The Japan Times - Equity markets mixed as traders eye US data ahead of Fed decision

After November's end-of-month rebound across world markets, confidence remains high amid speculation the US central bank could continue easing monetary policy into the new year.

That has helped overcome lingering worries about an AI-fuelled tech bubble that some observers warn could pop and lead to a painful correction.

While the odds on a third successive rate reduction on December 10 are hovering around 90 percent, traders will keep a close eye on this week's batch of indicators to gauge the Fed's desire to keep on cutting.

Among the reports due for release are private jobs creation, services activity and personal consumption expenditure -- the Fed's preferred gauge of inflation.

Bets on a cut surged in late November after several of the bank's policymakers said they backed lower borrowing costs as they were more concerned about the flagging labour market than stubbornly high inflation.

That helped markets recover the losses sustained in the first half of the month, and analysts said they could be in store for an end-of-year rally.

"As the clouds of worry that cast an ominous shadow over markets through to mid-November gently dissipate, they give way to new emotions -- notably the fear of not participating and the risk of underperforming benchmark targets," said Pepperstone's Chris Weston.

However, he warned that "risk managers remain highly astute to the landmines that could still derail the improving risk backdrop through December".

He cited the possibility the Fed does not cut, or offers a "hawkish cut", the Supreme Court's possible decision on the legality of President Donald Trump's trade tariffs, and jobs and inflation data.

Meanwhile, reports that Trump's top economic adviser Kevin Hassett -- a proponent of rate cuts -- is the frontrunner to take the helm at the Fed next year added to the upbeat mood.

After last week's healthy gains and Wall Street's strong Thanksgiving rally, Asian equities were mixed.

Hong Kong, Shanghai, Singapore and Bangkok rose, but Sydney, Seoul, Wellington, Manila, Mumbai and Taipei dipped.

London, Frankfurt and Paris fell at the open.

Tokyo sank 1.9 percent as the yen strengthened on expectations the Bank of Japan will lift interest rates this month.

Governor Kazuo Ueda said it would "consider the pros and cons of raising the policy interest rate and make decisions as appropriate", with Bloomberg saying traders saw a more than 60 percent chance of a move on December 19. That rose to 90 percent for a hike no later than January.

Masamichi Adachi, UBS Securities chief economist for Japan, wrote: "The BoJ is likely to hike its policy rate at the December 19 meeting. Recent remarks and reports... suggest groundwork for a rate hike is underway, with market probability exceeding 50 percent."

But he said the yen would likely remain under pressure against the dollar, adding that Prime Minister Sanae Takaichi's "preference for negative real rates may pressure (the) yen further".

Oil prices surged around two percent after OPEC+ confirmed it would not hike output in the first three months of 2026, citing lower seasonal demand.

The decision comes amid uncertainty over the outlook for crude as traders look for indications of progress in Ukraine peace talks, which could lead to the return of Russian crude to markets.

- Key figures at around 0815 GMT -

Tokyo - Nikkei 225: DOWN 1.9 percent at 49,303.28 (close)

Hong Kong - Hang Seng Index: UP 0.7 percent at 26,033.26 (close)

Shanghai - Composite: UP 0.7 percent at 3,914.01 (close)

London - FTSE 100: DOWN 0.2 percent at 9,701.41

Euro/dollar: UP at $1.1609 from $1.1604 on Friday

Pound/dollar: DOWN at $1.3222 from $1.3245

Dollar/yen: DOWN at 155.36 yen from 156.10 yen

Euro/pound: UP at 87.81 pence from 87.60 pence

West Texas Intermediate: UP 2.1 percent at $59.75 per barrel

Brent North Sea Crude: UP 1.9 percent at $63.58 per barrel

New York - Dow: UP 0.6 percent at 47,716.42 (close)

M.Sugiyama--JT