On November 4, 2026, traders woke up not only to watch the rise and fall of indices but also to the rapidly fluctuating numbers on the CME “FedWatch” tool: the market indicated a 78.9% probability of the Federal Reserve raising interest rates by 25 basis points in December, while the chance of maintaining rates was reduced to just 21.1%. The likelihood of further cumulative rate hikes in January 2027 was also raised to over 80%, making the outline of a prolonged high interest rate cycle clear. Almost simultaneously, the Reserve Bank of Australia took the lead by raising the policy rate by 25 basis points to 4.85%, marking an 18-year high and establishing a benchmark for “tightening.” Across the ocean, the People's Bank of China took a different approach, conducting a 100 billion yuan swap operation targeting non-bank institutions such as securities companies, fund companies, and insurance companies at a bidding rate of 10 basis points, with President Pan Gongsheng signaling the intention to maintain stable operations in the stock, bond, and foreign exchange markets, continuing a mildly accommodative stance. On the same day, AMD's third-quarter earnings report provided another answer to "fighting interest rates": $13.38 billion in revenue, a year-on-year increase of 45%, with data center revenue soaring by 97% year-on-year, offering a sliver of profit support for risk assets amid tightening shadows. With the potential for further rate hikes from the Federal Reserve, a confirmed rate hike from the RBA, increased liquidity operations from the PBOC, and positive earnings exceeding expectations from leading tech companies, global monetary policy has evidently entered a new phase of differentiation, forcing risk assets to engage in a new round of pricing games between the forces of interest rates and profits.

Probability of December Rate Hike Approaches 80%: The Federal Reserve Again Takes the Spotlight

The core of this round of games still revolves around the Federal Reserve. As of November 4, the CME “FedWatch” tool showed that the market pricing for the December meeting was heavily skewed: the probability of a 25 basis point rate hike reached 78.9%, while the chance of keeping the rate unchanged was only 21.1%. More crucially, traders did not regard this as merely a “symbolic last step,” but rather prepared for a “longer, higher” rate path—by January 2027, the probability of maintaining the current rate unchanged was only 15.3%, while the probability of a cumulative rate hike of 25 basis points was 63.0%, and the probability of a cumulative hike of 50 basis points was also 21.8%, betting on further adjustments from the Federal Reserve based on the current levels.

When the combined probabilities of two meetings pointed to over 80% likelihood of further tightening, the market was effectively rewriting its discount rate assumptions. Higher and more persistent policy rates mean that the global central financing cost is being forced to rise, making refinancing across sovereigns, corporations, and high-leverage sectors more challenging, which inherently suppresses risk appetite. Once the consensus that “the tightening cycle has not yet ended” was established, the asset pricing framework began to shift: short-term sentiment was no longer solely focused on whether the next meeting would raise rates, but began to rebalance around the long-term nominal interest rate range, risk premium levels, and whether profit growth could offset rising interest rates. This re-evaluation of the framework itself will become a major source of volatility and differentiation in the near term.

RBA Raises Rates to 4.85%: A Mid-Sized Economy Takes the Initiative

While the market was still using the CME tool to predict whether the Federal Reserve would raise rates by another 25 basis points in December and January, the Reserve Bank of Australia had already provided a concrete answer—raising rates by another 25 basis points, bringing the policy rate up to 4.85%, a new 18-year high. Unlike the United States, which remains in the “tightening expectations” phase, the RBA used a tangible rate hike to pull the current cycle of high interest rates back to the execution level, resonating with the expectation that the Federal Reserve may continue to tighten: one is a future scenario with a probability close to 80%, and the other is a reality that has already been decided.

For a developed economy like Australia that is of moderate size, it is more common to take a defensive “initiate” approach between high interest rates and growth pressures, rather than betting on a turning point. On the one hand, it cannot set prices for the world through its own cycle like the largest economy nor can it entirely follow a single anchor point like some smaller economies, but must instead prepare potential buffers for upcoming external shocks and asset volatility through relatively tight interest rates. On the other hand, as the market's judgment of the Federal Reserve's “continued tightening” gradually converges, if such economies remain passive, they may find themselves following a steeper rate hike path later on, incurring higher policy costs. Therefore, the RBA's push of rates to an 18-year high essentially reflects a preemptive tightening to gain a bit more safety margin and policy maneuverability in the global high interest rate marathon.

