U.S. stocks look set to build on Friday's jump with all investor hopes resting on a Fed rate cut materialising in December, but the question is how much further they can bounce?
Futures tied to the S&P 500 were up 0.3% in London trade and those on the tech-heavy Nasdaq index were up 0.5%, set to add to roughly 1% jumps on Friday, when investors cheered comments by influential Fed policymaker John Williams that the bank can cut interest rates "in the near term".
Traders now see a roughly 60% chance that the Fed will cut rates in December, up from around 40% on Thursday.
Yet those futures, which had been up around 1% earlier, have already cut their gains well before the U.S. open. Both indexes are still set for their biggest monthly drops since March, with the Nasdaq still down over 6%.
Besides the concerns around AI valuations that drove that selloff in the first place, optimism around a Fed cut doesn't change that October and November's payroll data -- key to rates expectations -- will only be released after the bank's December meeting.
And policymakers are split on the path ahead. Boston Federal Reserve President Susan Collins said on Saturday she's still leaning against a December rate cut.
U.S. markets will also have to digest retail sales, producer price and jobless claims data this week.
They looked subdued otherwise, with the dollar down 0.2% against a basket of currencies, while Treasury yields were largely steady after sizeable drops last week.
In a sign that risk sentiment remains fragile, Bitcoin dropping 2% to around $86,000, though it has bounced off Friday's low that had left it near the key $80,000 level below which losses may accelerate.
Markets remain on alert for intervention in the Yen by Japanese authorities, who tend to move in quiet periods with lower liquidity. The yen edged lower against the dollar on Monday, nearing last week's 10-month lows.
Thanksgiving could be an opportunity, but analysts are already questioning how effective a move might be.
In Europe, Ukraine peace talks remain front and centre after the U.S. and Ukraine agreed to modify an earlier proposal seen as too favourable to Moscow.
European defense stocks, while sitting on huge gains this year, continued to slide on Monday, dropping to their lowest since August.
Geopolitics aside, the big focus is on Britain's much anticipated Wednesday budget, when finance minister Rachel Reeves will have to convince investors that she can deliver credible belt-tightening plans after U-turning on plans to raise income tax levels.
But there is some good fiscal news too. Italy saw its credit rating upgrade from Moody's in 23 years on Friday.
