Stock markets are preparing to experience a Friday correction after the cuts made last night by Losy while investors’ hopes of a rate cut in December by the Federal Reserve fade. With this pessimism as a backdrop, European stock markets begin the day with falls of more than 1.5%.
Asian indices suffered heavy losses as the long-awaited US employment data failed to provide clarity on the near-term path of interest rates, and investors once again dumped risk assets despite rising .
fell sharply overnight as concerns about inflated technology stock prices resurfaced, prompting the Nasdaq’s biggest daily move since April 9, when the president’s Liberation Day tariffs rattled markets. The Nasdaq lost more than 2% at the close.
Data released yesterday showed the U.S. economy created many more jobs than expected in September, but the rising unemployment rate and downward revisions in previous months created uncertainty for the Federal Reserve, which must decide whether or not to cut interest rates next month.
Treasury yields fell as futures indicated a 40% chance of a US rate cut in December, down from 30% the previous day. However, with the next jobs numbers only available after the Fed meeting, investors remain unconvinced of monetary easing next month.
Thus, pessimism has settled in the stock markets around the world with the European stock markets opening the session with declines of more than 1.5%. In the case of the Ibex, this corrective leads it to trade below 15,800 points. The German Dax also exceeds 1% of cuts while the London FTSE 100 and the French Cac are down 0.9% each.
“Once again, a rotation is observed from large technology companies (including Nvidia, despite its good results), semiconductors and in general securities linked to AI, towards defensive securities” explain MacroYield experts. “In addition to underlying concerns about valuations and the AI bubble, economic fear could also have had some impact, despite Walmart’s good results.” they add.
Chinese stocks are headed for their biggest weekly drop since late December, as technology stocks join the global sell-off. The Shanghai Composite fell 2.45% at the close. The falls are widespread, with technology stocks leading the decline, following the weak session of their American counterparts on Wall Street overnight. In Hong Kong, the benchmark Hang Seng Index plunged 2.5% to its lowest level in five weeks, and the technology index fell 3.1% to its lowest level in three months. In Japan, the Nikkei closed down 2.3%.
“Market sentiment weakened toward the end of the year due to lower risk appetite and recent subdued economic data,” Morgan Stanley analysts note in a report. “The index’s upside potential is modest, with moderate earnings growth and a valuation stabilizing at a higher level,” they add.
For his part, Kyle Rodda, senior analyst at Capital.com, explains that “the markets had many reasons for optimism, and initially, Nvidia’s excellent quarterly results propelled Wall Street towards success. US employment data was also probably the best expected.” “However, the momentum was not enough to sustain the recovery, and the fact that two critical risk events were overcome – both with positive results, it should be noted – was not enough to stop the pessimism that currently affects the markets,” the expert adds to Reuters.
The Federal Reserve maintains a cautious stance on inflation, as some officials expressed growing concern about the stability of financial markets, including the possibility of a sharp decline in asset prices. There is debate about when, and even whether, interest rates should be cut further.
Cleveland Fed President Beth Hammack warned that a further rate cut at this time carries a wide range of risks to the economy. Fed Governor Lisa Cook foresees the risk of sharp declines in asset prices.
In the currency market, the yen briefly rallied after Japanese Finance Minister Satsuki Katayama said intervention was a possibility to address excessive volatility and speculative moves, in an escalation of pressure from Tokyo to stem the currency’s slide.
Bank of Japan Governor Kazuo Ueda said a weak yen could affect core inflation. Hours earlier, data showed that Japan’s core consumer prices rose 3% in October, keeping expectations alive for a short-term interest rate hike.
Treasuries stabilize after last night’s gains. The two-year Treasury yield is unchanged at 3.554%, after falling 4 basis points overnight, while the 10-year yield is little changed at 4.098%, after falling 3 basis points during the US session.
In the raw materials market, oil prices extend the previous night’s decline, while the US Government pressured Ukraine to accept a peace agreement with Russia. US West Texas Intermediate crude oil falls 1% to $58.38 and accumulates a decrease of 2.8% this week.
The spot gold price fell 0.2% to $4,069 an ounce, after remaining virtually unchanged overnight.
Meanwhile, bitcoin fell 0.91% to $85,550, its lowest level in seven months.
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