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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 and Iain Withers

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

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, have 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.

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 the whole scheme of things, it's (stocks) only got back

to where it was a couple of days ago," said Nutshell Asset

Management CIO Mark Ellis.

"But it did feel like significant liquidations, especially

in those high-beta tech names, which have done so well year to

date."

Chinese shares eased 0.9% 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, however, was whipped around by British budget

speculation. It fell sharply after the Financial Times reported

that Prime Minister Keir Starmer and finance minister Rachel

Reeves have ditched their party manifesto-busting plan to

increase income tax rates, before recovering some ground.

British government bond yields also rose sharply before

pulling back. Ten-year UK gilt yields were last up around 6 bps

on the day at 4.50%.

"There's been leaks and rumours about this budget for ages.

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

Asset Management's Ellis.

Oil prices jumped after a Ukrainian drone attack damaged a

Russian oil depot, sending Brent crude futures 1% higher

to $63.65.

Spot gold prices were little changed on the day at

$4,173 per ounce, having lost 0.6% overnight to snap a four-day

winning streak. However, the yellow metal remains far from its

record top of $4,381.