Global stock markets experienced an upswing following renewed expectations for a potential interest rate cut by the Federal Reserve in December. Investors flocked to technology stocks, undeterred by concerns over the sector’s potential overheating. This shift in sentiment comes as the parent company of Google, Alphabet, approaches a remarkable $4 trillion valuation, positioning itself to become only the fourth company to reach this milestone. Analysts view this as a testament to the ongoing strength of the AI-driven tech sector.
The MSCI All-World Index rose for a third consecutive day, recovering from two-month lows. European shares increased by 0.2 percent, while US stock index futures approached positive territory. The yield on benchmark 10-year Treasury notes remained steady at 4.036 percent, while the two-year yield, which is sensitive to expectations of lower Fed fund rates, held at 3.49 percent in Europe after a decline of 2.5 basis points in the previous session.
The prospect of a US interest rate cut gained momentum after Fed Governor Christopher Waller indicated that current data pointed to a weak job market, which could justify another quarter-point cut. His comments followed those of New York Fed President John Williams, who suggested on Friday that a December cut was a possibility. Markets are now pricing in an 81 percent chance of a quarter-point reduction in December, a significant increase from 42.4 percent just a week prior. The Federal Reserve is scheduled to meet on December 9 and 10.
Investors are poised for additional insights later on Tuesday as they review delayed data on retail sales, wholesale inflation, home prices, and consumer confidence. While these reports may not significantly alter expectations regarding the Fed’s upcoming decisions, they will provide a clearer snapshot of the economic landscape.
The shift in rate expectations has buoyed stock prices but has had a more muted impact on the US dollar. In November, the dollar has strengthened against most major currencies except for the offshore Chinese yuan, which has appreciated by approximately 0.5 percent. Michael Brown, senior research strategist at Pepperstone, noted that the foreign exchange market appears focused on growth differentials. He stated, “With the US economy outperforming peers now, as well as likely continuing to do so into 2026, this bodes well for the dollar moving forward.”
Significantly, the dollar has risen against the Japanese yen, which has recently reached its weakest point in ten months. This situation has raised concerns among Tokyo officials regarding the need for intervention to stabilize the yen. As of now, the dollar is trading at 156.47, down 0.3 percent for the day but up 1.6 percent in November. The euro also saw a slight increase, rising 0.1 percent to $1.1531.
Tensions in Japanese markets have been further exacerbated by ongoing diplomatic disputes with Beijing. A recent statement by Japan’s Prime Minister Sanae Takaichi, suggesting that a Chinese attack on Taiwan could provoke a Japanese military response, has stirred controversy. Prime Minister Takaichi recently spoke with US President Donald Trump, who had also conversed with Chinese President Xi Jinping on Monday. Trump’s upcoming visit to Beijing in April has been interpreted as a potential thaw in US-China relations following their recent trade war truce.
As the Thanksgiving holiday approaches, US stock and bond markets will close on Thursday and operate for only half a day on Friday. Meanwhile, shares of Alphabet rose 2.5 percent in Frankfurt, indicating a likely rally in US premarket trading. This uptick follows a report from The Information detailing discussions between Facebook parent company Meta and Alphabet regarding the use of AI chips in its data centers beginning in 2027, with potential rental agreements for next year.
In commodities, Brent crude futures fell 0.8 percent to $62.88 per barrel, driven by concerns over a potential increase in global supply outpacing demand in the coming year. Gold prices also dropped 0.6 percent to $4,115 per ounce but remain on track for a nearly 3 percent gain in November, reflecting ongoing investor interest in the precious metal.
