Gold glitters once more, as markets take UK Budget risks in their stride

Commodity

Summary:

Risk appetite returned as gold and silver rallied on Fed cut expectations, stocks recovered, and the pound stayed firm despite UK Budget concerns, while a CME outage thinned liquidity.

A theme is emerging as we reach the last trading day of November, risk is back on. Global indices are a sea of green this week, after a bruising first half of the month. Although European and US indices are on track to record a loss for the entire month of November, the scene could be set for a rally in the final weeks of the year. Interestingly, the Philadelphia Semi-Conductor Index is higher in November, as Google’s shares surged by more than 20%, and other tech stocks also recovered. This sector has led financial markets since their low in April, so the fact that semi-conductors are rallying, along with broader market width, could stoke the anticipated ‘Santa rally’.

The gold price is on track to record its fourth monthly gain and is higher by 3% so far this week. Silver is higher by 8%, as Fed rate cut bets ramp up. There is now an 82% of a rate cut from the Fed next month. This is sparking a rally in gold back above $4,000 per ounce, and the gold price is higher by $28 today. The silver price is higher by 1%. There are also gains for the oil price, as the Russia/ Ukraine peace plan remains on hold for the US’s Thanksgiving holiday.

Trading could be more volatile than usual today, as US markets open for half day and liquidity is likely to be thin. Added to this, a disruption on the CME trading exchange, could also affect trading across FX, stocks, commodities and some bonds.

The problem is linked to a cooling issue at one of its data centers. This closure ultimately means that liquidity will be even thinner than usual on the Friday of Thanksgiving. If there is any sensitive market news flow or events, then moves could be exacerbated by liquidity issues, and there could be more volatility as a result.

So far, news flow has not been too disruptive to trade. Donald Trump announced plans to dramatically tighten the US’s immigration system, which appears to be in response to the shooting of two National Guard members outside the White House, has not impacted market sentiment. The President’s post on Truth Social contained little detail, and so it is unlikely to be market moving.

Pound is resilient to Budget fears

Interestingly, the pound is the third best performing currency in the G10 FX space this week. GBP/USD is back above $1.32, it made a high above $1.3260 on Thursday but has given back some of those gains this morning. Interestingly, the pound remains resilient in the face of Budget criticism.

The list of concerns around the UK Budget are stacking up, including fears that the UK is at a tax tipping point, where extra revenue raising measures won’t generate as much as estimated, 2, that taxation measures are too back-dated and potentially threaten the UK's expanded fiscal headroom, 3, that spending pledges are unfair, weighing on business and consumer confidence even more, and 4, that the UK government will need to rely on short-dated debt to raise finance, which could leave UK bonds at the mercy of short term debt markets.

Why are markets so sanguine about UK Budget?

Although UK bonds sold off on Thursday, moves were relatively small. In the past week, UK 10-year Gilts are lower by 8 bps and are outperforming US and European peers. Does the fact that financial markets seem to be welcoming this budget mean that we are missing something? We think that financial markets have been appeased by this Budget because of the focus on building fiscal headroom, and the fact that the fiscal forecasts from the OBR were not as bad as had been feared. However, the Budget is a political disaster for the Chancellor, with YouGov reporting that the public believe it is the second most unfair Budget since 2010, a close second to the mini-Budget in 2022. Economic data backs this up, the Lloyds Business Barometer fell sharply in November to 42. From 50. This suggests that business confidence in the UK remains subdued.

In the Eurozone, weak inflation from France and weaker than expected retail sales from Germany are weighing on the euro, which is at the lows of the day.

Source:xtb

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Gerik

Economic

Stocks

Tech Giants Tap Debt Markets, but Credit Pressure Remains Contained

As Meta Platforms, Alphabet, and other technology leaders ramp up borrowing to finance their artificial intelligence infrastructure and global data center ambitions, market watchers have raised alarms about oversupply and potential spread widening. However, panelists at Bloomberg Intelligence’s credit conference in London argue that these fears are overstated.

Investment-grade spreads have widened by roughly 10 basis points due to what JPMorgan Asset Management’s Iain Stealey termed “temporary indigestion” from the sheer volume of issuance. Yet he emphasized that these companies generate substantial annual earnings and maintain robust balance sheets, reducing credit risk. Issuers like Meta are unlikely to return to markets until late 2026, suggesting that future supply will be more staggered and manageable.

Quality Still Reigns in Credit Markets

Meta and Alphabet’s limited debt profiles are seen as a strength, not a burden. Alphabet, in particular, boasts a credit rating superior to France’s, while Apple and Microsoft should they issue in Europe would be considered among the highest-quality corporate borrowers. Mahesh Bhimalingam of Bloomberg Intelligence noted that whenever such companies do enter the market, they typically trigger strong demand due to their profile and rarity.

