Federal Reserve's dovish stance triggers market volatility; Bitcoin and Ethereum face downward adjustments

Dovish Signals Drive Asset Revaluation

On Monday, the Federal Reserve Bank of New York President Williams issued dovish signals, stating that the Fed’s monetary policy is well prepared for next year. The inflation impact caused by tariffs is considered one-time, expected to recede next year. Meanwhile, Williams pointed out that downside risks to the labor market have increased in recent months, hinting that the Fed may further cut interest rates. This statement triggered a reassessment of monetary policy prospects, leading to declines in US stocks, commodities, and cryptocurrencies.

Boston Fed President Collins also expressed an unexpected dovish stance. Although she has been cautious about inflation levels, after considering risk balance, she ultimately supported the Fed’s 25 basis point rate cut decision last week. The synchronized shift of these two top Fed officials signals that monetary policy may accelerate easing next year.

US Stocks Under Pressure, Cryptocurrencies Break Support

Influenced by dovish expectations for the Fed, the three major US stock indices all declined on Monday. The Dow fell 0.09%, the S&P 500 dropped 0.16%, and the Nasdaq declined 0.59%. Technology stocks performed the weakest, with Goldman Sachs warning that if the tech industry cannot drive explosive AI application demand and successfully monetize it, the large investments in data centers by tech giants could prove to be a loss, raising doubts about the AI hype.

Popular tech stocks showed mixed performance. Broadcom and NVIDIA, after releasing earnings last week, were sold off, falling 5.6% and 2.6% respectively, with software stocks overall declining. In contrast, Apple and Amazon rose over 1%, and Tesla surged over 3.6% on news of Robotaxi testing, reaching near all-time highs.

Cryptocurrencies faced even greater downward pressure. Bitcoin fell 2.16% within 24 hours to $86,309, further weakening from the previous level of $86,000; Ethereum declined 3.33% in 24 hours to $2,961, breaking below the key $3,000 support level. Shares of crypto ecosystem companies also declined across the board, with many digital asset-related firms dropping between 6% and 14%.

Commodities Under Pressure, US Dollar Nears Key Support

Gold prices rose for two consecutive days but pulled back on Monday, up only 0.13% to $4,304 per ounce. WTI crude oil fell more sharply, down 1.48% to $56.68 per barrel, declining for three consecutive days. The decline in oil prices is mainly due to uncertain global economic growth prospects and expectations of a weaker US dollar amid the Fed’s easing outlook.

The US Dollar Index fell 0.14% to 98.25, approaching the critical support level of 98.0. The euro rose 0.12% against the dollar, while the dollar weakened 0.41% against the yen, as the yen strengthened on expectations of Fed rate cuts.

Hong Kong Stock Index Futures Retreat, European Stocks Rise Against the Trend

Hong Kong stock index futures faced pressure. The Hang Seng Index night session futures closed at 25,574 points, down 55 points from the previous close of 25,628; the China Enterprises Index futures fell 25 points. The China Gold Dragon Index dropped 2.17%, reflecting a correction in mainland Chinese stocks.

In contrast, European stocks rose against the trend. The UK FTSE 100 increased by 1.06%, France’s CAC 40 gained 0.7%, and Germany’s DAX 30 rose 0.18%, indicating a relatively positive reaction among European investors to the easing expectations.

US Non-Farm Payrolls to Be Focus, Market Awaits Tuesday Data

The US will release the November employment report on Tuesday, with market estimates of non-farm payrolls increasing by 50,000 and the unemployment rate at 4.5%. Morgan Stanley strategist Wilson noted that if employment data shows weakness, it will further increase the likelihood of the Fed cutting rates again, which is favorable for the short-term outlook of US stocks.

Williams also expects the non-farm payroll report to show relatively slow hiring, but emphasized that the Fed must achieve its 2% inflation target without impacting the labor market. This indicates that future policy decisions will face a delicate balance.

Strategic Institutions Lower Growth Expectations, Favor Specific Sectors

Despite short-term market adjustments, long-term expectations remain mixed. Citigroup set its 2026 end-of-year S&P 500 target at 7,700 points, up 12.7% from the previous close of 6,827.41, citing strong corporate earnings and ongoing benefits from AI investments. Citi believes AI infrastructure will be a key theme in 2026, but market focus will shift from companies providing technology to those adopting it, following a winner-takes-all pattern.

Goldman Sachs raised its 2026 copper price forecast from $10,650 per ton to $11,400, mainly due to reduced tariff risks and lower likelihood of US tariffs on refined copper.

Geopolitical Developments Reduce Market Uncertainty

Progress in Ukraine peace negotiations has been made, with a US official stating that about 90% of the issues have been resolved, though some remain. The US is expected to provide Ukraine with security guarantees similar to NATO’s Article 5, offering strong deterrence for Kyiv. Zelensky said talks with US envoy are very constructive, and Ukraine insists on a ceasefire without territorial concessions to Russia.

This progress is expected to reduce geopolitical uncertainty and support global risk assets.

Central Bank Policy Adjustments Quietly Underway

The Bank of Japan is reportedly planning to start reducing ETF holdings as early as next month. The central bank plans to sell ETFs at face value of 330 billion yen annually, following the September policy meeting decision, a process expected to take decades to complete. As of the end of September, the BOJ’s holdings were valued at 83 trillion yen, with a book value of 37.1 trillion yen. The BOJ aims for this sale to have minimal market impact, similar to previous reductions in bank stocks, maintaining a steady monthly pace. However, in events like the 2008 global financial crisis, the BOJ may halt sales.

Tech Industry M&A Trends Signal Industry Direction

OpenAI confirmed hiring Google executive Albert Lee as Head of Corporate Development. Lee previously led corporate development at Google Cloud and Google DeepMind, and participated in major acquisitions, including the $32 billion purchase of cybersecurity firm Wiz in March this year. This appointment indicates OpenAI’s continued pursuit of suitable acquisition targets to enhance AI competitiveness.

US Bond Market Remains Stable

The US 10-year benchmark Treasury yield is around 4.18%, unchanged from the previous trading day, reflecting that the bond market has largely digested expectations of Fed policy.

Summary

The dovish signals from Fed officials have become the core driver of market volatility this week. In the short term, US stocks, cryptocurrencies, and commodities face pressure and adjustments. However, in the long term, expectations of a loose monetary environment still support corporate earnings prospects. Institutions like Citi and Goldman Sachs remain constructive on the 2026 outlook. The US non-farm payroll report on Tuesday will be the next market focus; if the data shows weakness, it will further confirm rate cut expectations and potentially boost risk assets in the short term. Progress in geopolitical developments also helps reduce market uncertainty.