Financial markets exhibited cautious optimism on Thursday as investor confidence in an impending Federal Reserve rate cut fueled upward momentum across European equities and digital assets. The STOXX 600 index advanced 0.2%, propelled by robust performances in defense and technology sectors that effectively counterbalanced declines in healthcare stocks.
Market activity remained relatively subdued due to the U.S. Thanksgiving holiday closure, creating an atypical trading environment across major asset classes. The prevailing market sentiment continues to be dominated by expectations of monetary policy easing, with traders now pricing in an 85% probability of a December rate cut according to CME FedWatch data—a significant increase from just 30% the previous week.
Currency markets displayed remarkable stability, with the dollar maintaining its position against a basket of major currencies. Sterling retreated from recent four-week highs following British Finance Minister Rachel Reeves’ budget announcement, which alleviated concerns about the nation’s long-term fiscal health. The euro held steady at $1.1593 while the pound remained unchanged at $1.324.
The Japanese yen emerged as a particular focus for currency traders, strengthening to 156.375 per dollar from nearly 158 a week earlier. Market participants are closely monitoring potential intervention from Tokyo authorities after weeks of verbal warnings aimed at curbing the currency’s persistent decline. Prime Minister Sanae Takaichi explicitly dismissed comparisons to Britain’s ‘Truss moment’, asserting confidence in her administration’s spending plans.
Cryptocurrency markets joined the positive trend, with Bitcoin gaining 0.7% to reach $90,800—positioning the digital asset to break a four-week losing streak with an approximately 3% weekly gain. Gold experienced minimal pressure, easing 0.1% to $4,159 per ounce.
Market analysts attribute the sustained bullish sentiment to diminishing concerns about AI investment valuations and an overall positive earnings season. Chris Beauchamp, IG chief markets strategist, noted that while AI spending concerns remain the ‘market’s kryptonite’, the primary economic engines continue to perform satisfactorily, pushing valuation worries to the background for the immediate future.