ORLANDO, Florida, Nov 6 (Reuters) -

U.S. stocks, bond yields and the dollar all fell on

Thursday, dragged down by renewed fears of an AI bubble and

worries over the strength of the U.S. labor market.

More on that below. In my column today I look at life for

markets after the global rate-cutting cycle, which appears to be

turning. Will it signal a bullish period for earnings growth and

stocks, or a tightening of liquidity and greater risk aversion?

If you have more time to read, here are a few articles I

recommend to help you make sense of what happened in markets

today.

1. SPECIAL REPORT-Meta is earning a fortune on a

deluge of

fraudulent ads, internal documents show

2. AI can be both a bubble and a breakthrough: Mike

Dolan

3. OpenAI does not "want government guarantees" for

massive

AI data center buildout, CEO Altman says

4. A Trump Supreme Court tariff defeat would add to

trade

uncertainty

5. Bank of England holds rates in knife-edge vote

that

hints at December cut

Today's Key Market Moves

* STOCKS: Wall Street's main indices down between

0.8% and

1.9%. China's Shanghai Composite +1%, Japan's Nikkei +1.3%, Hong

Kong +2.1%. France and Germany -1.3%.

* SHARES/SECTORS: Philadelphia Semiconductor index

-2.4%,

Roundhill Mag 7 ETF -2%, consumer discretionaries -2.5%. Energy

only one of two sector gainers, +0.9%. DoorDash -17.5%.

* FX: Japanese yen and sterling are the biggest G10

FX

gainers.

* BONDS: U.S. yields fall as much as 8 bps at short

end to

bull steepen the curve. December Fed rate cut probability back

up to 70%.

* COMMODITIES/METALS: Oil and Comex copper slightly

lower,

gold slightly higher.

Today's Talking Points

* Navigating the U.S. jobs fog

Normally, investors now would be gearing up for the

October U.S. non-farm payrolls report scheduled for release on

Friday. But the record-long U.S. government shutdown means there

will be no data. Some numbers have come out this week though,

and it's very much a mixed bag.

ADP private sector job growth numbers for October were

stronger than expected, but Challenger layoffs nearly tripled,

and the Chicago Fed said the unemployment rate has ticked up a

notch to 4.4%. Cost-cutting and AI are dark clouds over the

labor market, which is already foggy enough.

* U.S. money market tightness

There was some respite on Thursday as Fed rate cut

expectations ticked up, but worries around U.S. interbank and

money market liquidity continue to swirl. Of course, the Fed is

watching this like a hawk - no pun intended - and will surely

step in if they have to.

But as TS Lombard puts it, things are "uncomfortably tight"

- a government shutdown, a Treasury General Account build

draining funds from the system, high front-end rates, and the

SOFR-IORB spread widening. Add in ongoing QT for now and

seasonal balance-sheet constraints, "and the ingredients for a

funding-market flare-up are all there."

* Trump's tariff travails

The legality of U.S. President Donald Trump's tariffs -

his flagship economic policy - is in doubt as U.S. Supreme Court

justices decide whether the 1977 International Emergency

Economic Powers Act (IEEPA), which Trump has invoked, covers

tariffs.

Trump on Thursday for the first time acknowledged that U.S.

consumers "might be paying something" when it comes to tariffs.

That "something" has been pretty low so far this year, but is

now rising - economists reckon consumers will be eating around

two-thirds of the total tariff bill by next year.

Markets brace for life after global easing cycle

The global interest-rate cutting cycle has likely peaked.

The question now is when, or if, today's high-flying markets

will start to feel the pinch.

Remarkably, there have been more rate cuts around the world

in the last two years than during the 2007-09 Global Financial

Crisis, according to Bank of America. Although that's the number

of cuts and not the magnitude of easing, it reflects the scale

of the historic inflation-fighting rate hikes in 2022-23.

But the cycle now appears to have turned. This doesn't mean

global easing has stopped. Central banks - most notably the U.S.

Federal Reserve - are still expected to cut further. Rather, the

number of cumulative cuts will decline moving forward.

On the face of it, the end of super-easy monetary policy

should mean less accommodative financial conditions ahead.

But, perhaps counterintuitively, history suggests otherwise.

Peaks in the last three major global easing cycles were followed

by a broadening of the earnings cycle and solid equity market

gains.

Are we about to see this again? Maybe, but given the frothy

valuations in many of today's markets, it's not a given this

time around.

LESS CONCENTRATION, MORE ROTATION

The peak of the easing cycle could be a bullish signal for

Wall Street, say analysts at Societe Generale, who argue that it

is a sign that earnings growth is going to broaden out and

accelerate.

Manish Kabra, head of U.S. equity strategy at SocGen, says

the cycle peak is a "powerful signal" to diversify into other

areas of the market like small caps and less levered stocks. He

notes that reducing equity exposure would typically come later

when investors start pricing in the start of the hiking cycle.

"When the easing cycle peaks, it's traditionally a sign of

market conviction that earnings growth is going to accelerate,"

Manish says, pointing to previous "peaks" in August 2020 and

September 2009 - which were both followed by strong equity

performance.

Of course, there's a big difference between now and these

episodes, namely today's stock prices and valuations. Wall

Street was only beginning to emerge from historic crashes in

September 2009 and August 2020, whereas now it has never been

higher.

This might suggest that a more defensive risk profile may be

warranted today.

Kabra downplays talk of bubbles, however. S&P 500 earnings

growth this year is running at around 12%, but if you exclude

'AI boom' stocks, that falls to only 4%.

IT ALL COMES BACK TO LIQUIDITY

Almost every major asset class has risen this year, apart

from oil, the dollar and some long-dated bonds. Even unloved and

much-maligned U.S. Treasuries have gotten a bounce.

But globally, these rallies have had many different drivers.

In equities, the AI boom has been rocket fuel for Wall Street,

bets on a defense spending splurge have boosted European stocks,

and the prospect of significant fiscal easing has lifted stock

prices in Japan and China.

However, the unifying force that has lifted all these boats,

according to Standard Chartered, is liquidity. And plenty of it.

Eric Robertsen, the bank's global head of research and chief

strategist, says the broad rally from the April lows, impacting

stocks, bonds, commodities and cryptocurrencies, can be deemed a

'financial conditions trade'. How else can nearly every asset

class rise together in a world of extreme economic and

geopolitical uncertainty?

Of course, 'liquidity' is not solely or even primarily a

function of monetary policy. Bank reserves, the availability of

and demand for private sector credit, and general risk appetite

are key factors that contribute to the rather amorphous concept

that is 'liquidity'.

But if interest rate changes can be viewed as a loose proxy

for liquidity or at least a directional signal, then we are at

an inflection point.

Robertsen posits that the "abundant" liquidity from well

over 150 rate cuts in the last 12 months has more than offset

investors' concerns over growth. Their risk appetite may be put

to the test if the liquidity taps are being turned off, even if

only gradually.

"Can markets thrive at this altitude without additional

oxygen?" Robertsen asks.

We may be about to find out.

What could move markets tomorrow?

* Taiwan trade (October)

* Germany trade (September)

* Bank of England chief economist Huw Pill speaks

* Mexico inflation (October)

* Canada unemployment (October)

* U.S. University of Michigan consumer sentiment, inflation

expectations (November, prelim)

* U.S. Federal Reserve officials speaking include: New York

Fed's

John Williams, Vice Chair Philip Jefferson, and Governor Stephen

Miran

* U.S. earnings, including KKR, Constellation Energy, Duke

Energy,

News Corp, Expedia

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