Markets cautious amid Fed speculation and geopolitical tensions

US equities snapped a five-day winning streak at the start of December as investors exercised caution ahead of key data releases, including the delayed September Personal Consumption Expenditures (PCE) inflation report and the impending Federal Reserve interest rate decision. The dollar index fell below 99.2, extending November’s 0.30% decline amid expectations of a 25 bps rate cut.

European stocks also started the month cautiously after a volatile November, with the STOXX 50 down 0.30% and the STOXX 600 slipping 0.40%, led by weakness in industrials. Investors awaited fresh catalysts, including US economic data, while geopolitical risks lingered amid efforts toward a potential Ukraine peace deal, as US Special Envoy Steve Witkoff visited Moscow following Kyiv’s approval of a revised US-backed proposal.

In Asia, the Shanghai Composite rose 0.65% and the Shenzhen Component added 1.25%, both reaching one-week highs as optimism over a possible Fed rate cut outweighed domestic economic concerns. A private survey showed China’s factory activity returning to contraction in November, following official data highlighting subdued manufacturing and a cooling services sector, with attention now turning to the Central Economic Work Conference for signals on the 2026 policy agenda.

Locally, the FTSE/JSE All Share Index climbed 0.89%, driven by resource and industrial stocks as foreign inflows responded to global monetary policy optimism. The rand softened slightly to around R17.15 against the US dollar, down 0.20%, reflecting cautious investor sentiment ahead of domestic data releases and ongoing global developments.

In commodities, oil prices eased on concerns about oversupply and slowing demand, while gold advanced as investors sought safe-haven assets amid economic uncertainty. The contrasting movements underscore cautious sentiment across markets, with risk appetite balanced against inflationary pressures and growth concerns.