This reinforces a cause-and-effect relationship: the AI buildout necessitates more capital, which is increasingly sourced through bond markets but the resulting pressure is eased by the strength of the issuers and market appetite for quality paper.

Credit Outlook for 2026: Carry and Structure Over Speculation

The broader consensus from the conference was that 2026 should remain supportive for credit markets. Ashwin Palta of BNY Investments highlighted that current yields provide attractive compensation for risk, especially when investors move “up in quality.” Lower-rated names are not offering sufficient spread advantage to justify increased risk, prompting a rotation into higher-tier credits and well-structured instruments.

Among the most appealing asset classes discussed were Additional Tier 1 (AT1), Restricted Tier 1, and hybrid securities. AT1 bonds, in particular, have delivered over 10% returns year-to-date, and expectations for continued strong performance are grounded in sound starting fundamentals.

Metro Bank and the Case for Small-Cap Financials

Jackie Ineke of Spring Investments pointed out an unconventional opportunity: the subordinated debt of smaller financial institutions, particularly Metro Bank Holdings Plc. Recently upgraded by Fitch and boosted by deregulatory support from UK Chancellor Rachel Reeves, Metro’s AT1 bonds now carry relatively less perceived risk than some of those issued by larger investment banks. Ineke highlighted its turnaround narrative, asserting that the issuer’s improved profitability outlook and political tailwinds position it as an appealing outlier in the financial credit space.

This contrast underscores a key analytical insight: risk perception in credit is not always aligned with institutional size. The correlation between bond performance and issuer profile is shaped as much by trajectory and context as it is by legacy reputation.

The message from the Bloomberg Intelligence panel is clear: the surge in tech-related debt issuance to fund AI initiatives is not destabilizing the credit market. Instead, it is creating high-grade opportunities for investors and reflecting the strategic capital needs of cash-rich, structurally important firms. With yield curves favoring quality and investor demand remaining strong, 2026 is set to offer continued resilience even as AI reshapes corporate capital flows. The credit market is absorbing the tech sector’s evolution with measured confidence.

Source: Reuters

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Adam

Stocks

U.S. equity funds witnessed their first weekly outflow in six weeks in the week through November 26, as concerns over lofty tech valuations prompted investors to take profits and overshadowed optimism about a possible Federal Reserve rate cut next month.

They divested a net $4.56 billion worth of U.S. equity funds in their first weekly net sales since October 15, LSEG Lipper data showed.

US equity funds see first weekly outflow in six weeks_1

Weekly flows into US equity, bond and money market funds in $ million

The S&P 500 (.SPX), opens new tab has risen more than 3% so far this week on expectations of a Federal Reserve rate cut next month. But investors remain cautious as November has been marked by heightened volatility, driven by concerns over stretched tech valuations and the economic impact of a record 43-day U.S. government shutdown.

U.S. large-cap funds saw a net $144 million weekly outflow following five successive weeks of inflows. Investors also ditched mid-cap and small-cap funds worth a total of $1.69 billion and $885 million, respectively.

Weekly flows into US equity sector funds in $ million

U.S. bond funds remained popular for an eighth straight week as these funds drew approximately $8.6 billion in weekly inflows.

Short-to-intermediate government and treasury funds secured $4.05 billion, the largest amount for a week since September 24. General domestic taxable fixed income funds also had a net $1.59 billion weekly inflow.

US equity funds see first weekly outflow in six weeks_3

Weekly flows into US bond funds in $ million

U.S. money market funds, meanwhile, received $25.28 billion worth of inflows after two successive weeks of net sales.

Source: reuters

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Adam

Stocks

The artificial-intelligence boom’s promise of runaway electricity demand has jolted shares of US power companies to all-time highs. But those generators and utilities are now learning that the hype comes with an edge: Investors won’t wait forever for results.

Companies that recently hit record valuations are returning to earth as investors realize the massive data-center deals they’d banked on are actually smaller, or slower, than expected.

Constellation Energy Corp. saw shares tumble 11% from an October high after a third-quarter earnings call that yielded no details on new power generation. The headline of one Jefferies analyst note read: “No Data Center Deals.” Similarly, Vistra Corp. has fallen 16% since mid-October as analysts noted a slower pace of data center announcements than they expected.

The S&P 500 Utilities Index is now set to post the worst monthly performance since August, after reaching an all-time high in October.

“These are not your father’s and mother’s utility stocks,” said Mark Malek, chief investment officer at Muriel Siebert & Co. “People are starting to question, ‘Can these companies scale as fast as they want to, are they throwing capital at these projects that’ll never get done?’”

