Summary
- U.S. dollar and bond yields remain elevated, fueled by expectations of slower pace of Fed easing.
- Global equity markets soften, with investors focusing on Nvidia’s upcoming earnings.
- Bank of Japan remains cautious on interest rate hikes.
LONDON – The U.S. dollar and bond yields held near multi-month highs on Monday, driven by market expectations that the Federal Reserve will slow down its rate cuts. Meanwhile, global stock markets were mostly lower, as investors awaited Nvidia’s earnings report later in the week, a major focus for tech stocks.
U.S. Dollar & Bond Yields Surge
The U.S. dollar strengthened after comments from Fed Chair Jerome Powell, signaling that there was no rush to reduce interest rates further. The dollar index, which tracks the currency against six others, remained at 106.76, just shy of last week’s one-year peak of 107.07. The U.S. Treasury yields also edged higher, with the benchmark 10-year yield reaching 4.471%. The two-year yield stood at 4.3141%. These moves indicate a shift in market expectations, with traders pricing in fewer rate cuts in the near future.
The outlook for U.S. interest rates and inflation has kept the dollar firm, with the currency recently reaching its highest level in a year. The euro and sterling remained near multi-month lows, with the euro trading at $1.0540 and sterling at $1.2621.
Global Stocks Soft, Nvidia in Focus
Global equity markets saw modest declines. The MSCI World Index fell by 0.1%, while Europe’s STOXX 600 was down by 0.2%. Major European indices, including those in Frankfurt, London, and Paris, were mostly in the red, dropping between 0.2% and 0.1%. In contrast, Nasdaq futures were up by 0.3%, recovering after five consecutive days of losses. Meanwhile, S&P 500 futures edged up 0.1%, ahead of Nvidia’s third-quarter results on Wednesday.
Nvidia, a leader in artificial intelligence chips, has seen its stock soar nearly 200% this year, contributing significantly to the S&P 500’s rise. However, the company’s rapid growth has set high expectations, and any earnings miss could spark concerns that the market’s hopes for AI-driven growth may be overblown.
Japan’s Economic Outlook
In Asia, the MSCI Asia-Pacific Index rose slightly by 0.2%. However, Japan’s Nikkei 225 fell by 1.1%, mainly due to a decline in technology stocks. Meanwhile, Bank of Japan Governor Kazuo Ueda remained cautious about raising rates, although he hinted at future hikes if economic conditions and inflation align with the central bank’s projections. The Japanese yen weakened further, dropping to 155.18 per U.S. dollar, continuing its decline since October.
Commodities & Precious Metals
In commodities, oil prices saw a slight uptick. Brent crude futures rose 0.7% to $71.52 per barrel, and U.S. crude futures increased 0.5% to $67.36. Gold prices surged by 1.3%, recovering to $2,593 an ounce, following a sharp decline the previous week.
Key Takeaways:
- Dollar and U.S. bond yields remain strong, signaling slower Fed rate cuts.
- Global stocks dip as investors focus on tech earnings, particularly Nvidia.
- Japan’s yen continues to weaken, with no clear indication of immediate interest rate hikes.
- Oil and gold prices show modest gains amid a volatile market.
