Anndy Lian
The Fed pivots, but markets hold their breath
At first glance, the sharp drop in US jobless claims to 191,000, the lowest level in over three years, should have sparked optimism. Fewer Americans filing for unemployment typically signals labour market resilience, which in turn supports consumer spending and broader economic activity. Despite this positive development, market participants remained unmoved, with equities trading in narrow ranges and volatility suppressed.
This disconnect underscores a deeper uncertainty about the path ahead, particularly as monetary policy remains in flux. National Economic Council Director Kevin Hassett’s public call for a 25 basis point interest rate cut at the upcoming December FOMC meeting adds another layer to the narrative, suggesting growing political and economic pressure on the Federal Reserve to pivot toward easing. While such a move may be anticipated by some, markets appear to be holding their breath, waiting not just for confirmation of a cut, but for evidence that it will mark the start of a durable easing cycle rather than a one-off adjustment.
Equity markets reflected this indecision. The S&P 500 inched up by 0.1 per cent, the Nasdaq gained 0.2 per cent, and the Dow Jones Industrial Average slipped by 0.1 per cent, painting a picture of consolidation rather than conviction. This sideways movement aligns with the broader implication that investors should maintain exposure to high-quality US equities while selectively exploring non-US value and mid-cap opportunities for alpha generation.
The emphasis on quality suggests that in an environment of ambiguous macro signals, investors are prioritising balance sheet strength, earnings visibility, and resilient business models. Meanwhile, the fixed-income market responded with modest yield increases. Ten-year US Treasury yields rose 3.5 basis points to 4.098 per cent, and two-year yields climbed 3.9 basis points to 3.523 per cent.
This upward move may seem counterintuitive ahead of an expected rate cut, but it likely reflects positioning shifts and the market pricing in both near-term easing and longer-term inflation or growth concerns. With spreads widening, however, bonds are regaining appeal as a defensive asset class, particularly for those looking to front-run the Fed’s pivot and lock in relatively attractive yields before they decline further.
In foreign exchange markets, the US dollar rebounded, but an important shift emerged in yen dynamics. The Japanese yen advanced 0.1 per cent to 155.10 against the dollar following reports that key members of Prime Minister Takaichi’s government would not oppose a potential Bank of Japan rate hike in December.
This development marks a subtle but significant shift in Japan’s policy stance, long anchored to ultra-loose monetary conditions. If the BoJ does act, even modestly, it would further narrow the yield differential between Japanese and US assets, likely fuelling additional yen strength. For global investors, this suggests a reorientation of capital flows and potential repricing of carry trades that have underpinned certain risk strategies for years.
In commodities, Brent crude rose 0.9 per cent to settle at US$63.26 per barrel, while gold held steady at US$2,407 per ounce, consolidating for a fourth consecutive day. Gold’s stability amid choppy risk sentiment reaffirms its role as a defensive hedge, especially as geopolitical uncertainties linger. Oil, meanwhile, remains hypersensitive to supply-chain disruptions and Middle East tensions, though demand concerns continue to cap its upside.
Turning to Asia, regional equities traded mixed, with Chinese markets showing signs of recovery. The rebound in China, supported by both policy expectations and valuation support, has prompted a strategic barbell approach, favouring both high-growth tech names and high-dividend, stable earners.
This duality captures the dual forces shaping China’s market: optimism over long-term innovation potential and pragmatism around near-term economic uncertainty. With US futures pointing higher, the global equity backdrop appears supportive, but the lack of strong directional momentum suggests that traders remain cautious until clearer signals emerge from next week’s labour market data.
The cryptocurrency market, however, diverged from this cautious stability, declining 1.36 per cent over the past 24 hours. This pullback encapsulates three distinct but interrelated dynamics. First, a significant leverage unwind occurred in Bitcoin markets, with US$86.78 million in liquidations, 58.98 million of which came from long positions. This surge in long squeezes, up 20 per cent from previous levels, coincided with a 4.4 per cent drop in perpetual futures open interest and elevated funding rates of plus 0.0027 per cent.
The spot-to-perpetual ratio of 0.21 further signalled an over-leveraged long bias, leaving the market vulnerable to even minor price corrections. As small dips triggered margin calls, cascading sell-offs amplified downside pressure. The Fear and Greed Index’s decline to 25, down from 27 just a day earlier, confirms a waning appetite for speculative risk.
Second, Ethereum’s much-anticipated Fusaka upgrade, launched on December 3, failed to sustain bullish momentum. Despite the technical improvement aimed at reducing transaction costs, ETH dipped 1.5 per cent as traders appeared to treat the event as a classic buy-the-rumour, sell-the-news scenario.
The upgrade itself represents a meaningful step forward for Ethereum’s scalability and user experience, but short-term market dynamics often prioritise positioning over fundamentals. With ETH’s 14-day relative strength index at 65.75, the asset remains in neutral territory, not yet oversold, but lacking immediate upside catalysts. This opens the door for further consolidation as the market digests the upgrade’s real-world impact.
Third, Binance’s announcement of a dual-CEO structure, appointing Yi He alongside Richard Teng, introduced a layer of governance uncertainty. While the move ostensibly balances innovation with compliance, markets interpreted it as a sign of internal recalibration, possibly influenced by lingering regulatory scrutiny and the indirect role of founder Changpeng Zhao.
The resulting 3.75 per cent weekly decline in BNB reflected broader concerns about platform stability and regulatory risk, which spilt over into the wider crypto ecosystem. In an environment already marked by caution, such leadership shifts can amplify bearish sentiment, particularly when they raise questions about strategic direction.
Taken together, these three forces, leverage flush, post-upgrade selloff, and governance concerns, explain the crypto market’s retreat. The rise in Bitcoin dominance to 58.7 per cent further underscores a flight to perceived safety within the digital asset space, as altcoins underperformed amid risk-off flows.
Looking ahead, all eyes turn to tomorrow’s US jobs data. A strong report could rekindle the positive correlation between Bitcoin and the Nasdaq, currently at plus 0.53, by reaffirming the narrative that crypto behaves as a risk asset in a growth-friendly macro regime. Conversely, any sign of labour market weakness might accelerate the Fed’s pivot, potentially reviving demand for yield-sensitive assets, including crypto.
For now, Bitcoin’s US$3.04 trillion Fibonacci support level stands as a critical test of market resilience. In a world where macro signals are improving, but sentiment remains subdued, the path forward will hinge on whether fundamentals can finally overpower fear.
Source: https://e27.co/the-fed-pivots-but-markets-hold-their-breath-20251205/
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