U.S., European, and Japanese stock markets all rose; central bank rate hikes are almost certain; Japanese long-term bond yields hit record highs at one point; gold and silver retreated from high levels.

U.S., European, and Japanese stock markets all rose; central bank rate hikes are almost certain; Japanese long-term bond yields hit record highs at one point; gold and silver retreated from high levels.

The US economic data released overnight was weaker than expected, further strengthening market expectations for a Federal Reserve rate cut and boosting global risk appetite.

On December 4th, US stock index futures rose collectively, European stocks opened higher overall, Asian stocks were mixed, and Japanese stocks posted notable gains. US Treasury yields edged up, Japanese long-term bond yields retreated after hitting new highs. The US dollar and Indian rupee weakened, while the Japanese yen rose sharply in the short term. In commodities, gold and silver pulled back from high levels, while oil rose. Cryptocurrencies were mixed, with Bitcoin falling and Ethereum rising.

Data showed that employment growth in the US ADP private sector slowed, and the ISM services index also reflected sluggish activity, jointly supporting market expectations of monetary easing.

Meanwhile, market focus is shifting to the Bank of Japan. Due to Governor Kazuo Ueda’s recent hawkish signals, the market broadly expects a rate hike at the December meeting, which previously drove Japan’s long-term bond yields to surge. Currently, Japanese long-term bond yields are diverging: the 30-year government bond yield retreated after a spike, supported by robust auction demand; while the 10-year yield continues to rise, driven directly by expectations of monetary policy tightening.

Frederic Neumann, HSBC Holdings’ Chief Asia Economist, analyzed:

“Unlike most other Asian markets, Japan is more sensitive to Fed rate cut expectations, partly because Fed policy may influence the Bank of Japan's decision space through exchange rate channels. If market confidence in Fed rate cuts increases, it will help ease pressure on the yen, thus creating a longer window for the Bank of Japan to maintain relatively loose monetary policy.”

Core market developments are as follows:

S&P 500 futures up 0.05%, Nasdaq 100 futures flat, Dow Jones futures up 0.13%Euro Stoxx 50 index opened up 0.6%, Germany’s DAX up 0.7%, UK FTSE 100 up 0.2%, France’s CAC 40 up 0.1%
Nikkei 225 closed up 2.3% at 51,028.42, TOPIX up 1.9% at 3,398.21, Korea's Kospi index closed down 0.2% at 4,028.51US 10-year Treasury yield rose 2 basis points to 4.08%; Japan’s 30-year government bond yield hit a historic high of 3.445%Dollar index basically flat, hovering near 99; Indian rupee fell 0.3% against the dollar intraday to 90.4175, a new record lowSpot gold down 0.2% to $4194.37 per ounce; spot silver down over 1.7% to $57.46/oz; WTI crude oil up over 0.3% to $59.33/barrelBitcoin down 0.7% to $93,075.12; Ethereum up 0.6% to $3,184.46

US equity index futures rose collectively. Data released Wednesday showed that layoffs at US firms in November saw the biggest monthly drop since early 2023, heightening concerns about growing labor market weakness. Swap pricing shows market expectations for a rate cut in December increased Wednesday, with traders seeing over a 90% chance of a 25-basis-point cut.

The Nikkei 225 closed up 2.33%, led by technology and semiconductor stocks.

Amid rising expectations for a Bank of Japan rate hike, Japanese long-term government bond yields have risen sharply recently and hit historic highs, though yields for different tenors have diverged. According to Wallstreetcn, as market expectations for a December rate hike surged, Japanese government bond yields soared to their highest levels in decades, with the 30-year yield rising by 2.5 basis points to 3.445%, the highest level since the bond was introduced in 1999.

According to Wallstreetcn, despite ongoing concerns over Japan’s fiscal situation, high yields attracted investors, with the 30-year JGB auction seeing the strongest demand since 2019. After the auction results, 30-year JGB prices rose and yields declined, easing market tensions. Market Live strategist Mark Cranfield commented:

“Japanese government bond investors appear to have found an attractive yield level on 30-year bonds, with a bid-to-cover ratio as high as 4.04 times. This is the highest demand since 2019, and the low price far exceeded pre-auction expectations—another positive signal. Additionally, Nomura Securities was the largest buyer, which typically signals participation by long-term investors.”

The yen rose briefly against the US dollar. According to Wallstreetcn, the BOJ may raise rates in December, and the government may tolerate this move. The market’s focus is shifting from “whether to hike” to “how much to hike.”

Due to stalled progress on a trade agreement with the US, market sentiment remains weak and the Indian rupee fell 0.3% against the dollar intraday to 90.4175, hitting a record low. According to sources, with reduced dollar inflows, India’s central bank will tolerate a weaker rupee.

Spot silver sank sharply from highs and then rebounded, currently down over 1.7% to $57.47/oz. However, silver remains near historic highs as the market widely expects Fed rate cuts.

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