Global markets are navigating short-term volatility amid diverging monetary policies among major central banks. While expectations of Fed rate cuts persist, the probability of a Bank of Japan (BOJ) rate hike has surged. Despite Monday's cryptocurrency plunge and weak US manufacturing data fueling risk-off sentiment, asset performances diverged sharply—US stock futures declined, Japanese government bonds (JGBs) rallied on robust auction demand, and cryptocurrencies rebounded.
On December 2, Asian equities rose led by tech stocks, while European markets were mixed. The dollar and US Treasuries held steady, the yen remained weak, gold and silver retreated, and crude oil advanced.
Market focus remains on policy signals from major central banks. The Federal Reserve will hold its policy meeting on December 12–13, followed by the BOJ’s rate decision on December 19.
Against this backdrop, demand for Japan’s final 10-year JGB auction of the year significantly exceeded the past year’s average, reflecting market anticipation of policy shifts. Kristina Hooper, Chief Market Strategist at Man Group, noted that JGB yields have "soared this year" amid expectations of widening fiscal deficits and further BOJ rate hikes, warranting close monitoring. She added:
"This is critical because rising JGB yields could lift other long-term sovereign bond yields, exacerbating borrowing costs for governments already under fiscal strain."
**Key Market Movements:**
- **US stock futures** dipped: S&P 500 and Nasdaq 100 futures fell 0.07%, while Dow Jones futures lost 0.1%. - **European equities** were mixed: Euro Stoxx 50 and Germany’s DAX rose 0.1%, while the UK’s FTSE 100 and France’s CAC 40 slipped 0.1%. - **Asian markets**: Japan’s Nikkei 225 closed flat at 49,303.45, while the TOPIX edged up 0.1%. South Korea’s KOSPI surged 1.9%. - **Bonds**: The 10-year US Treasury yield held at 4.08%; Japan’s 10-year JGB yield dropped 2 bps to 1.855% post-auction. - **Currencies**: The dollar index steadied at 99.4; the yen weakened 0.2% to 155.76 per dollar. - **Commodities**: Spot gold fell 0.6% to $4,206.48/oz; silver retreated over 1.2% to $57.27/oz. Bitcoin rose 0.7% to $87,053.60, and Ethereum gained 0.5% to $2,806.78.
**US Data Watch**: November’s US manufacturing activity contracted for a fourth month, with the pace of decline hitting a four-month high. Ahead of the Fed’s meeting, officials will scrutinize Friday’s PCE inflation data, expected to show persistent price pressures. Labor market indicators—including the ADP jobs report and consumer confidence data—will further shape rate expectations.
Homin Lee, Senior Macro Strategist at Lombard Odier Singapore, remarked: "With potential Fed easing and growth-friendly fiscal policies, the macro backdrop remains conducive for risk-taking."
**JGBs Rally on Strong Demand**: Japan’s 10-year yield fell 2 bps after a well-received auction, with a 30-year bond sale due Thursday. The yen softened after BOJ Governor Kazuo Ueda signaled a potential near-term rate hike.
**Silver and Crypto**: Spot silver pulled back from overbought levels after a six-day rally. Bitcoin rebounded following Monday’s sell-off, which liquidated nearly $1 billion in leveraged crypto positions.