Volkswacht Bodensee - Markets rise ahead of US data, expected Fed rate cut

Investors have in recent sessions struggled to match last week's healthy gains fuelled by comments from central bank officials indicating their preference for a further easing of monetary policy.

However, optimism has been helped by reports reinforcing the view that the jobs market is softening, including payrolls firm ADP saying more than 30,000 posts were lost in November.

And while figures Thursday on jobless claims and layoffs came in slightly better than expected, markets have priced the chances of a rate cut next Wednesday at around 90 percent.

Focus is now on the release later Friday of the personal consumption expenditures (PCE) index, the Fed's preferred gauge of inflation, with a below-forecast reading tipped to ramp up hopes for several more rate reductions in 2026.

Data on income and spending is also due to come out.

Still, debate continues to swirl over the bank's plans for the next 12 months as inflation remains stubbornly above target.

"While the US labour market is showing signs of slowing with the latest ADP report seeing a decline in hiring, there is a sense that it is still reasonably resilient," said Michael Hewson at MCH Market Insights.

With key jobs creation data not due until after the Fed's decision, "any further move to cut rates by another 25 basis points could well be a leap of faith on the part of some members of the committee", he wrote.

He warned that "markets are pricing in the likelihood of another cut, which means any delay could prompt a significant adverse reaction".

"Of course, there is another scenario where the Fed cuts rates, but then signals a pause as it looks to assess the effect that three successive rate cuts have had on the US economy."

Meanwhile, Michael Krautzberger, of AllianzGI, said in a commentary: "Despite uncertainty, in our view, recent (policy board) statements, macro data, and market pricing point toward a 25 basis point cut" next week.

"Looking further, we maintain our forecast of a total 50 basis points in additional insurance cuts to a Fed funds target range of 3.25-3.5 percent by mid-2026, assuming a non-recessionary base case."

In New York, the S&P 500 and Nasdaq ended slightly higher but the Dow was marginally off.

After a slow start in Asia, most markets enjoyed a positive run-in to the weekend.

Hong Kong and Shanghai reversed morning losses while there were also gains in Sydney, Seoul, Taipei, Manila and Jakarta.

Mumbai got a boost from an interest rate cut by the Indian central bank, as low inflation provided room to help cushion the economy against US President Donald Trump's tariff blitz. The rupee, which this week hit a record low against the dollar, rose.

London, Paris and Frankfurt opened on the front foot.

Tokyo shed more than one percent, having jumped more than two percent Thursday, while Singapore and Wellington also slipped.

On currency markets the Japanese yen extended gains against the dollar as traders grow increasingly confident the Bank of Japan will hike its own borrowing costs later this month.

In corporate news, Chinese artificial intelligence chip maker Moore Threads Technology soared more than 500 percent on its debut in Shanghai after raising $1.1 billion in an initial public offering.

The blockbuster opening -- which came after the IPO was more than 4,000 times oversubscribed -- suggested there was plenty of confidence in the country's homegrown AI chip industry.

"The noise is real, but so is the signal: this IPO has become a barometer for faith in China's next-gen AI‑chip ambitions," said Dilin Wu, research strategist at Pepperstone.

"Investors are buying into the story of China building a serious homegrown (graphics processing unit) amid global supply constraints," she said.

- Key figures at around 0815 GMT -

Tokyo - Nikkei 225: DOWN 1.1 percent at 50,491.87 (close)

Hong Kong - Hang Seng Index: UP 0.6 percent at 26,085.08 (close)

Shanghai - Composite: UP 0.7 percent at 3,902.81 (close)

London - FTSE 100: UP 0.2 percent at 9,727.97

Euro/dollar: UP at $1.1660 from $1.1648 on Thursday

Pound/dollar: UP at $1.3349 from $1.3335

Dollar/yen: DOWN at 154.79 yen from 155.03 yen

Euro/pound: UP at 87.34 pence from 87.00 pence

West Texas Intermediate: DOWN 0.2 percent at $59.58 per barrel

Brent North Sea Crude: FLAT at $63.27 per barrel

New York - Dow: DOWN 0.1 percent at 47,850.94 (close)

J.Sauter--VB