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• BoJ hike talk lifts JPY and yields, driving risk assets lower
• Oil on the rise on OPEC and Venezuela considerations 
• Week ahead focuses on ADP and core PCE data

A largely downbeat start to the week, with risk assets under pressure despite stepping into December off the back of the best weekly gain for global equity markets for over a month. Crucially, crypto has provided one area of particular concern, with the continued flush lower bringing financial stress for many that will also have positions across a raft of traditional assets. The main piece of news for markets has come from overnight comments out of the BoJ, with Governor Ueda noting that the group will weigh up the pros and cons of a rate hike in December. While this provided a rare rise for the yen, it also saw yields spike with the 2-year hitting the highest level since 2008. With a huge amount of Japanese funds invested abroad off the back of cheap local borrowing, the continued rise in Japanese bonds does raise risk of liquidity returning home to the detriment of international financial asset prices. With the Nikkei having gained 42% over the six-month from May-October, the prospect of a stronger yen has seen Japanese stocks reverse lower. Meanwhile, with yields rising for a nation that presides over a debt-to-GDP above 250%, it comes as no surprise to see precious metals on the rise once again today.

OPEC+ have announced a decision to pause their production increases over the first three-months of 2026, noting that seasonal factors make it sensible to provide a more stable environment. However, coming off the back of a period where many members had already struggled to produce their full quota, it appears to be the case that Saudi Arabia are the one nation capable of ramping up production. Meanwhile, Trump’s comments that indicated a control of Venezuelan airspace appeared to signal the end for Maduro, raising concerns over a possible fresh geopolitical conflict involving a major oil and gas producer. Nonetheless, with Venezuela sitting on the largest proven oil reserve in the world, prices could yet head lower if we see a leadership that opens up the oil & gas sector to US businesses in exchange for lower sanctions.

A busy week ahead sees things kick off with the ISM manufacturing PMI today, with traders keeping a close eye on inflation signals within the ‘prices paid’ element of the report. With the CME currently pricing a December rate cut at 88%, there is a growing feeling that we will see the FOMC act sooner rather than later. However, more importantly, there will undoubtedly be increased focus on exactly where rates end up, with many likely to challenge the current perception that the Fed Funds rate resolves at 275-300. Trump has officially chosen his candidate for the Fed chair role, with Kevin Hassett the clear favourite. Given the fact that Stephen Miran has spent every meeting voting for a 50bp cut, whoever Trump picks will more than likely push for rates to be significantly lower than 3%.

This week sees the September core PCE inflation data released on Friday, helping to make up for the jobs report that would ordinarily come out on the first Friday of the month. Instead, it is the ADP payrolls release of Wednesday which does to job of informing the Fed over the direction of travel for the jobs market in November. With the now resolved government shutdown continuing to jumble up the official economic data, we are left with the scraps of months gone by. In many ways, the delayed nature of the data we are finally receiving makes it more likely that the Fed maintains their current position rather than reacting to any one specific release unless it provides a particularly significant divergence from expectations.

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