Global stocks dipped for the second day in a row, as U.S. Treasury yields rose sharply, stirring unease ahead of the release of U.S. inflation data, which investors hope will offer clues on the Federal Reserve’s plans for rate cuts. The MSCI All-Country World Index fell by 0.2%, with European and Asian shares struggling to recover from a recent downturn. U.S. stock futures also slipped slightly after Tuesday's market losses.
The yields on U.S. Treasury bonds spiked, with the 10-year yield climbing to 4.42% and the 2-year to 4.34%, marking the highest levels since July. This increase in bond yields follows Donald Trump’s re-election, as investors anticipate his policy proposals will drive government borrowing, raise inflation, and increase the fiscal deficit, potentially hindering the Fed’s ability to reduce rates. Meanwhile, traders see a 62% likelihood of a Fed rate cut in December, down from 77% a week prior. A higher-than-expected U.S. Consumer Price Index (CPI) report could further reduce expectations for a rate cut.
In currency markets, the rising Treasury yields bolstered the U.S. dollar, reaching a six-month high. The Japanese yen fell to 155 per dollar, a level that might prompt intervention by Japanese officials. In commodities, prices remained under pressure due to concerns about China's economic outlook amid U.S. trade tensions.
