London (AFP) - Major stock markets diverged Tuesday, with analysts warning November’s rally fuelled by bets on interest rate cuts may have gone too far.

On Wall Street, the Dow and S&P 500 fell but the Nasdaq rose in initial deals following sizeable losses in Asia and a mixed session in Europe.

After markets in Shanghai and Hong Kong closed, Moody’s said it had downgraded its outlook on China’s credit rating citing rising debt in the world’s second-largest economy.

“The markets are a touch nervous ahead of US jobs figures this week which could either reinforce or undermine the narrative that interest rates have peaked and rate cuts are on the way,” said AJ Bell investment director Russ Mould.

“Signs the labour market is heating up again would put any hopes of a Santa rally into the end of the year under threat,” he added.

London dipped in late afternoon deals but eurozone indices logged modest gains.

The price of haven investment gold dropped slightly, after striking a record high on Monday at $2,135.39 per ounce as the dollar weakened on expectations for a rate cut.

Bitcoin on Tuesday reached $42,393.19, a fresh high since April last year, before pulling lower.

European gas prices hit the lowest level in nearly two months, bringing some relief amid cold weather.

Equity markets had surged last month as slowing inflation and a softer US job market stoked expectations that the Federal Reserve would early next year begin loosening monetary policy.

Those hopes were boosted Friday when Fed chief Jerome Powell said rates were “well into restrictive territory”.

More than one percentage point of reductions through to next December have been priced in by futures traders, according to Bloomberg News.

But observers said the euphoria may have caused investors to get ahead of themselves and the next few weeks could be a little bumpy, while they remained broadly upbeat about the new year.

Morgan Stanley strategist Michael Wilson said in a note that this month could see “near-term volatility in both rates and equities” before positive seasonal trends and “January effect” provide a lift next month.

“The biggest near-term risk for the markets could simply be that after a phenomenal one-month rally, a period of consolidation may be a necessary breather,” said UBS Global Wealth Management’s Jason Draho.

Traders were awaiting the release Friday of key US jobs data, with a miss to the downside of expectations likely to ramp up optimism for a rate cut in early 2024. However, a forecast-beating reading could jolt markets.

That is followed next week by the Fed’s policy meeting. Most watchers are tipping it to stand pat on rates, though its statement will be parsed for any clues about plans for the next few months.

- Key figures around 1430 GMT -

New York - Dow: DOWN 0.4 percent at 36,054.85 points

London - FTSE 100: DOWN 0.4 percent at 7,482.38

Paris - CAC 40: UP 0.6 percent at 7,372.82

Frankfurt - DAX: UP 0.5 percent at 16,478.93

EURO STOXX 50: UP 0.6 percent at 4,439.20

Tokyo - Nikkei 225: DOWN 1.4 percent at 32,775.82 (close)

Hong Kong - Hang Seng Index: DOWN 1.9 percent at 16,327.86 (close)

Shanghai - Composite: DOWN 1.7 percent at 2,972.30 (close)

New York - Dow: DOWN 0.1 percent at 36,204.44 (close)

Euro/dollar: DOWN at $1.0817 from $1.0839 on Monday

Pound/dollar: DOWN at $1.2618 from $1.2632

Dollar/yen: DOWN at 146.94 yen from 147.19 yen

Euro/pound: DOWN at 85.71 pence from 85.77 pence

West Texas Intermediate: UP 0.6 percent at $73.48 per barrel

Brent North Sea crude: UP 0.8 percent at $78.63 per barrel

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