Devon Funds Morning Note - 02 December 2025

Tuesday 2nd December 2025

Frosty Markets

Global

December has got off to a frosty start for equity markets as US equities are trading softer. The S&P 500 in current trading is down 0.5%, the Dow Jones has slipped 0.7%, while the Nasdaq is trading 0.4% lower. Cryptocurrencies have faced a major selloff while the Institute of Supply Management (ISM) manufacturing survey came in softer than expected.

The ISM manufacturing index slipped to 48.2, its weakest reading since July and the ninth straight month in contraction territory, signalling that US factory activity is still under pressure even as some other data look firmer. The prices paid component was broadly steady at 58.5, indicating ongoing input cost increases, while both the employment and new orders indices moved lower, pointing to softer hiring and demand. Analysts see the softer data as reinforcing the case for a Fed rate cut at the 10 December meeting, with markets now fully pricing in a 25bp move.

Cryptocurrencies are taking on a collapse, pulling back 6-10% of from mid November’s all-time highs as major coins; Bitcoin (-6.5%), Ethereum (-9.2%), and XRP (-8.8%) have all slid overnight with traders pointing to a build-up in leverage over recent weeks meant that once prices started to slip, margin calls and stop loss triggers kicked in, prompting exchanges to liquidate heavily geared positions and accelerating the slide.

Despite the crypto risk-off signal, equity traders have largely resisted cutting exposure, leaning instead on the historical strength of the “Santa rally.” Since 1990, the S&P 500 has delivered its second best average monthly return and second lowest volatility in December, while also recording its highest proportion of positive months. Going back to 1950, the index has averaged a 1.4% gain in December and finished higher about 73% of the time, with an average rise of 2.9% in years when the month is positive. This, combined with an anticipated Fed rate cut, time will tell how it all plays out.

Elsewhere, comments from Bank of Japan Governor Ueda have signalled that a rate hike is on the table for the 20 December meeting. His comments pushed the yen higher and drove 2-year yields above 1% for the first time since 2008.

In China, the private RatingDog PMI slipped slightly into contraction and came in softer than expected, especially among smaller, export focused firms. Taken together with the weekend’s official PMIs, the surveys point to an economy still struggling to gain momentum, with domestic demand remaining subdued.

New Zealand

The NZX 50 slipped 0.3% to start the first trading day of December, giving back part of last week’s rebound. Losses were driven by Contact Energy, falling 1.87%, a2 Milk dipped 3.1%, and Sanford took a 4.3% tumble.

Gentrack (-1.9%) hosted its strategy day, which it used to underline its positioning as a specialist platform provider that helps utilities and airports modernise billing, customer experience and operational systems, rather than just selling standalone software. A central theme was its deep integration with Salesforce, which management highlighted as a key competitive edge given that more than 70% of active pipeline opportunities are with customers that already run Salesforce and want tightly connected, cloud‑native industry solutions. This alignment is intended to shorten sales cycles, increase win rates and support Gentrack’s push for double‑digit revenue growth in its core markets over the medium term.

Looking at economic data, ASB’s latest Housing Confidence Survey shows a net 28% of respondents think it is a good time to buy, signalling the strongest buyer sentiment in years. At the same time, price expectations remain muted, with only 17% expecting house prices to rise over the next 12 months.

Further to this, construction appears to be on the up. Stats NZ figures show 3,520 new homes were consented in October, up about 24% on a year ago and 15% versus October 2023. Over the 12 months to October, dwelling consents rose to 35,552, an annual increase of around 6%. Standalone houses remain the most common type of new dwelling, with 16,183 consents in the year to October, just ahead of 15,484 townhouses and units, followed by 2,649 apartments and 1,236 retirement village units. Retirement village consents are the only category in persistent decline, falling 30.4% over the past year and marking a third straight annual drop.

Australia

The ASX 200 also started December on the back foot, falling 0.6%, with the ASX itself sliding 2.8% as the company faced issues putting out announcements throughout the session, causing an almost five-hour trading halt for names, including Metcash (-9.2%), which missed on first-half earnings.

Financials fell 0.9%, dragged down by renewed selling in Insurers and Banks after AUB Group slumped 17.8% following the withdrawal of its private equity takeover proposal. Health Care was the weakest sector, dropping 1.7% as investors sold ResMed (-4.6%) on worries about potential competitive threats.

On the positive side, Energy and Materials outperformed thanks to firmer commodity prices, with Greatland Gold jumping 10.2% to top the index after releasing a feasibility study for its Havieron gold-copper project.

Elsewhere, Australian government bonds sold off as yields rose by 2–4 basis points across the curve, reflecting renewed concerns around sticky inflation and the risk of a more hawkish policy stance from the Reserve Bank. In commodities, iron ore futures rose 0.8% supported by demand signals from China.

More on the Corporate Travel scandal (yesterday’s note), CEO Jamie Pherous has ruled out stepping down over the £80m UK overcharging scandal, with the UK Home Office among those affected. The scandal comes just two years after the company secured the Australian federal government’s Whole of Australian Government travel contract, which contributed roughly 20% of its FY24 revenue. Pherous says he plans to lead the company through the crisis, rather than step aside. As the founder and 11.95% shareholder, also noted that the board, chaired by Ewen Crouch, has not requested his resignation.

Comments from our readers

No comments yet