Global Markets React to Strong U.S. Jobs Data and Rising Yields

Global markets tumbled Monday following a robust U.S. jobs report that pushed Treasury yields to 14-month highs, challenging equity valuations as earnings season begins. European futures dipped, with EUROSTOXX 50 down 0.3% and FTSE 100 easing 0.2%.

The report shifted focus to U.S. consumer price data, where a core inflation rise above 0.2% could halt any chance of Federal Reserve rate cuts. Currently, markets predict only 27 basis points of cuts in 2025, with the Fed's rate expected to settle at 4.0%.

Oil prices surged to four-month highs as Russia’s crude exports declined amidst tightened U.S. sanctions. Brent rose $1.38 to $81.14 per barrel, while U.S. crude jumped $1.41 to $77.97. Meanwhile, China's December export growth outpaced forecasts, but its trade surplus with the U.S. expanded to $105 billion, stoking tariff concerns. Beijing also defended the yuan by easing offshore borrowing rules.

U.S. stock futures continued their slide, with the S&P 500 and Nasdaq falling 0.4% and 0.6%, respectively. Treasury yields' rise weighed on equities, increasing borrowing costs and elevating the appeal of bonds over other asset classes.

The dollar hit a 14-month peak, lifting the dollar index to 108.90, while the euro fell to $1.02075. Sterling dropped 0.5% to $1.2128 amid fiscal concerns, while the yen steadied at 157.35 as speculation grew over potential Bank of Japan policy changes.

Major U.S. banks, including Citigroup, Goldman Sachs, and JPMorgan, are set to report earnings this week, testing optimism amidst higher yields and geopolitical uncertainties.

Gold held steady at $2,688 an ounce, while Asian shares broadly declined, led by a 1.6% drop in MSCI’s Asia-Pacific index. South Korean stocks fell 1% ahead of a key political decision on President Yoon Suk Yeol’s impeachment.