(Bloomberg) — European stocks and U.S. stock futures fell as traders reduced bets on Federal Reserve interest rate cuts after Friday’s payrolls data. Global bond yields rose, while the dollar strengthened.
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Europe’s Stoxx 600 index fell 0.6%. Energy stocks outperformed as oil rose to a four-month high, with a new wave of U.S. sanctions on Russia threatening to squeeze supplies. S&P 500 contracts fell 0.4%. Asian stocks fell for the fourth day in a row. The Bloomberg dollar indicator hit its highest level in more than two years. Treasury yields extended last week’s advance, with the 10-year bond rising two basis points to 4.78%.
Shocking U.S. labor market numbers underscoring the resilience of the U.S. economy, combined with expectations that President-elect Donald Trump’s policies could boost inflation, are persuading many investors that interest rates will remain higher for longer than previous projections.
“The market is really believing that there will be fewer and fewer cuts” from the Federal Reserve, Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB, said in an interview on Bloomberg Television. “At this point, there is still a lot of uncertainty, at least when it comes to Trump’s incoming policies.”
The next key figure from the US will be the inflation figures due out on Wednesday. Traders will also be watching the New York Federal Reserve’s one-year inflation expectations on Monday, producer prices on Tuesday and jobless claims on Thursday.
Bank of America Corp., which previously projected two quarter-point rate cuts by the Fed this year, said it no longer expects any and said there is a risk that the next step will be an increase. Goldman Sachs Group Inc. expects two cuts this year, down from three previously.
Treasuries plunged on Friday after December payrolls data, sending the 30-year yield above 5% for the first time in more than a year. Declines in global bond markets extended into Monday, with German debt falling for an eighth day, the longest streak since December 2022.
The dollar strengthened for a fifth day, while the pound fell as much as 0.7% to $1.2124, the weakest level since November 2023, following its 1.7% fall last week.
“A slowing economy and rising twin current account and fiscal account deficits are negative for the pound,” said Christopher Wong, currency strategist at Oversea-Chinese Banking Corp. in Singapore.
Brent crude oil rose above $81 a barrel, after rising nearly 4% on Friday. That was after the United States imposed its most aggressive and ambitious sanctions yet on the Russian oil industry, targeting two major exporters, insurance companies and more than 150 oil tankers.
In Asia, an MSCI Inc. gauge of the region’s stocks fell as much as 1.1%, bringing the benchmark’s decline this month to more than 3%.
Chinese stocks extended their losses even after local data showed exports rose to a record last year. This may be one of the last high points for the country’s trade, as US President-elect Donald Trump has promised to impose even higher tariffs on Chinese goods when he takes office next week.
China increased its support for the yuan with a warning and adjustments to its capital controls, after the currency fell near a record low against the dollar in offshore trade.
The People’s Bank of China and other regulators will strengthen their management of the foreign exchange market, address any behavior that may disrupt market order, and avoid the risks of a yuan overshoot. Beijing will ensure that the currency is basically stable at reasonable levels, the central bank said in a statement.
This week’s key events:
India CPI, Monday
ECB Chief Economist Philip Lane and Governing Council Member Olli Rehn speak in Hong Kong on Monday
New York Fed President John Williams speaks Tuesday
Bank of Japan Deputy Governor Ryozo Himino speaks Tuesday
Eurozone industrial production, Wednesday
France CPI, Wednesday
UK CPI and US CPI, Wednesday
Chicago Fed President Austan Goolsbee and Minneapolis Fed President Neel Kashkari speak Wednesday
Unemployment in Australia, Thursday
Germany CPI, Thursday
US Initial Jobless Claims, Retail Sales and Import Prices, Thursday
Bank of America and Morgan Stanley results for Thursday
China GDP, property prices, retail sales, industrial production, Friday
Eurozone CPI, Friday
Home construction and industrial production in the US, Friday
Some of the main movements in the markets:
Stocks
The Stoxx Europe 600 fell 0.6% at 8:15 a.m. London time
S&P 500 futures fell 0.4%
Nasdaq 100 futures fell 0.6%
Dow Jones Industrial Average futures fell 0.2%
The MSCI Asia Pacific index fell 1.1%
The MSCI Emerging Markets Index fell 1.5%
Coins
Bloomberg Dollar Spot Index Little Changed
The euro fell 0.1% to $1.0230
The Japanese yen rose 0.1% to 157.53 per dollar
The offshore yuan rose 0.1% to 7.3525 per dollar
The pound fell 0.3% to $1.2166.
Cryptocurrencies
Bitcoin fell 1% to $93,389.56
Ether fell 2.2% to $3,193.95.
Captivity
The 10-year Treasury yield rose three basis points to 4.79%
The yield on the 10-year German bond rose three basis points to 2.62%
The British 10-year yield rose four basis points to 4.88%
Raw materials
This story was produced with the help of Bloomberg Automation.