PBOC Injects 100 Billion Yuan in Swaps: Supporting Stability Amid Tightening Waves

Just as the Federal Reserve's rate hike expectations intensify and the RBA takes the lead in raising rates to an 18-year high, the People's Bank of China chose to inject low-cost funds into securities, fund management, and insurance companies through a swap operation of 100 billion yuan. The bidding rate for this operation was only 10 basis points, which is a direct expression of the policy stance: while major global economies emphasize the “fight against inflation” narrative, the PBOC is more concerned about maintaining a stable and predictable capital market and credit environment. Although the specific duration of the operation and the list of participating institutions were not disclosed, in the current backdrop of rising external interest rates, such low-cost tools directed at non-bank institutions represent a solid support for market volatility.

In contrast to the combined probabilities of further interest rate hikes from the Federal Reserve in December and January and the RBA’s substantial tightening stance at 4.85%, PBOC Governor Pan Gongsheng publicly emphasized the need to maintain stable operations in stock, bond, and foreign exchange markets, resembling a "growth stabilization" sub-melody amid the global rate hike chorus: not merely following the ups and downs of the external interest rate cycle but using structural tools like swap operations to direct easing to critical nodes in the capital market, mitigating volatility and preserving liquidity, thereby securing a relatively stable buffer zone for domestic asset pricing under the premise of a continued high external interest rate cycle.

AMD’s Earnings Report Exceeds Expectations: AI Dividends Offset High Interest Rate Shadows

At the same moment when interest rate expectations were leaning towards “higher and longer,” AMD's third-quarter report narrated a different thread for asset pricing. In the third quarter of 2026, AMD's revenue reached $13.38 billion, a year-on-year increase of 45%, clearly exceeding the market’s expectations of $13.09 billion; the adjusted earnings per share were $2.09, also better than the general expectation of $1.95. In the context of high interest rates raising discount rates, such profit growth directly counteracts valuation pressure.

Moreover, the internal structure showed a “double-edged sword”: the data center business revenue reached $8.55 billion, a year-on-year increase of 97%, significantly surpassing the expected $8.2 billion, almost describable as “doubling growth,” fueled by sustained demand for AI-related computing power; in contrast, client and gaming business revenue was only $3.72 billion, an 8% year-on-year decline, showcasing the clear pressures facing traditional PC and entertainment consumption in a high interest rate environment. A rapidly expanding AI data center sector is filling in, or even covering, the decline in traditional business, and this structural resilience sends a signal to the market: even if the interest rate curve continues to rise, as long as leading technology companies can extract sufficient profit increments from the AI cycle, the sentiment around risk assets will not solely be dominated by the tightening shadows of central banks.

Intertwined Hikes and Easing: Global Assets Seek New Anchors

When viewing the Federal Reserve, RBA, and PBOC on the same timeline, the current global landscape seems more like a cross-game between “tightening versus stability”: according to the CME “FedWatch” tool, the market assigns over 70% probability for the Federal Reserve to raise rates by 25 basis points in December 2026, and over 80% probability for continued cumulative hikes in January 2027, while the RBA has raised its policy rate to a new high of 4.85%, reinforcing its anti-inflation stance with action. Conversely, the PBOC is conducting a swap operation of 100 billion yuan at a bidding rate of 10 basis points directed to securities, funds, and insurance non-bank institutions, while Governor Pan Gongsheng clearly states the intention to “maintain stable operations in stock, bond, and foreign exchange financial markets,” releasing a mild easing signal within a relatively conservative framework. Under this high interest rate shell, AMD's third-quarter revenue and earnings significantly exceeded expectations, with a year-on-year surge in data center revenue, indicating that the profitability of the new AI cycle is paralleling monetary policy, becoming an overlooked second line in risk asset pricing; the market narrative is shifting from simply tracking interest rates to a multi-factor game of “interest rate path × profit resilience.” Going forward, what will truly determine asset anchors will be the actual endpoints of the Federal Reserve's two meetings, the rhythm and intensity of the PBOC's continued use of swaps and other tools, and whether the subsequent earnings reports from leaders like AMD can sustain the current profit momentum.

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