By Ankur Banerjee
SINGAPORE, Dec 1 (Reuters) – Stocks turned lower on Monday after a strong end to November as a bout of risk aversion gripped markets even as U.S. rate-cut optimism remained intact while the yen firmed, with investors weighing the prospect of a rate hike as soon as this month. The spotlight in the currency market has been on the Japanese yen, which strengthened to 155.47 per U.S. dollar as Bank of Japan Governor Kazuo Ueda took the stage in Nagoya with investors looking for cues on the timing of the next hike. Ueda said in a speech to business leaders that the central bank would consider the “pros and cons” of raising rates at its next policy meeting, providing the strongest signal yet on whether a hike was on the cards later this month. Ueda is due to speak again later in the day.
His comments strengthened the yen, pushed the Nikkei down more than 1.5% and Japanese government bond yields to 17-year highs. [JP/] [.T]
The two-year JGB yield, the most sensitive to the BOJ’s policy rate, rose 2 basis points to 1.01%, its highest since June 2008.
The market has been focusing on the yen for the last few weeks, uncertain over the timing of the next interest rate hike and concerned about fiscal policies under Prime Minister Sanae Takaichi. Charu Chanana, chief investment strategist at Saxo, said traders had taken Ueda’s comments to mean he was “almost on board with a rate hike this month” but that any move was unlikely to end the yen’s weakness.
“Let’s remember that Japan is edging away from ultra-easy policy, not sprinting.” “That means the yen can claw back some ground on BOJ hints and lower global yields, yet it’s hard to call the end of yen weakness while U.S.–Japan rate gaps remain this wide,” Chanana said.
STOCKS SURRENDER AFTER STRONG NOVEMBER
After a strong end to November, where investors shrugged off worries of an AI bubble, traders were looking for catalysts to continue any upward momentum, with the focus this week on economic data. U.S. stock futures slid in Asian hours, with S&P 500 futures down 0.57% and Nasdaq futures 0.8% lower. Cryptocurrencies bitcoin and ether both slumped more than 5%, highlighting the cooling risk appetite. Hong Kong’s Hang Seng, though, rose more than 1%, pushing Asian stocks higher. MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.1%, having gained more than 23% this year and on course for its best annual gain since 2017. “There’s no single headline driving today’s risk-off tone,” said Saxo’s Chanana, who pointed to several pressure points, including rising JGB yields and sliding cryptocurrencies.
“At the same time, weak China PMIs have revived stimulus hopes, which is why Hong Kong stocks are bucking the regional decline.” Investor focus this week will be on U.S. economic releases that cover manufacturing and services activity as well as consumer sentiment. Matt Simpson, senior market analyst at StoneX in Brisbane, said if the incoming data signalled a slowdown without tipping into recession then sentiment would probably remain upbeat while the U.S. dollar weakens as it typically does at this time of year. The dollar index, which measures the U.S. currency against six other rivals, was at 99.414, little changed on the day. The index has dropped 8% this year with much of the losses coming in the first half of the year.
CONSUMER SPENDING IN FOCUS
Investors will watch out for comments from Federal Reserve Chair Jerome Powell later in the day as they look for clues on what the Fed will do when it meets next week.
Traders are pricing in an 87% chance of a cut after a slew of dovish comments from policymakers in the last few days. Attention will also be on holiday consumer spending as data from Black Friday and Cyber Monday retail sales events trickle in. U.S. shoppers spent a record $11.8 billion online on Black Friday, up 9.1% from 2024, according to Adobe Analytics, which tracks visits shoppers make to online retail websites. In commodities, oil prices rose after OPEC+ agreed to leave oil output levels unchanged for the first quarter of 2026 as the group slows its push to regain market share amid fears of a looming supply glut. Brent crude futures were 1% higher at $63.03 a barrel. U.S. West Texas Intermediate crude was at $59.16 a barrel, up 0.99%.
(Reporting by Ankur Banerjee in Singapore; Editing by Muralikumar Anantharaman and Kate Mayberry)
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