Asian and global markets weakened on Monday after a strong finish to November. A wave of risk aversion swept across investors, even though optimism over potential U.S. rate cuts remained in place. At the same time, the Japanese yen strengthened sharply, and government bond yields in Japan climbed to their highest levels since 2008.
The focus in currency trading was firmly on the yen. It rose to 155.55 per U.S. dollar after Bank of Japan Governor Kazuo Ueda signaled that an interest rate hike may be considered soon. In a speech to business leaders, Ueda said the central bank would weigh the “pros and cons” of raising rates at its next meeting in two weeks.
Global equities, which had rebounded strongly in November as investors looked past concerns about an AI-driven bubble, struggled to find fresh catalysts. Traders shifted attention to upcoming economic data due this week.
U.S. stock futures were weaker, with S&P 500 futures down 0.7% and Nasdaq futures falling 0.8%. European futures slipped 0.3%. Crypto markets also dropped sharply, with bitcoin and ether both down more than 5%, reflecting reduced risk appetite.
Hong Kong’s Hang Seng rose 0.7%, but overall market sentiment in Asia was cautious. Saxo’s chief investment strategist Charu Chanana said there was no single driver behind the risk-off tone. Instead, several pressures were at play, including rising Japanese bond yields and falling cryptocurrencies. She added that weak China PMIs revived hopes for additional stimulus, helping Hong Kong stocks resist the broader decline.
Ueda’s comments lift yen, pressure stocks
Ueda’s remarks pushed the yen higher, knocked the Nikkei about 2% lower, and sent Japanese government bond yields to 17-year highs. The two-year JGB yield rose 3 basis points to 1.02%, while the 10-year yield climbed 7 basis points to 1.87%. Both reached their highest marks since June 2008.
Markets have been watching the yen closely in recent weeks. Investors remain uncertain about the timing of the next BOJ rate hike and are wary of fiscal policy decisions under Prime Minister Sanae Takaichi. Repeated verbal warnings from Tokyo officials have also raised the possibility of foreign exchange intervention.
Fred Neumann, chief Asia economist at HSBC, said Ueda’s comments indicate growing concern inside the BOJ about the impact of a weaker yen on consumer spending. He added that a December rate hike looks more likely now, but investors will focus on follow-up policy guidance. A stronger, more hawkish tone could help stabilize expectations for both the yen and bond markets.
U.S. data and consumer spending in focus
This week, investor attention will shift to U.S. economic releases covering manufacturing, services, and consumer sentiment. Matt Simpson, senior market analyst at StoneX, said markets may remain upbeat if the data points to a gentle slowdown without sliding into recession. He also noted that the U.S. dollar typically weakens at this time of year.
The dollar index stood at 99.414, little changed on the day, and has fallen 8% so far this year, with most of the decline occurring in the first half.
Investors are also awaiting remarks from Federal Reserve Chair Jerome Powell. Traders now assign an 87% chance of a rate cut next week after a series of dovish comments from Fed officials. Holiday shopping data will also be closely watched. Black Friday online spending hit a record $11.8 billion, up 9.1% from 2024, according to Adobe Analytics.
In commodities, oil prices edged higher. OPEC+ agreed to keep output levels unchanged for the first quarter of 2026 as the group slows its effort to regain market share amid concerns about oversupply. Brent crude gained 1% to $63.03 a barrel, while U.S. West Texas Intermediate rose 0.99% to $59.16.
