Morning Bid: Risk-on, risk-off, risk-on

A look at the day ahead in European and global markets from Rae Wee

There have been a couple of instances over the past month where a market rally was abruptly halted by sudden risk aversion - sometimes with little obvious trigger - only for an upswing to follow shortly afterwards, again for hardly any apparent reason.

Wednesday was yet another case of that.

Global stocks advanced and bitcoin reclaimed the $90,000 level, rising to its highest in nearly two weeks, after a drubbing on Monday.

Markets in Europe were also set for a steady open, with eyes on remarks from European Central Bank (ECB) President Christine Lagarde later in the day for clues on the central bank's rate outlook.

There was little news overnight or in the Asian session to lift investors' spirits, but analysts say Monday's selloff in stocks, bonds and cryptocurrencies - sparked by hawkish comments from Bank of Japan Governor Kazuo Ueda - could have been an isolated event driven in part by thinned liquidity.

After all, December has historically been a good month for equity markets.

So risk is back on the menu, for now, as investors look ahead to a U.S. Federal Reserve meeting next week, where a 25-basis-point cut is now 85% priced in.

Markets are also gradually pricing in a more dovish outlook for the future U.S. rate path, with nearly 90 bps worth of easing expected by the end of 2026 on the prospect that White House economic adviser Kevin Hassett could take over from Fed Chair Jerome Powell next year.

U.S. President Donald Trump said he would be announcing his nominee early next year, and has narrowed the list to a single candidate.

On the data front, the ADP national employment report due later in the day is forecast to show 10,000 jobs were added in November, down from October's 42,000, in a sign that labour market slack in the world's largest economy is steadily rising.

Elsewhere in markets, figures out on Wednesday showed Australia's economy grew at the fastest annual pace in two years in the September quarter, with broad-based strength suggesting little scope for more policy easing, which helped lift the Aussie dollar.

The Indian rupee, meanwhile, weakened past the psychologically important 90 per dollar mark, as weakness in trade and portfolio flows alongside worries about the lack of a trade deal with Washington pummelled the currency.

Key developments that could influence markets on Wednesday:

- ECB President Christine Lagarde, Chief Economist Philip Lane speak

- U.S. ADP employment report (November)

- France, Germany, UK services PMI (November)

(Reporting by Rae Wee; Editing by Kate Mayberry)