Global stocks slid, with European shares set for a weak open on Wednesday as worries over U.S. inflation resurfaced and bond yields spiked, boosting the dollar and keeping the yen, yuan and euro near multi-month lows.
After losses in Asia and Wall Street overnight, European bourses were due to open lower after data showed the U.S. economy and labour market remained stable, spurring expectations that the Federal Reserve will be measured in its rate cutting cycle.
Eurostoxx 50 futures were down 0.3%, while German DAX futures fell 0.23%. Rising bond yields will probably weigh on tech stocks in Europe as well after they touched a more than five-month high on Tuesday.
Investor focus in 2025 has been on shifting U.S. rate expectations, amid growing policy divergence between the U.S. and other economies and the threat of tariffs once President-elect Donald Trump steps back into the White House on Jan. 20.
The Fed in December projected just two rate cuts for 2025, half the number it had earlier predicted. Markets are currently pricing in 38 basis point of easing this year with the first cut fully priced in for July.
The European Central Bank, meanwhile, is expected to make deep rate cuts, with traders pricing in 99 bps of easing this year, even though euro zone inflation accelerated in December, according to data on Tuesday.
That has left the euro close to the more than two-year low of $1.022475 it touched last week. It last bought $1.035375, with investors worried the single currency may fall to the key $1 mark this year due to tariff uncertainties. [FRX/]
The yen was last at 158.12 per dollar after touching 158.425 on Tuesday, a level last seen in July when Tokyo intervened to support the currency. It slid more than 10% last year against the dollar and has had a rough start to 2025.
In stocks, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.5%. On Wall Street, all three main indexes finished lower as the economic and jobs data stoked inflation worries. [.N]
China’s blue chip CSI300 Index fell more than 1% to its lowest in more than three months on Wednesday in a stuttering start to the year that has seen regulators and authorities rush to soothe investors’ nerves. [.SS]
Hong Kong’s Hang Seng Index dropped just over 1% to its lowest level since the end of November, while China’s yuan fell to a fresh 16-month low. [CNY/]
US DATA UNDERPINS DOLLAR
Data on Tuesday showed U.S. job openings unexpectedly increased in November while hiring softened, suggesting the labour market slowed at a pace that probably does not require the Fed to be in a rush to cut rates.
