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

Ankur Banerjee

A risk-on rally spurred by the sudden shift in U.S. rate-cut

wagers after dovish comments from policymakers may falter in

Europe while currency markets remain wary that Tokyo could

intervene to support the yen.

Phone-call diplomacy was also in the spotlight.

U.S. President Donald Trump touted relations with China as

"extremely strong" on Monday following a call with Chinese

counterpart Xi Jinping.

Trump also told Japanese Prime Minister Sanae Takaichi

"call me anytime" in their first phone call since Tokyo's leader

sparked a major diplomatic bust-up with China.

Markets though, are laser-focused on U.S. rate developments

after Federal Reserve Governor Christopher Waller reiterated the

labor market's weakness could justify a further quarter-point

rate cut in December. His comments were the latest to help raise

investor expectations of a rate cut next month.

Traders are now pricing in an 81% chance of a cut next month

versus 42% a week earlier, CME FedWatch showed. That huge swing

underscores the challenge the market faces in pricing in

near-term rates in the absence of economic data due to the

longest U.S. government shutdown that ended on November 14.

Despite the sharp rise in rate-cut wagers, the U.S. dollar

has remained stable.

And so, that leaves the yen languishing near its

10-month lows and perilously close to 160/dollar, with no

respite as chatter about intervention from Tokyo officials rages

on. In short, the yen vigil is here to stay.

A holiday-curtailed week may provide Tokyo with the perfect

opportunity to directly engage with some yen buying, traders

say, but ultimately it may have limited impact.

Meanwhile, shares of Novo Nordisk slumped on

Monday after the obesity drugmaker announced its Alzheimer's

trials for an older oral version of its semaglutide drug failed

to help slow the progression of the brain-wasting disease.

Market reaction may extend into Tuesday unless dip buyers

intervene, although analysts noted investors had low

expectations for the trial's success.

European futures point to a lower opening as the

momentum in Asian equities slows. Perhaps last week's worries

about AI valuations remain on investor minds.

Key developments that could influence markets on Tuesday:

Germany Q3 GDP data, French consumer confidence data for

November, Easyjet earnings