move to be a rate hike, pencilling in increases for May and August 2026.

Tech names were a mixed bag; Block Inc. fell 6.0%, despite reporting a 10% increase in Black Friday transactions. Peers 360 (-2.2%) and Megaport (-6.3%) dropped, while WiseTech Global bucked the trend, rising 4.5% after outlining its new pricing model at its Investor Day.

On a final note, Chemist Warehouse has become the first major retailer compelled to the bargaining table under Labor’s new multi employer wage laws, after the Fair Work Commission ruled that staff in a group of South Australian franchise stores had shown majority support for a union deal. The company must now negotiate in good faith with the SDA union on a collective agreement covering hundreds of largely award minimum, casual workers, raising the likelihood of materially higher wages and improved conditions that could lift Chemist Warehouse’s labour costs over time and potentially spill over to other franchisees and pharmacy brands in its group.

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