Markets were in a holding pattern on Monday, as US equity futures showed minor gains while Japan’s Nikkei took a significant hit. Investors were bracing for crucial US inflation data later this week, after bond yields surged to a 14-month peak, and inflation concerns resurfaced across global markets.
In early Asian trading, US Treasury yields remained elevated at 4.77%, slightly down from a peak of 4.805% hit in New York trade, the highest level since November 2023. Equity futures for the S&P 500 and Nasdaq 100 showed modest gains, up by 0.25% and 0.5%, respectively.
Meanwhile, Japan’s Nikkei dropped 1.5%, extending losses after the holiday break. Other Asian markets, including Hong Kong, China, and Australia, saw mixed performances, with modest advances in some areas.
On Monday, US stocks had experienced volatility, with the Nasdaq dipping 0.4% to a two-month low, while the S&P 500 managed a slight recovery after hitting a two-month low. The US dollar index surged to its highest level in more than two years before retreating slightly in response to reports suggesting that the incoming Trump administration may pursue a gradual tariff plan.
The recent rise in yields came after a robust US payrolls report, which reinforced fears of the Federal Reserve maintaining its more hawkish stance, with the market reducing expectations of interest rate cuts in the near future. There are also growing concerns about inflationary pressures linked to tariffs, migration policies, and taxes under President-elect Donald Trump’s administration.
Market watchers are now awaiting Wednesday’s release of US consumer price data, which is expected to be pivotal for future Fed policy. A core inflation reading surpassing the projected 0.2% increase could dampen hopes for future rate cuts. “The next few days will be crucial until we get clarity on the inflation figures,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “The Fed has adopted a more hawkish approach, and the market is pricing in minimal rate cuts for 2025.”
Adding to market tensions, oil prices surged to four-month highs, driven by concerns over reduced oil shipments from Russia due to escalating sanctions from Washington. Brent crude futures rose above $80 per barrel, surpassing their 200-day moving average.
Meanwhile, cryptocurrency markets also reflected investor unease, with Bitcoin falling nearly 7% over the past week to just below $95,000.
In the foreign exchange market, the euro held steady at $1.02475, hovering near its lowest level in over two years, while the Japanese yen traded at 157.54 per dollar, edging away from a six-month low reached last week.
Despite this, the yen showed little response to remarks from Bank of Japan Deputy Governor Ryozo Himino, who delivered a balanced outlook. The US dollar index, which measures the greenback against a basket of currencies, hit 110.17 before pulling back to 109.62.
Looking ahead, investors are also focusing on the start of the US fourth-quarter earnings season on Wednesday, with results expected from major banks including Citi and JPMorgan Chase. According to Oliver Pursche, senior vice president at Wealthspire Advisors, “Investors are trying to figure out whether the strong corporate earnings driven by a robust economy outweigh the potential benefits of lower inflation from a weaker economy.” He added that most investors would favor a strong economy with slightly elevated inflation.
As the market navigates these uncertain waters, all eyes will be on the upcoming inflation data and corporate earnings reports to provide further direction.
Related Topics:
Aegis Logistics Stock Jumps 3.94%, Outperforms Sector by 3.21%
Treasury Yields Reaching 5% Pose Threat to Stock Rally
US Stock Futures Steady Ahead of Earnings and Inflation Data