Why US Utility Stocks Are Falling After the AI Power Surge_1

Vistra declined to comment. Constellation didn’t immediately respond to a request for comment.

While utilities have long been regarded as safe places to park money, the massive data-center build-out being spurred by AI has triggered an avalanche of investment into the sector. Now, as reality sets in, investors are trying to figure out which companies can deliver on their big promises — and which would be able to weather the potential pop of a trillion-dollar AI bubble.

“The AI bubble fears are playing into some of the weakness recently in utilities,” said Travis Miller, a utility analyst for Morningstar. “If the electricity demand growth doesn’t show up, then utilities look overvalued where they’re trading today.”

The companies have already started to temper expectations. Constellation narrowed the top end of its full-year earnings per share forecast in November, while Vistra did the same with its adjusted Ebitda forecast. NRG Energy maintained its full-year Ebitda forecast in November, but investors had been expecting a guidance increase.

Why US Utility Stocks Are Falling After the AI Power Surge_2

Still, some analysts say the pullback is nothing to worry about, with investors simply taking profits after the huge gains of October.

“We don’t have a bubble in utilities,” said Sophie Karp, a utility analyst at KeyBanc Capital Markets. “The market is taking a pause until we see the next leg of growth.”

Even after recent declines, Constellation remains 60% higher this year, with NRG rising 87% and GE Vernova up 79%, outpacing even the 34% gain that Nvidia Corp. has seen this year.

Such a development would particularly hit unregulated power sellers such as Constellation, NRG and Vistra.

Source: Bloomberg

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Daniel Carter

Political

The U.N. human rights office voiced concern on Friday that the Myanmar junta was pressuring people into voting in an election next month and that electronic voting machines and AI surveillance could help authorities to identify opponents.

International officials have already raised concerns about Myanmar's phased election from December 28 into January, calling it a sham exercise aimed at legitimising the military's rule after it overthrew a civilian democratic government in 2021.

The electronic voting machines did not allow people to leave their ballot blank or spoil it, meaning they have to pick a candidate, said James Rodehaver, head of the Myanmar team for Office of the High Commissioner for Human Rights (OHCHR).

"There's a real worry that this electronic surveillance technology is going to be used to monitor how people are voting," he told a Geneva press conference, saying that authorities could track if people are voting, and who for.

The military authorities in Myanmar intend "to enable all eligible voters to exercise their franchise freely and fairly in the upcoming general election", state media reported on Friday. Reuters was unable to reach a junta spokesperson for further comment.

Rodehaver said his team is verifying reports that locals are being forced to attend military training sessions on how to use the electronic voting machines in contested areas.

"After such training, some participants were warned by armed groups not to vote," he said, saying civilians were caught between the two sides.

OHCHR has also received reports of displaced people being ordered by the military to return to their villages to vote, Rodehaver said.

Authorities have arrested three young people who hung up posters depicting a ballot box with a bullet, he added. Myanmar previously said it has pardoned thousands in order to allow them to vote.

The country has been in turmoil since the coup overthrew the civilian government led by Nobel laureate Aung San Suu Kyi, who has been in detention ever since. Nationwide protests afterwards grew into an armed resistance.

The Trump administration that it will end temporary legal status for Myanmar citizens in the United States, claiming they can now safely return, citing the junta's planned elections as a sign of improvement. OHCHR is urging the United States to reconsider, it said.

Junta spokesperson Zaw Min Tun previously said that the U.S. announcement was a positive sign and citizens abroad were welcome to return to take part in the vote.

Source: Reuters

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Justin

Political

Economic

The European Commission should resist automakers' calls to allow cars to run on biofuels beyond 2035 because they are in short supply and not truly carbon-neutral, campaign group T&E said on Thursday.

New vehicles in the European Union must have no carbon dioxide emissions from 2035 under rules designed to boost sales of electric cars and phase out fossil fuels and the internal combustion engine.

However, automakers are pushing the EU executive to grant an exemption to allow carbon-neutral fuels to continue to power internal combustion engines, plug-in hybrids and range extenders. The Commission will unveil measures designed to support the auto sector on December 10.

In a report published on Thursday, T&E pointed to EU law changes in 2018 that limited the use of crop-based fuels, such as from palm oil or soy, favouring used cooking oil, animals and other waste-based sources, which now account for about half of bio-based diesel in the EU.

However, some 60% of biofuels and 80% of used cooking oil are imported, principally from Asia, T&E said, with rising cases of fraud, such as palm oil passed off as waste.

T&E said biofuels made from food crops typically only save 60% of CO2 emissions compared with fossil fuels because of CO2 emitted in their cultivation and transportation. They also risk leading to deforestation.

