European equities and U.S. futures retreated on Friday after Federal Reserve Chairman Jerome Powell signaled that the central bank is in no rush to cut interest rates, despite concerns about inflation and the economy’s resilience. The Stoxx Europe 600 index fell 0.7%, extending its losing streak to a fourth consecutive week, while S&P 500 futures pointed to a second day of declines on Wall Street.
In bond markets, yields on two-year U.S. Treasuries steadied following a sharp rise the previous day. Traders dialed back expectations for an interest rate cut by the Fed in December, reducing the odds of a reduction to less than 60% from about 80% a day earlier. Powell’s comments, made during a speech on Thursday, reinforced the Fed’s cautious stance on further easing, suggesting that the strength of the U.S. economy may allow for a slower pace of policy adjustments.
The U.S. dollar strengthened, with the Bloomberg Dollar Spot Index poised to rise approximately 1.4% for the week, having hit a two-year high on Thursday. Powell’s remarks further bolstered the dollar, adding to a rally that began after Donald Trump’s election victory. The greenback’s upward momentum underscores investor optimism about U.S. economic prospects, though some analysts caution that the market may be overpricing the potential impact of Trump’s policy agenda.
“Markets risk over-egging this story,” said Richard Franulovich, head of FX strategy at Westpac Banking Corp. in Sydney. “The US dollar is pricing in a lot of Trump policy without clear timing or implementation details.”
Global equities are showing signs of fatigue, following a surge in the aftermath of the U.S. presidential election. Fed policymakers have voiced concerns about the economy’s strength, lingering inflation, and ongoing uncertainty. These factors have prompted calls for a pause in the market rally and have raised questions about whether the bullish sentiment may be overstretched.
In Asia, the MSCI Asia Pacific Index posted a modest gain of 0.3%, on track for its first weekly increase. However, China’s CSI 300 Index declined, despite signs of economic resilience in the country. Retail sales in China grew at the fastest pace in eight months, according to a monthly report, signaling strong domestic demand.
The Japanese yen reversed earlier losses after Finance Minister Katsunobu Kato announced that authorities are monitoring the foreign exchange market, following concerns about recent currency volatility.
Meanwhile, commodities saw mixed moves. Oil prices were on track for a weekly decline, pressured by a stronger dollar and fears of an oversupplied global market in the year ahead. Brent crude slipped 1.5% to $71.47 a barrel, while gold held near a two-month low.
Key Economic Events This Week:
U.S. Retail Sales, Empire Manufacturing, Industrial Production Data – Friday
Market Movements:
Stocks:
- Stoxx Europe 600: -0.7%
- S&P 500 Futures: -0.6%
- Nasdaq 100 Futures: -0.9%
- Dow Jones Industrial Average Futures: -0.6%
- MSCI Asia Pacific Index: +0.3%
- MSCI Emerging Markets Index: +0.1%
Currencies:
- Bloomberg Dollar Spot Index: -0.2%
- Euro: +0.2% to $1.0556
- Japanese Yen: +0.3% to ¥155.75 per dollar
- Offshore Yuan: +0.2% to ¥7.2379 per dollar
- British Pound: little changed at $1.2661
Cryptocurrencies:
- Bitcoin: -0.6% to $87,685.14
- Ether: -2.6% to $3,038.95
Bonds:
- 10-year U.S. Treasuries: +1 basis point to 4.45%
- Germany’s 10-year bond yield: +1 basis point to 2.35%
- U.K. 10-year bond yield: +2 basis points to 4.50%
Commodities:
- Brent Crude: -1.5% to $71.47 a barrel
- Spot Gold: little changed
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