(Bloomberg) — European stocks and US equity futures dropped as traders trimmed bets on Federal Reserve interest-rate cuts after Friday’s payroll 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 climbed to a four-month high, with a fresh wave of US sanctions on Russia threatening to crimp supplies. Contracts for the S&P 500 were 0.4% lower. Asian stocks fell for a fourth day. Bloomberg’s gauge of the dollar touched the highest in more than two years. Treasury yields extended last week’s advance, with the 10-year up two basis points to 4.78%.
Blowout US job market figures underscoring resilience in the American economy, combined with expectations that policies under President-elect Donald Trump may boost inflation, are persuading many investors that interest rates will stay higher for longer than previous projections.
“The market is really going with the story that there will be less and less cuts” by the Fed, Eugenia Victorino, head of Asia strategy at Skandinaviska Enskilda Banken AB, said in an interview on Bloomberg Television. “At this point, you still have so much uncertainty at least as far as the incoming Trump policies are concerned.”
The next key number from the US will be inflation figures due Wednesday. Traders will also be watching the New York Fed’s one-year inflation expectations due Monday, producer prices on Tuesday and jobless claims on Thursday.
Bank of America Corp., which previously projected two quarter-point Fed rate cuts this year, said it no longer expects any, and said there’s a risk the next move is a hike. Goldman Sachs Group Inc. sees two cuts this year, down from three earlier.
Treasuries slumped on Friday after the December payrolls data, sending the 30-year yield above 5% for the first time in more than a year. Declines across 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 slid as much as 0.7% to $1.2124, the weakest level since November 2023, following its 1.7% drop last week.
A “slowing economy, growing twin deficits of current account and fiscal accounts are negatives for the pound,” said Christopher Wong, a foreign-exchange strategist at Oversea-Chinese Banking Corp. in Singapore.
Brent crude climbed above $81 a barrel, after surging almost 4% Friday. That was after the US imposed its most aggressive and ambitious sanctions yet on Russia’s oil industry, targeting two large exporters, insurance companies, and more than 150 tankers.
In Asia, an MSCI Inc. gauge of the region’s stocks dropped as much as 1.1%, taking the benchmark’s decline this month to more than 3%.
Chinese shares extended 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, with US President-elect Donald Trump promising to impose even higher tariffs on Chinese goods when he takes office next week.
China ramped up its support for the yuan with a warning and tweaks to its capital controls, after the currency dropped close to a record low against the dollar in offshore trading.
The People’s Bank of China and other regulators will strengthen their management of the foreign-exchange market, deal with any behavior that may disrupt market order and prevent the risks of an overshoot in the yuan. Beijing will make sure the currency is basically stable at reasonable levels, the central bank said in a statement.
Key events this week:
India CPI, Monday
ECB Chief Economist Philip Lane and Governing Council member Olli Rehn speak in Hong Kong, 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, Minneapolis Fed President Neel Kashkari speak, Wednesday
Australia unemployment, Thursday
Germany CPI, Thursday
US initial jobless claims, retail sales, import prices, Thursday
Bank of America, Morgan Stanley earnings, Thursday
China GDP, property prices, retail sales, industrial production, Friday
Eurozone CPI, Friday
US housing starts, industrial production, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.6% as of 8:15 a.m. London time
S&P 500 futures fell 0.4%
Nasdaq 100 futures fell 0.6%
Futures on the Dow Jones Industrial Average fell 0.2%
The MSCI Asia Pacific Index fell 1.1%
The MSCI Emerging Markets Index fell 1.5%
Currencies
The Bloomberg Dollar Spot Index was 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 British pound fell 0.3% to $1.2166
Cryptocurrencies
Bitcoin fell 1% to $93,389.56
Ether fell 2.2% to $3,193.95
Bonds
The yield on 10-year Treasuries advanced three basis points to 4.79%
Germany’s 10-year yield advanced three basis points to 2.62%
Britain’s 10-year yield advanced four basis points to 4.88%
Commodities
This story was produced with the assistance of Bloomberg Automation.
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