Asia markets step back into the Fed’s gravity well

Asian markets walked into Tuesday’s session with a very familiar tailwind: the gravitational pull of a Federal Reserve pivot that—after weeks of second-guessing—is starting to look like more than just another false dawn. US equities bounced overnight, tech found its footing after last week’s AI-valuation wobble, and the rate-cut drumbeat is now pounding loud enough to rattle even the more stoic macro tourists drifting through November’s chop.

And Asia did what Asia always does when the Fed’s weather vane shifts toward dovish trade winds: it followed the S&P’s wake. Japan reopened after a holiday and bid stocks higher; Korea joined the uptrend; and China-sensitive sentiment caught a small bid after the latest Trump–Xi reconnect reinforced the fragile tariff truce narrative. A US-listed China gauge popped nearly 3 %, as if markets were momentarily willing to believe that geopolitics might not be the perpetual wrecking ball it’s been all year.

But the real centre of gravity—once again—was the Fed.

Waller, Daly, Williams… the entire dove-wing of the FOMC has now gone from clearing its throat to singing the same December-cut chorus. Waller openly signalled support for easing next month. Daly chimed in on Monday. Williams, standing only a step away from Powell’s, started tipping the scales last Friday by saying a “further adjustment in the near term” is warranted as labour market downside risks expand and inflation upside risks finally cool.

And here’s the tell: there has been zero effort by Fed leadership to walk any of this back. None of the quiet, subtle “clarifications” they usually sneak through the FT or WSJ Fed whisperers when markets run too far. Suggesting the doves were almost certainly sanctioned by Powell himself. That silence is deafening—and markets heard it.

US 10s dropped to 4.02%, money markets priced in a 90% chance of a cut, and the fear-laden November pullback mutated into something traders know far too well: the early stages of a classic December melt-up setup.

November’s panic over AI valuation blow-ups?
Jobs-market hard landing alarms?
Systematic flows threatening to push S&P through soft support last Friday?

Frankly, none of those fears materialized. Instead, we got a garden-variety pullback, not a prelude to a deeper correction. And that Friday moment—when Bitcoin teetered below 80K, S&P support cracked, and systematic sellers tried to bulldoze the tape—now looks more like a panic air-pocket than the start of a trend.

Gold is also sensing the shifting winds. Lower rates are oxygen for bullion. Oil stabilised as risk-on appetite offset the oil price decline from tentative Ukraine peace progress — yes, peace tends to add barrels at the margin, but in this environment, rate cuts matter more than uncertain peace, while both Ukraine and Russia continue to bombard each other mercilessly.

Still, under the surface, macro complexity is building—not easing.

Because while markets are pricing a smooth December cut, the Fed itself is setting up the kind of internal crack-up that hasn’t been seen in decades. The vote could be 7–5. It could even break into the uncharted waters of 6–6. There hasn’t been a 7–5 decision since 1983, and the Fed has literally no formal protocol for resolving a tie.

The dissent map heading into Friday looked roughly split:
5 leaning against a cut (Barr, Musalem, Schmid, Goolsbee, Collins)
5 leaning for a cut (Miran, Waller, Bowman, Williams, Cook)
Two unknowns (Powell and Jefferson)

Williams’ dovish pivot—effectively Powell’s proxy—flipped the board. Markets immediately repriced December cut odds from 35% to north of 70%, in perfect lockstep with the voice closest to the Chair.

But this is no kumbaya moment. Waller warned yesterday that anyone accusing the Fed of groupthink should buckle up: this meeting will be the opposite. The Powell Fed could deliver a decision that comes with the most dissent in modern history. And that political undertow—Bowman’s defiance, Cook’s potential desire to push back against Trump’s attempts to fire her, Goolsbee’s rare willingness to break ranks—adds a new layer of uncertainty to what should be a clean pivot.

Yet the market only cares about one thing: the direction of travel.
And the direction is down—on rates, if not on volatility.

This week’s data deck—retail sales, PPI, durable goods, and a critically-timed jobless claims print—will be read through the prism of a Fed leaning on “alternative indicators” in the absence of payrolls. The economic backdrop is still sluggish enough to justify easing, but not weak enough to trigger recession alarms. In other words: the Goldilocks the market keeps begging for.

And globally, Asia is still trapped inside the larger macro cyclone: AI-capex supercycle, US-China detente flickers, the Japanese bond-yen feedback loop, and a year-end liquidity backdrop shaped by TGA drawdowns and the seasonal funding squeeze. But for now, traders are choosing to surf the front-end repricing rather than obsess over the macro plumbing.

Indeed, the first coupon auction of the holiday-shortened week dropped, and it was a snoozer, which came in right as expected.

The sale of $69BN in 2-year notes, priced at a high yield of 3.489%, down from 3.504% in October and the lowest since August 2022; it also priced on the screws with the 3.489% when issued.

The market has priced the quiet part out loud: September’s delayed jobs report likely sealed the December cut. With the next labour data only dropping after the December meeting, there may simply be nothing left on the calendar to derail the pivot.

And beyond December? We think easing slows in early 2026 and lands at a terminal 3–3.25% after growth reaccelerates on lower tariff drag, tax cuts, and looser financial conditions. That’s the macro runway traders are quietly sketching behind the curtain. And yes, that’s a wide runway, and it should provide oxygen for every long-duration, AI-adjacent, liquidity-hungry trade on the board.

So Asia walks into Tuesday’s session with the wind at its back. The Fed is pulling the lever, tech is shaking off its valuation hangover, and the market’s November angst is fading into the rear-view mirror.

The only thing that could break the spell in the next 48 hours is a data surprise big enough to knock the pivot narrative off its axis.

But as every seasoned Asia-open trader knows: when key Fed members start hinting at cuts, and the boss at the Eccles Building doesn’t push back, the path of least resistance is almost always lower for rates and higher for stocks