More advanced fuels made from municipal waste or sewage sludge are more sustainable, the report said, but are not available in sufficient quantities and are already earmarked for aviation and shipping. If road transport were included, EU demand could be from double to nine times the 2050 sustainable supply.

The T&E report said that allowing biofuel in EU cars could increase CO2 emissions by up to 23% in 2050.

The group advises that biofuels should not be part of the post-2035 solution and, if they are, limited to just 5% of sales of cars powered by truly carbon-neutral e-fuels.

Source: Investing

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Adam

Economic

The Chicago Mercantile Exchange Group proudly describes itself as the place “where the world comes to manage risk.” Except on Friday, the world was shut out.

Trading of futures and options was halted due to a fault at a data center, spilling over into multiple markets and affecting contracts covering trillions of dollars. It hit S&P 500 futures as well as everything from Treasuries and US crude oil to gasoline and palm oil. EBS, a platform used in foreign exchanges, was restored at 12 p.m. London time after being down for several hours.

In Singapore, one oil trader said when the initial alert was issued around 10:30 a.m. local time on Friday, they thought it was a hoax because the trades and quotes were still streaming in. But a few minutes later, the screen suddenly froze and they were booted out of the Nymex platform.

With the go-to service out, screens that would usually be a flickering wall of numbers ground to a halt, and traders had to seek out other options to keep trading and operating.

“It’s pretty annoying. We wanted to price some equity index options,” said Gerald Gan, deputy chief investment officer at Singapore-based Reed Capital Partners. “My provider is scouring for alternatives, but I doubt the liquidity would be as ample as CME.”

Such reactions reflect how CME — which started in the late 1800s as the Chicago Butter and Egg Board — has grown to become an integral part of the global market machinery and a crucial part of traders’ daily work. On average in October, derivatives trading volumes amounted to more than 26 million contracts every day, according to data from the group.

On Nov. 20, open interest in CME’s US Treasury futures and options set an all-time high of 35.1 million contracts. About $1 trillion of notional value is traded daily in the E-mini S&P 500 and Nasdaq 100 futures alone.

Exchange outages have occurred frequently in recent years, with technology issues affecting pricing across platforms globally.

In June 2024, a glitch during a software update in June 2024 led the New York Stock Exchange to erroneously halt trading on about 40 stocks and display odd trades showing a 99% drop in prices. Earlier in the year, tech issues disrupted premarket Nasdaq trading for almost three hours.

In Europe, London Stock Exchange Group Plc suffered three outages in a few months at the end of 2023, including one that halted trading for thousands of shares.

The latest CME malfunction is already longer than a similar, hours-long outage due to a technical error in 2019, which will mean questions for the company, the data center operator and the extent of contingency plans.

‘Real Black Friday’

Commodity traders scrambled to work out what would happen when the US benchmarks for gasoline and diesel futures expired later in the day — that can involve delivering actual barrels when the market closes at the end of month. Some oil brokers questioned why they came to work, with volumes already expected to be low the day after Thanksgiving and unable to trade CME volumes.

On LinkedIn, one employee at Glencore commented “Real Black Friday” in response to a post on the issues.

The outage meant limited trading in Treasury futures. Elsewhere, cash bonds traded sporadically and volumes may be hit by the reduced ability of traders to hedge. There are alternative methods to hedge trades, such as through swap markets which became more active following the start of trading in London, according to traders.

Futures for European and UK bond markets trade on a different exchange and were unaffected.

In the foreign exchange market, one trader said prices on platforms were returning to normal, but when trading opened at 8 a.m. in London, some platforms initially showed elevated bid-offer spreads.

“We typically use derivatives for tactical trades but it’s obviously impossible this morning,” said Amelie Derambure, a portfolio manager at Amundi SA. “Thankfully, it’s a quiet day. It would have been quite a handicap had it been a busy day.”

Global Impact

Friday was set to be a subdued day for stock markets, with only a half day of trading in the US after the Thanksgiving holiday. There’s no US economic data scheduled and no Federal Reserve speakers ahead of a blackout period leading up to their December decision.

“Lucky it’s quiet post Thanksgiving,” said Emmanuel Valavanis, a London-based equity sales specialist at Forte Securities. “For this to happen on the last trading day of the month is bad enough, but coinciding with last day of year-end for many mutual funds compounds the potential issue. Freezing a trillion dollars is not a good look for those involved.”

Frustration, Confusion Ripple Across Markets on CME Outage_1

Some said they were staying away given the risks posed by the outage on a day when trading was already expected to be thinner.

“I am wary about trading on such an illiquid day, so I would not have wanted to trigger trades anyway,” said Rajeev De Mello, chief investment officer at Gama Asset Management. “And with this outage, all the more so.”