Repriced Fed-cut odds dent equities
Key Points
- Bank of America research has raised the odds of a December 25bp Fed cut, and traders have repriced short-term futures and swaps, adding volatility to Treasuries and rate-sensitive equities.
- China's private-sector PMI has eased to 49.9, signalling marginal contraction and increasing the likelihood of policy support that has affected EM and commodity-sensitive assets.
- BOJ Governor comments about considering a rate increase pushed two-year JGB yields to 1.02%, tightened carry trades and weighed on Japanese equities, pressuring the Nikkei.
- HCOB PMI showed euro-area manufacturing slipping into contraction, and European markets were softer as investors reacted to weaker activity and policy uncertainty.
Global Market Summary
US equities closed lower as the S&P 500 (SPX) fell 0.56%, the Nasdaq (^IXIC) slipped 0.45% and the Dow (DJIA) declined 0.85%, with traders re-pricing short-term rate expectations after a Bank of America research note and coverage highlighting Fed-policy uncertainty. European markets were softer: CAC 40 (FRA40) -0.32%, FTSE (UKX) -0.18% and DAX (DAX) -1.04% as HCOB PMI showed euro-area manufacturing slipping into contraction. Asia was mixed with Shanghai (000001.SS) up 0.65% and Hong Kong (HSI) up 0.67% while the Nikkei (NKY) dropped 1.89% amid BOJ commentary and a rise in JGB yields.
Top Movers
Energy led sector gains with XLE up 0.99% while utilities XLU lagged, down 2.25%. Leading stock movers included BHC (+11.49%), ASH (+11.15%), BLTE (+11.07%) and BBWI (+9.31%). Biggest decliners were BLLN (-13.63%), BMNR (-11.14%) and GRAL (-10.73%).
Macro highlights
China's private-sector manufacturing PMI eased to 49.9 in November, signalling marginal contraction and increasing the likelihood of policy support that could re-price EM and commodity-sensitive assets. The US ISM Manufacturing PMI fell to 48.2 in November, extending manufacturing contraction and adding to downside growth risks. BOJ Governor comments about considering a rate increase pushed two-year JGB yields to 1.02%, tightening carry trades and weighing on Japanese equities, while a Bank of America research note repriced odds of a December Fed cut.
News that moved markets
Bank of America Global Research published a note that raised the probability of a 25bp Fed cut in December and projected further cuts in mid-2026, prompting traders to reprice short-term rate futures and swaps. Reuters analysis flagging the risk of multiple Fed dissents heightened policy uncertainty and contributed to intra-day volatility in Treasuries and rate-sensitive equities. BOJ commentary and a jump in JGB yields tightened carry trades and pressured the Nikkei, while a UK–US agreement to keep tariffs on UK pharmaceutical shipments at zero for three years reduced trade-related downside risk for drug exporters. Multiple completed transactions were reported, including Ecobat's sale of its U.K. operations to funds advised by Splitstone Capital, Richardson International's acquisition of 8th Avenue Pasta, Gildan's completion of the HanesBrands acquisition, and Marex Group's completion of Winterflood alongside an agreement to sell Winterflood’s custody business. Announced deals included Targa Resources' planned $1.25 billion acquisition of a Permian Basin gathering and processing system and Somnigroup's proposed all-stock bid for Leggett & Platt.
What to Watch Tomorrow
- JP Consumer Confidence (Nov) — consensus 35.9 vs 35.8 prior, Dec 02, 05:00 AM | Indicates household sentiment and spending appetite in Japan.
- EA Inflation Rate YoY Flash (Nov) — consensus 2.1% vs 2.1% prior, Dec 02, 10:00 AM | Signals near-term inflation trend for the euro area.
Key Takeaways
- US equities closed lower as the S&P 500 (SPX) fell 0.56%, the Nasdaq slipped 0.45% and the Dow declined 0.85% after traders repriced short-term rate expectations.
- European indices closed softer after HCOB PMI showed euro-area manufacturing had slipped into contraction, and major bourses underperformed amid weaker activity.
- BOJ commentary pushed two-year JGB yields to 1.02%, carry trades tightened and the Nikkei fell sharply as investors adjusted positions.
- Energy led sector gains (XLE +0.99%) while utilities lagged (XLU -2.25%); multiple transactions were reported or completed across sectors.
References
- 1. https://www.reuters.com/business/bofa-expects-december-fed-cut-two-more-2026-2025-12-01/
- 2. https://www.reuters.com/business/flurry-fed-dissents-coming-meetings-could-pose-market-political-risks-2025-12-01/
- 3. https://x.com/Bank_of_Japan_e/status/1995463021783662617
- 4. https://x.com/RapidResponse47/status/1995516253759565925
- 5. https://x.com/Barchart/status/1995299880231751721
- 6. https://x.com/WhiteHouse/status/1995587455635128534
- 7. https://x.com/BIS_org/status/1995448563925475545
- 8. https://www.reuters.com/world/europe/euro-zone-factory-activity-contracts-november-job-cuts-accelerate-pmi-shows-2025-12-01/
- 9. https://www.reuters.com/world/asia-pacific/chinas-november-factory-activity-swings-back-decline-private-pmi-shows-2025-12-01/
- 10. https://obr.uk/investigation-into-november-2025-efo-publication-error/
- 11. https://x.com/RapidResponse47/status/1995504787689992567
- 12. https://x.com/RapidResponse47/status/1995494522588176887
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