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World stocks deep in the red, US stock futures lower

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Investors see Fed rate cut next month as a toss-up

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Fed officials take hawkish view

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UK markets whipped around by budget talk

By Dhara Ranasinghe

LONDON, Nov 14 (Reuters) - World stock markets took a

beating on Friday as a hawkish tone from Federal Reserve

officials doused hopes for a December U.S. rate cut, while a

still-messy data calendar and worries about an AI bubble added

to the angst.

Blue-chip bourses from Tokyo to Paris and London were deep

in the red with fresh concern about Britain's upcoming budget

adding to pain across UK markets.

U.S. stock futures pointed to a bleak open for Wall Street

shares after they racked up steep falls on Thursday.

Citing worries about inflation and signs of relative

stability in the labour market after two U.S. rate cuts this

year, a growing number of Federal Reserve policymakers are now

signalling reticence on further easing.

Markets now price a 49% chance of a quarter-point December

Fed cut, compared to just over 60% earlier this week.

Concerns about a lack of economic data due to a U.S.

government shutdown that came to an end this week, and frothy

tech valuations against the backdrop of an AI boom, meanwhile

added to the edgy mood across financial markets.

"Until we

get the delayed data, we are in a holding pattern," said

Jeremy Stretch, head of G10 FX Strategy at CIBC Markets in

London.

"We are back to 50-50 on a December rate cut and this,

alongside concerns about an AI bubble, has destabilised

sentiment."

Already the mood has turned fickle this month and darlings

such as Palantir ( PLTR ) and Oracle shares have

notched up falls of around 15% each over the past two weeks.

Chipmaker Nvidia is down nearly 8%.

The White House meanwhile has dashed hopes for a clearer

view of the U.S. economy any time soon, saying U.S. unemployment

data for October may never be available, adding to a sense that

the Fed could pause until it gets more clarity.

"There is some alternative data coming through, so markets

are getting a view that the labour market is slowing down. But

because the Fed doesn't have enough confidence in the alternate

data, they would rather still hold," said Seema Shah, chief

global strategist at Principal Global Investors in London.

"So you have markets that are concerned about the growth

outlook," she added. "If the data is correct in the way it seems

to be trending, the economy does require rate cuts."

MSCI's broadest gauge of Asian shares outside of Japan

fell almost 2%, while Japan's Nikkei slid around

1.8% and South Korea dropped 3.8%. In Europe,

tech stocks fell to a seven-week low.

And as the risk-off sentiment gathered momentum around the

globe, bitcoin fell to six-month lows and the safe-haven

Swiss franc hit its highest levels since 2015 against the euro

.

Chinese shares fell after the release of

monthly activity figures that showed industrial output and

retail sales slowing in October, missing analyst estimates and

snuffing out a short-lived rally in equity markets.

Treasury bonds attracted bids on Friday as investors looked

for safe havens. Two-year Treasury yields were a

touch lower at 3.58%, having risen 3 basis points overnight,

while the 10-year yield rose 1.4 basis points to

4.12%.

The dollar headed for a weekly fall on Friday as investors

trimmed positions, with the dollar index a touch lower on the

data at 99.19.

The yen got some much-needed respite and last

traded at 154.48 per dollar, after hitting its weakest level in

nine months on Wednesday.

The dollar was down a third of a percent against the Swiss

franc and the euro was little changed at around $1.16

.

UK MARKETS WHIPSAWED

Sterling was whipped around by British budget speculation.

British finance minister Rachel Reeves

has no plans to raise income tax

rates in this month's budget due to improved fiscal

forecasts, a source said, following a surge in borrowing costs

earlier in the day on reports she had backtracked on tax hikes.

British government bond yields also rose sharply, with

10-year UK gilt yields last up around 10 bps on the day at 4.53%

.

It was set for its biggest one-day rise since early

July.

"There have been leaks and rumours about this budget for

ages. It's got to be the most telegraphed budget ever," said

Nutshell Asset Management CIO Mark Ellis.

Elsewhere, oil prices rallied on supply fears after the

Black Sea port of Novorossiysk halted oil exports following a

Ukrainian drone attack that hit an oil depot in the major

Russian energy hub.

Brent crude futures rallied 1.5% to $64 a barrel,

while U.S. West Texas Intermediate crude advanced 1.6% to

$60 a barrel.

Spot gold prices were last down 1.3%. However, the

yellow metal remains not too far from its record top of $4,381.