Market Shift: Asian Stocks Rally as Fed Rate Cut Becomes Increasingly Plausible

The Big Picture: What’s Driving Thursday’s Rally

Asian stocks are having a moment. Thursday’s session saw the MSCI Asia-Pacific Index (excluding Japan) climb 0.27%, with Japan’s Nikkei and South Korea’s Kospi surging over 1% each. The momentum is real, and it’s all centered on one thing: the growing likelihood that the Federal Reserve will cut rates in December.

Here’s the thing—just a week ago, traders were pricing in only a 30% chance of a December rate cut. Now? That probability has jumped to 85%, according to CME FedWatch. That’s a massive swing in sentiment, and it’s reshaping how investors are positioning themselves across Asian markets.

Why the Sudden Shift in Fed Expectations?

The U.S. labor market data this week changed everything. New jobless claims just hit a seven-month low, which might sound like good news for workers, but it’s made the rate-cut case more plausible to investors. Fed officials—including San Francisco Federal Reserve President Mary Daly and Governor Christopher Waller—have been signaling openness to easing monetary policy.

George Boubouras from K2 Asset Management nailed the reasoning: while core inflation is still above target, labor market vulnerabilities could be significant enough to justify a December rate cut. The U.S. 10-year breakeven inflation rate sits around 2.25%, suggesting markets are comfortable with inflation trajectories. It’s a delicate balance, but one that increasingly points toward rate cuts.

The Currency Puzzle: Yen in Spotlight

While stocks are climbing, the Japanese yen remains the trading-world’s favorite puzzle. The currency appreciated slightly to 156.16 per dollar as traders eye potential intervention from Japanese authorities. This comes after the yen has lost nearly ten units since October, as concerns grow about Japan’s borrowing needs amid ambitious government spending.

Meanwhile, the euro hit its highest point in over a week at 1.1604, and sterling climbed to $1.3247—a one-month peak—following the UK’s budget announcement. The dollar index, measuring the dollar against six peers, stayed relatively stable at 99.523.

China’s Property Headache: A Growing Concern

Beneath the surface of this stock rally lies a nagging worry. China Vanke, a leading state-backed developer, is seeking bondholder approval to postpone repayment on a 2 billion yuan ($282.6 million) onshore bond. This would be the firm’s first such extension, and it’s raising fresh concerns about the property sector’s debt situation.

Crypto Bounces Back: Bitcoin on the Move

Bitcoin has shaken off recent weakness, trading above $87.60K on Thursday—a 0.27% daily gain—and positioning itself to end a four-week losing streak. Gold prices held steady at $4,164.81 per ounce after gaining 0.8% in the prior session.

Bottom Line

This week’s trading—shortened by the Thanksgiving holiday—has revealed how quickly sentiment can shift. The Fed’s apparent openness to December easing, combined with labor market data, is reshaping expectations across Asia. Meanwhile, Japan’s yen situation and China’s property concerns remind us that not everything in the macro story is bullish. For traders, it’s a reminder to stay nimble as policy paths evolve.