Market Performance Overview
The dollar index fell this week after high volatility, impacted by weak retail sales data and increasing market expectations of Federal Reserve rate cuts. The index dipped below the 100 level, heading for its worst weekly performance since July.
US Treasury yields generally declined, with the 10-year yield falling below 4%, indicating increased demand for safe-haven assets driven by interest rate outlook.
Spot gold prices generally rose, driven by rate cut expectations early in the week, rising nearly $100 intraday. Despite subsequent volatility, gold remained near two-week highs. Silver saw stronger gains, rising sharply mid-week, and climbing for several days amid improved risk appetite.
Non-US currencies saw gains against the US dollar due to dollar weakness, including the Euro, British Pound, Japanese Yen, and Australian Dollar. The Euro, Pound, and Aussie all rose against the US dollar for four consecutive trading days.
International crude oil prices fluctuated upwards. In the first half of the week, prices were negatively impacted by news of positive signs in Russian-Ukrainian peace talks, leading to expectations of stable Russian supplies. WTI crude dipped to a one-month low. Later, prices recovered from weekly lows due to increased uncertainty about the talks and anticipation of the OPEC+ meeting.
US stocks generally strengthened, led by the technology sector, driven by strengthened rate cut expectations. Competition in AI saw a shift, with Nvidia falling sharply intraday, while Alphabet, Google's parent company, hit new highs. Despite brief divergence mid-week due to weak economic data, market sentiment improved in subsequent trading sessions, with the S&P and Nasdaq rebounding respectively. US markets were closed Thursday for Thanksgiving.
CME Nine-Hour Outage Impacts Trillions of Dollars in Derivatives Contracts
On Friday, futures and options trading was temporarily suspended at the Chicago Mercantile Exchange (CME), the world's largest derivatives exchange, due to a data center cooling system failure. The shutdown impacted contracts such as US crude oil, gasoline, palm oil, US Treasury bonds, and S&P 500 index futures, and even affected the EBS foreign exchange trading platform, impacting contracts worth trillions of dollars.
The outage severely impacted trading in US Treasury futures, with spot bond trading sparse and traders lacking hedging means. Although traders were able to hedge through the swap market after London opened, it was a major blow to the overall market. Commodity traders were in a desperate situation, particularly those handling the benchmark delivery issue of US gasoline and diesel futures expiring that day.
The gold market also experienced a "moment of horror." The technical fault at CME froze trading in gold futures and options on Comex, causing its price to disconnect from the London spot market price, making trading significantly more difficult.
According to the latest updates, CME Globex futures and options markets began pre-trading at 21:00 Beijing time and officially opened at 21:30 Beijing time. The EBS market opened at 20:00 Beijing time.
EBS mainly handles trading in US dollar currency pairs such as EUR/USD and USD/JPY. The Globex electronic platform offers thousands of futures and options with different expiration dates and inter-product arbitrage contracts. Its product categories cover a wide range, including metals (gold, silver, etc.), energy (crude oil, etc.), interest rates, agricultural products, stock indices, foreign exchange, and equity futures and options. Currently, more than 90% of CME's futures contracts are traded electronically on the Globex platform.
Investment Bank Views
JPMorgan Chase economists have adjusted interest rate forecasts, now expecting the Federal Reserve to continue cutting interest rates in December rather than waiting until January of next year to take action. UBS analysts stated that next month's Fed meeting will be "awkward" and did not rule out delaying the meeting in order to obtain data.
JPMorgan Chase upgraded Chinese stocks to "overweight," believing that the current correction provides a very attractive entry point and expects gains next year.
Several Wall Street institutions have provided forecasts for the 2026 US stock S&P 500 index, with Deutsche Bank expecting a target price of 8000 points, HSBC expecting 7500 points, and Morgan Stanley expecting 7800 points. Institutions generally believe that the AI craze will continue to drive the stock market higher, but Wells Fargo warns that AI trading may form a bubble. JPMorgan Chase believes that if inflation improves, the Federal Reserve will cut interest rates more aggressively, and the index is expected to exceed 8000 points.
Wall Street's major banks expect that dollar weakness and AI investment will drive emerging markets to continue to rise in 2026. Morgan Stanley advises clients to maintain long positions in emerging market local currency bonds, expecting yields to reach around 8% by mid-2026.
Mizuho Securities believes that the "Hassett" effect may put pressure on the US dollar. Bank of America expects the price of gold to reach US$5,000 in 2026.
Weekly Key Events
1. Has a December Rate Cut Become a "Controversy of Consensus" as Dovish Fed Members Emerge One After Another?
Several Federal Reserve officials have recently publicly supported cutting interest rates, and market expectations of a 25 basis point rate cut in December have risen to around 87%. Weaker employment, lower consumer confidence, and a lack of rebound in inflation are the main drivers. At the same time, the market believes that if Hassett is appointed chairman, he will implement the aggressive interest rate cuts that Trump expects. Despite the strengthening of dovish forces, officials within the Federal Reserve are still concerned about inflation risks.
Governor Waller argues that a December rate cut is warranted due to the weak labor market. He pointed out that the December meeting minutes will include the October and November non-farm payroll reports and the November CPI, which may affect January decisions. He believes that the impact of tariffs on inflation is limited and one-off.
Governor Mian, a dove, called for multiple 50 basis point rate cuts, believing that the policy is too tight, causing rising unemployment and suppressing the economy. He believes that current inflation is "artificially high" and stems from imbalances in the housing market and policy lags, and advocates for more conservative balance sheet management.
The President of the San Francisco Federal Reserve, Daly, also supports a December rate cut, believing that the risk of worsening employment is higher than the risk of inflation rebounding and that the price pressure brought by tariffs is small.
The timing of the December Federal Open Market Committee (FOMC) meeting has become a focus
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