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Asian shares finish November with a strong performance, helped by Fed cuts

Asian shares will end a difficult November on a more stable footing as renewed hopes of a U.S. interest rate cut have helped calm valuation fears and Treasuries are rallying for the fourth consecutive month.

The U.S. market, which was closed for Thanksgiving overnight, is due to have a shorter session on Friday. This means that activity will be more muted across all major asset classes than usual. The majority of European stocks were higher while currencies were more calm.

In Asia, European stock futures rose by 0.1% while FTSE Futures rose by 0.2%. Wall Street futures, however, were affected by the data outage that occurred at CME Group, which affected trading in currencies, futures, and Treasuries.

The MSCI broadest Asia-Pacific share index outside Japan fell 0.3% on Friday but still rose 2.7% over the course of the week. This was the first increase in four weeks. It was down 3% for the month.

Nikkei, the Japanese stock market index, was not moved much and was heading for a rise of 3,2% per week. It was down 4.3% for the month.

South Korean shares fell by 1.5% following the central bank's announcement that it would end the current easing cycle. The index has still gained 1.9% this week.

The global equity markets were unusually volatile in November, as fears about the sky-high valuations of tech stocks shook markets. Meanwhile, a U.S. shutdown ended after 43 days. Bitcoin, the risk-barometer, fell 16% in November.

Federal Reserve officials are cautious due to the lack of data from the shutdown, but Fed Governor Christopher Waller, and New York Fed president John Williams, have expressed support for a cut in rates next month. This has helped stabilize the sentiment.

CME FedWatch shows that Fed funds futures indicate an 85% probability of a rate reduction next month. This is a dramatic change from the 30% chance a week ago.

Vincenzo Vedda is the chief investment officer of DWS. He said: "I think we are not quite there yet, if you compare valuations to past bubbles, for instance."

"We think that the inflation is generally under control... In general, we expect a decent growth in the coming 12 months... You have a benign climate for risky assets.

The Hang Seng Index in Hong Kong fell 0.2%, while the blue chips index in China rose 0.2%.

BOJ HIKE IS IN VIEW

The data showed that Tokyo's core consumer prices rose by 2.8% from November of last year, which was above the forecasted 2.7% increase. This is just one of a number of data points that has kept the bets on a Bank of Japan rate hike alive.

Markets are now pricing in a rate hike as early as next month. As the yen fell and political pressures faded, more BOJ board members have signalled a rate hike.

The yen was unchanged at 156.37 to the dollar after rebounding from a 10-month-low of 157.9, which was hit last week. Investors await the Japanese authorities' intervention after weeks of verbal browbeating to stop the currency's steady decline.

The dollar's performance on the currency market was stable against its major counterparts, but it was expected to suffer a loss of 0.7% per week, the largest since July.

Markets bet on the end of policy easing cycles for both countries. The Aussie is up by 1.1% this week and the Kiwi 1.8%. The minutes of the European Central Bank meeting show that policymakers were also not in a hurry to lower rates.

The prospect of Fed policy easing in December boosted the rise in Treasuries. The CME outage affected Treasury futures, but the prices of these contracts were still set to rise for a 4th straight month.

The U.S. continued to push for a peace plan in the Ukraine conflict, despite the fact that oil prices were up on Friday.

The spot gold price rose 0.6%, to $4,182 an ounce. This brings the monthly gain up to 4.5%. However, they are still a long way from the record high $4,381.

(source: Reuters)