Global Stocks Nudge Higher as Traders Bet Big on Fed Rate Cut — All Eyes on the Yen

The original story by Amanda Cooper for Reuters.

Stocks crept higher on Thursday, as investors kept leaning into the idea that the US Federal Reserve will cut interest rates in December — even with US markets shut for Thanksgiving and trading volumes thinner than usual.

The mood across markets was generally calm and upbeat, a sharp contrast from earlier in November when worries about an AI spending bubble rattled tech stocks.

With Wall Street closed for the holiday and only a half-day session coming on Friday, global trading was relatively muted — but still positive:

• Europe’s STOXX 600 edged up about 0.1%, helped by defense and tech names.
• Asian markets were mostly firmer overnight, helped by easing fears that AI-related spending has gone completely off the rails.

Analysts say as long as investors are convinced a Fed rate cut is coming and earnings remain solid, the path of least resistance for stocks is still up.

Valuation worries? They’re still there — just pushed to the back burner for now. The one thing that could quickly spoil the party, strategists warn, is another wave of concern over runaway AI investment. For now, those fears have cooled.

After a 43-day US government shutdown jammed up economic reporting, fresh data is slowly trickling back — but much of it is stale. That’s left markets leaning heavily on Fed speeches instead of hard numbers.

Comments in the past week from officials like Mary Daly and Christopher Waller have turbocharged expectations for a December cut:

• Traders now see about an 85% chance of a quarter-point cut next month, up from roughly 30% just a week ago.

Despite inflation still running above the Fed’s 2% target, investors point to signs of a softer job market and note that market-based inflation expectations — like the 10-year breakeven around 2.25% — suggest no one’s panicking about prices spiraling higher.

The US dollar was slightly softer against most major currencies, as rate-cut hopes took the edge off. It did notch a small rise on the day against a basket of currencies, mainly thanks to a weaker euro and pound:

• Sterling dipped about 0.1% to around $1.323, slipping from near four-week highs after UK finance minister Rachel Reeves’ budget eased some worries over the country’s long-term fiscal picture.

The real focus in FX, though, was on the Japanese yen.

• The yen has firmed to around 156.4 per dollar, after flirting with 158 just a week ago.
• Traders are on intervention watch, given weeks of tough talk from Japanese officials about stopping the currency’s slide.

Tokyo has already ramped up verbal warnings, and sources say the Bank of Japan is preparing markets for a possible rate hike as soon as next month — a major shift after years of ultra-easy policy. A more consistent tightening path could help support the yen and change its recent weak trajectory.

Prime Minister Sanae Takaichi also tried to calm nerves, dismissing the idea that Japan could face a “Truss moment” — a UK-style market revolt over government spending plans.

Outside stocks and FX, moves were modest:

• Bitcoin added about 1.1% to roughly $91,143, putting it on track to snap a four-week losing streak with a gain of nearly 3% this week.
• Gold eased about 0.17% to $4,156 an ounce, after a 0.8% climb in the prior session.

With US markets shut and big catalysts bunched up in December — from the next Fed decision to key jobs and inflation data — Thursday’s trade was more about positioning than bold bets.

For now, the story is simple: markets are leaning hard into the “Fed cut soon” narrative, AI panic has cooled, and the yen is the one asset everyone’s watching for the next big move.