Stocks Near Erasing November Losses on Fed Bets: Markets Wrap

(Bloomberg) -- Global equities were close to erasing their November losses as rising bets for Federal Reserve interest-rate cuts revived markets after a selloff sparked by worries over frothy AI valuations.

The MSCI All Country World Index climbed for a fifth straight session on Thursday, cutting its November drop to just 0.5%. That follows seven consecutive months of gains. Asian stocks, which also enjoyed a similar run, rose 0.3% Thursday, trimming their losses to 2.1% so far in November. Futures contracts indicated a tepid open for European stocks, while the US is closed for Thanksgiving.

Attention in China was on the property sector after China Vanke Co. proposed delaying repayment on a local bond, sending some of its notes plunging to record lows. Elsewhere, Bitcoin traded over $91,000 and a gauge of the dollar retreated for a third consecutive day.

The moves tracked firming expectations for an easing by the Fed, with money markets pricing in a roughly 80% chance of a quarter-point rate cut next month and three more by the end of 2026. A week ago, traders expected only three cuts in total.

The cross-asset action signals cautious optimism across global markets after concerns over tech valuations hammered equities earlier in the month. Sentiment has also been supported by the prospect of a pro–rate-cut official becoming the next US central bank chief.

“Certainly it looks like the Fed rate-cut optimism has offset AI bubble concerns for now,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “And the weaker dollar adds an additional leg of support for Asia.”

Meanwhile, the release of the US central bank’s Beige Book showed US employment declined slightly and prices rose moderately, according to the survey of regional business contacts. Spending declined further, except among higher-end shoppers. Also, initial jobless claims fell slightly, defying expectations for a modest increase. 

A four-day rally in Treasuries stalled on Wednesday, with the 10-year yield at 4%, as fresh US labor market data came in stronger than expected.

The US data “reinforced the notion that there are crosscurrents and mixed performance in the real economy,” said Ian Lyngen at BMO Capital Markets. Still, there is nothing within the reports that will derail the Fed from cutting by 25 basis points on Dec. 10, he said.

What Bloomberg Economics says...

The most important message from the Federal Reserve’s latest Beige Book was that employment declined slightly, with nearly half of districts noting weaker demand for workers. That’s a significant downgrade since the previous report. We think the weak reading on the employment side of the Fed’s mandate will help tip the scales toward a 25-basis-point rate cut at the Dec. 9-10 FOMC meeting.

Expectations for a rate cut have strengthened after it emerged that White House National Economic Council Director Kevin Hassett is the leading contender for the next Fed chair — a choice investors see aligning with President Donald Trump’s push for lower rates.

Investors are also paying attention to the dollar, with the Bloomberg Dollar Spot Index headed for a third day of declines as investors bolstered bets on rate cuts.

“The bigger risks to the dollar are emerging labor market weakness, and renewed risks to Fed independence,” said Kaitlyn Buhariwalla, a strategist at Westpac Banking Corp. 

Elsewhere, shares and dollar notes of China Vanke slid after it proposed delaying repayment on a local bond for the first time, while Hong Kong property group New World Development Co. received additional bondholder support in its debt swap plan, a filing showed.

The developer’s surprise move to seek a delay in repayment on local debt is another setback for the housing industry, which is still struggling to recover from years of sales declines and massive defaults by China Evergrande Group, Country Garden Holdings Co. and others. Vanke had long been considered one of the healthier property firms.

There were early signs of broader unease spreading. Other yet-to-default builders are also coming under pressure, with Longfor Group Holdings Ltd.’s dollar bond due in 2028 dropping.

In the commodities market, oil edged lower as investors tracked US-led efforts to end the war in Ukraine, while looking ahead to an OPEC+ gathering this weekend.

Corporate News:

• The Pentagon concluded that Alibaba Group Holding Ltd., Baidu Inc. and BYD Co. should be added to a list of companies that aid the Chinese military, according to a letter to Congress sent roughly three weeks before Donald Trump and Xi Jinping agreed to a broad trade truce.
• Asahi Group Holdings Ltd. said it expects its financial results to be delayed by more than 50 days after the end of the fiscal year, following a crippling cyberattack.

Some of the main moves in markets:

Stocks

• S&P 500 futures were little changed as of 1:11 p.m. Tokyo time
• Japan’s Topix rose 0.4%
• Australia’s S&P/ASX 200 was little changed
• Hong Kong’s Hang Seng rose 0.3%
• The Shanghai Composite rose 0.5%
• Euro Stoxx 50 futures were little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.1602
• The Japanese yen rose 0.2% to 156.09 per dollar
• The offshore yuan fell 0.1% to 7.0763 per dollar

Cryptocurrencies

• Bitcoin rose 1.2% to $91,274.01
• Ether rose 0.9% to $3,048.56

Bonds

• Japan’s 10-year yield declined one basis point to 1.790%
• Australia’s 10-year yield declined three basis points to 4.50%

Commodities

• West Texas Intermediate crude fell 0.5% to $58.34 a barrel
• Spot gold fell 0.4% to $4,145.20 an ounce

This story was produced with the assistance of Bloomberg Automation.

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