Global stocks fell, with the dollar reaching two-year highs, in response to a strong US jobs report, which boosted bond yields and tested equity valuations. European shares were set to open lower, with EuroSTOXX 50 futures easing 0.3%, and other major indexes following suit.
The strong jobs report raised the stakes for a key consumer price index (CPI) report on Wednesday, with any rise greater than 0.2% threatening to rule out further interest rate cuts. Oil prices jumped to four-month highs amid signs of weaker crude shipments from Russia.
Market analysts are now scaling back expectations for Federal Reserve rate cuts in 2025, with the central bank seen cutting interest rates to around 4.0% instead of 3.0% previously forecast. Today, at least five Fed officials are scheduled to speak, including Federal Reserve Bank of New York President John Williams on Wednesday.
As yields on 10-year Treasuries hit 14-month highs, investors are adjusting their expectations, with some calling for interest rate hikes if the personal consumption expenditure (PCE) index exceeds 3%. Gold prices remained resilient at $2,688 an ounce, while the dollar strengthened.
The labor market data also saw China’s export growth rise 10.7% in December, while imports added 1%, signaling a robust economy. However, the country’s import growth is still subject to the challenges posed by the incoming US administration.
Asian markets were mixed, with Japan’s Nikkei 225 index down 0.2%, and South Korea’s KOSPI falling 1.0%. China’s Shanghai Composite index eased 0.3%.