Payrolls, AI selloff and China data set the tone for a critical week in markets
Markets focus on the U.S. payrolls report as recent AI-driven losses cool and bond yields retrace. Tech stocks slid after mixed results from major chip suppliers, while Treasury moves and central bank signals are driving short-term positioning. China’s weak factory and retail figures and renewed property stress weigh on Asian equities and push the yuan higher. In the near term traders watch job data, a key U.S. bond auction and central bank decisions in Tokyo and London. Over the longer term investors are weighing earnings, AI-related cost savings and structural growth needs in China.
Tech selloff eases but AI theme still under pressure
Equity markets began the week with relief after a bruising end to last week for AI-focused names. Oracle (NYSE:ORCL) and Broadcom (NASDAQ:AVGO) suffered sharp slides of 18 percent and 11 percent respectively on Thursday and Friday, and that pain pulled Nvidia (NASDAQ:NVDA) down about 3 percent on Friday. The moves trimmed Nasdaq performance while the Dow managed gains and even hit a record high during the session.
Monday brought a tentative rebound for Nvidia after reports it is evaluating added production for its H200 AI chips because orders exceeded current output. That development suggests demand remains strong even as revenue and guidance from some suppliers disappointed investors. Micron (NASDAQ:MU) is due to report later in the week and will be watched closely for signs about memory demand and inventory dynamics.
Market action points to active sector rotation. Expensive tech names are under pressure from company specific misses and the reappraisal of AI timing. Meanwhile industrial and value sectors have attracted flows that lifted the Dow while the Nasdaq lagged. Traders will be sensitive to further earnings signals that could either reinforce or ease the recent repricing of AI exposure.
Bonds, yields and the calendar of risk
Fixed income markets have played a central role in recent price moves. Long dated Treasury yields climbed to three month highs last week as investors digested growth and policy signals. The 2 to 30 year yield curve steepened to its widest since September before yields eased somewhat overnight. Those moves reflect a mix of positioning ahead of a delayed November payrolls release and the regular cadence of large government supply.
This week adds fresh potential for volatility. The November payrolls report due Tuesday is the main near term macro event. A 20 year U.S. bond auction on Wednesday will test demand for extended duration. In addition the prospect of a Bank of Japan rate rise on Friday adds an external driver for global yields and cross border flows. Political signals about the next Federal Reserve chair are also being digested after comments that narrowed the field to two candidates. Market probabilities for those nominees shifted materially after the remarks.
Investors are watching how these forces interact. Payrolls can move short dated yields and risk sentiment. The BOJ outcome could shift global real rates and influence currency and cross border bond flows. Together these events will inform positioning into year end.
China data and property stress raise growth questions
Asia starts the week under pressure from fresh weak data in China. Factory output growth slowed to a 15 month low and retail sales recorded their weakest print since the abrupt end of zero COVID restrictions. Those numbers underline an urgent need for new growth drivers as authorities look ahead to 2026.
The property sector added to risk appetite concerns. House prices extended declines in November and state linked developer China Vanke (2202.HK) sought renewed bondholder backing for an onshore debt repayment after an earlier plan was rejected. That episode is the latest manifestation of a property crisis that began in 2021 and is still shaping credit dynamics in local markets.
Curiously the yuan strengthened to its strongest level in over a year despite the weak activity prints. The currency move was driven in part by flows and expectations of policy response. Chinese equities fell, but not as sharply as technology markets in Tokyo and Seoul. Policy makers may face growing pressure to deploy demand supports between now and the new policy cycle.
Central bank turns, currency behavior and market implications
This week features a rare split in direction between two major central banks. The Bank of England is widely expected to cut rates on Thursday while the Bank of Japan is expected to raise on Friday. The European Central Bank meets as well and is likely to hold policy steady after a spate of hawkish messaging from board members last week.
The contrasting moves have implications for currency crosses and bond flows. The gap between Bank of England and BOJ policy rates has narrowed by about 165 basis points since mid last year and will probably exceed 200 basis points after the upcoming meetings. Despite that squeeze sterling has strengthened more than 1 percent against the yen since mid last year and is about 5 percent firmer since mid year. That pattern shows market attention is not confined to rate differentials alone. Fiscal risks in the United Kingdom and Japan and flows into perceived safe or risky assets have been important drivers.
Investors will parse central bank guidance for clues on the path of policy next year. Any language that changes expectations for cuts or hikes will influence not only spot currencies but also cross border demand for bonds and equities.
Events to watch for the coming session include the U.S. November payrolls report, the New York Federal Reserve manufacturing survey, the NAHB housing indicator and Canada consumer price inflation. Speeches by New York Fed President John Williams and Fed Governor Stephen Miran add further data points for rate expectations. Together these releases and policy meetings will shape flows as markets close out the year.
Graphics and market data referenced in the preceding coverage were produced contemporaneously and reflect recent market moves. The balance of earnings updates, macro prints and central bank signals will determine whether the recent rotation from growth to other sectors deepens or eases in the final trading week.
