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.
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. 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. “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.
