The market digests interest rate cut expectations, European stocks open slightly higher, U.S. stock index futures decline, gold and silver rise, and cryptocurrencies retreat

The dovish signals from the Federal Reserve and the optimistic sentiment released from the US-China leaders' conversation are gradually being digested and priced in by the market, leading to a marginal weakening of the short-term upward momentum in risk assets.

On November 25, US stock index futures collectively fell, while most European stock indices rose, and Asian stocks followed the overnight rise in US stocks. US Treasury yields remained basically flat, and the US dollar index fluctuated narrowly above the 100 mark. Gold and silver both rose, crude oil declined, and cryptocurrencies retreated after a brief surge.

Traders generally believe that the previous market adjustment is nearing its end, and risk appetite is gradually recovering. Currently, the market focus is shifting to the initial jobless claims data for November, which will be released on Wednesday. In the context of the absence of November non-farm payrolls, this data has become a key reference for the Federal Reserve to assess the economic fundamentals and calibrate its policy path.

Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, stated:

“The previous valuation reset in the stock market resonates with the rising probability of a rate cut in December, which has not only become the core driving factor for the recent stock market rally but also propelled the market to initiate upward momentum for the year-end rally.”

The core market trends are as follows:

• US stock futures collectively fell, with S&P 500 futures down 0.13%, Nasdaq 100 futures down over 0.2%, and Dow futures down 0.15%
• The Euro Stoxx 50 index opened up 0.2%, Germany's DAX index opened flat, the UK's FTSE 100 index opened flat, and France's CAC 40 index rose 0.25%
• The Nikkei 225 index closed up 0.1%, at 48,659.52 points, Japan's Topix index closed down 0.2%, at 3,290.89 points, and South Korea's KOSPI closed up 0.3%, at 3,857.78 points
• The yield on the 10-year US Treasury bond is 4.036%
• The US dollar index fell 0.03%, to 100.15, and the Japanese yen depreciated 0.18% against the dollar, to 156.6
• Spot gold rose 0.02% to $4,135 per ounce, spot silver rose 0.14% to $51.4 per ounce, and Brent crude oil fell over 0.5% to $58.52 per barrel
• Bitcoin fell over 0.6% to $87,692 per coin

US stock index futures collectively fell, as the market displayed a game of “policy optimism versus data uncertainty” during the gradual pricing process of rate cut expectations.

Recently, several core officials of the Federal Reserve have been intensively releasing dovish signals, continuously reinforcing market expectations for rate cuts. Federal Reserve Governor Christopher Waller and San Francisco Fed President Mary Daly publicly expressed support for a rate cut in December on Monday, while New York Fed President John Williams also clearly stated last Friday that “a rate cut is possible in the near term,” with multiple signals of policy easing significantly boosting market risk appetite.

The current market focus has locked onto the December Federal Reserve meeting, but the delay in the release of economic data caused by the US government shutdown has left investors lacking timely and effective fundamental references, relying only on lagging historical data, which further exacerbates the ambiguity in the market's judgment of economic fundamentals James Egelhof, Chief U.S. Economist at BNP Paribas, stated:

"The interpretative discrepancies caused by data lag make it difficult for the market to accurately anchor the true state of the economy, thereby amplifying short-term volatility risks."

From the market pricing perspective, the current implied probability of a Federal Reserve rate cut in December has exceeded 70%. However, it should be noted that this probability has shown significant fluctuations in recent weeks due to increasing internal disagreements among policymakers and the lack of core economic data. The market's pricing of rate cut expectations has not yet fully stabilized.

Boosted by the technology sector, Asian stock markets collectively rebounded following the overnight rise in U.S. stocks. The market holds an optimistic view on Google's new artificial intelligence model, coupled with reports that the company plans to develop its own AI chips, which have bolstered investor confidence in the tech sector.

Spot gold rose slightly to $4,135 per ounce.

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