Global stocks dip as dollar strengthens on rate expectations
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Global equity markets retreated on Wednesday, weighed down by renewed inflation concerns in the U.S. and surging bond yields. The dollar strengthened, supported by expectations of a measured Federal Reserve rate-cutting cycle, while the euro, yen, and yuan struggled near multi-month lows.
Key market movements
European futures and stock performance
Eurostoxx 50 futures fell 0.3%, and German DAX futures dropped 0.23%
Technology stocks in Europe face pressure from rising bond yields, which reached a five-month high on Tuesday
Currency market shifts
The euro hovered near a two-year low, last trading at $1.0354, with fears of further declines amid U.S. tariff uncertainties and ECB easing expectations
The yen lingered at 158.12 per dollar, close to intervention levels seen in July, reflecting persistent weakness following a rough 2024
U.S. rate outlook and data impact
The Federal Reserve’s December projections indicate only two rate cuts for 2025, half the earlier forecast
Markets are pricing in 38 basis points of easing in 2025, with the first cut expected in July
Data on Tuesday showed stronger-than-expected U.S. job openings in November, which eased concerns over a sharp labor market slowdown.
Benchmark 10-year Treasury yields climbed to 4.699%, their highest since April, bolstering the dollar
The dollar index (DXY) stood at 108.65, not far from its two-year high, as investors continued to expect U.S. rates to stay elevated for longer
Global stock and commodity highlights
Asia-Pacific markets
MSCI’s Asia-Pacific index fell 0.5%, with Hong Kong’s Hang Seng Index down over 1% and China’s CSI300 index dropping more than 1% to a three-month low
U.S. markets
Wall Street saw losses across all three main indices as labor market data stoked inflation fears
Commodities
Oil prices rose, with Brent crude up 0.67% at $77.57 per barrel and WTI crude climbing 0.85% to $74.88 per barrel
Investor focus shifts to payrolls data
Markets now await Friday’s non-farm payrolls report, expected to show a gain of 160,000 jobs in December, following a surge of 227,000 jobs in November. A stronger-than-expected report could further temper expectations of aggressive Fed rate cuts
Outlook
The combination of stable U.S. economic growth, persistent inflation concerns, and a gradually cooling labor market supports the case for a cautious Fed. Global markets remain under pressure, with the dollar poised to benefit from higher-for-longer rate expectations. Investors will closely monitor the upcoming inflation report on January 15 for further direction.
Key market movements
European futures and stock performance
Eurostoxx 50 futures fell 0.3%, and German DAX futures dropped 0.23%
Technology stocks in Europe face pressure from rising bond yields, which reached a five-month high on Tuesday
Currency market shifts
The euro hovered near a two-year low, last trading at $1.0354, with fears of further declines amid U.S. tariff uncertainties and ECB easing expectations
The yen lingered at 158.12 per dollar, close to intervention levels seen in July, reflecting persistent weakness following a rough 2024
U.S. rate outlook and data impact
The Federal Reserve’s December projections indicate only two rate cuts for 2025, half the earlier forecast
Markets are pricing in 38 basis points of easing in 2025, with the first cut expected in July
Data on Tuesday showed stronger-than-expected U.S. job openings in November, which eased concerns over a sharp labor market slowdown.
Benchmark 10-year Treasury yields climbed to 4.699%, their highest since April, bolstering the dollar
The dollar index (DXY) stood at 108.65, not far from its two-year high, as investors continued to expect U.S. rates to stay elevated for longer
Global stock and commodity highlights
Asia-Pacific markets
MSCI’s Asia-Pacific index fell 0.5%, with Hong Kong’s Hang Seng Index down over 1% and China’s CSI300 index dropping more than 1% to a three-month low
U.S. markets
Wall Street saw losses across all three main indices as labor market data stoked inflation fears
Commodities
Oil prices rose, with Brent crude up 0.67% at $77.57 per barrel and WTI crude climbing 0.85% to $74.88 per barrel
Investor focus shifts to payrolls data
Markets now await Friday’s non-farm payrolls report, expected to show a gain of 160,000 jobs in December, following a surge of 227,000 jobs in November. A stronger-than-expected report could further temper expectations of aggressive Fed rate cuts
Outlook
The combination of stable U.S. economic growth, persistent inflation concerns, and a gradually cooling labor market supports the case for a cautious Fed. Global markets remain under pressure, with the dollar poised to benefit from higher-for-longer rate expectations. Investors will closely monitor the upcoming inflation report on January 15 for further direction.