Global markets experienced turbulence this week, driven by US Treasury yields rise. Stocks fell, with Wall Street futures dropping sharply. Nasdaq futures declined by 0.6%, while S&P 500 futures fell 0.5%. These changes reflect investor anxiety ahead of crucial U.S. jobs data.
Asian markets mirrored this downturn. Japan’s Nikkei dropped 0.8%, extending its weekly losses to 1.5%. Meanwhile, China's blue-chip stocks slipped by 0.1%. Despite this, Hong Kong's Hang Seng Index rose 0.5%, offering a slight contrast in market performance.
The spotlight now shifts to the U.S. monthly payrolls report, set for release on Friday. Median forecasts predict an increase of 160,000 jobs in December, with unemployment expected to hold steady at 4.2%. A stronger-than-expected report could push 10-year Treasury yields to new 13-month peaks.
Analysts from ING believe job growth below 150,000 may halt the upward momentum in Treasury yields. However, significant deviations from forecasts are necessary to influence markets substantially.
Patrick Harker, President of the Philadelphia Fed, highlighted that rate cuts by the U.S. Federal Reserve might be unnecessary in the near term. However, differing views from Kansas City Fed President Jeff Schmid signal ongoing debates regarding monetary policy.
The surge in Treasury yields continues to impact global bond markets. The benchmark 10-year U.S. Treasury yield currently sits at 4.6791%, nearing its eight-month peak of 4.73%. If it breaks this level, a climb to 5%—unseen since 2007—could be imminent.
Currency markets have also reacted. The U.S. dollar index rose for the sixth consecutive week, reaching 109.14. In contrast, the British pound remains under pressure, slipping 0.1% to $1.2292 on Friday. Economic concerns in the UK contributed to this decline, pushing gilts to their highest yields in 16.5 years.
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