Business & Economy

Global stock markets slide amid strong U.S. dollar, employment data

Published by
Esther Agbor

 

Global stock markets took a downturn on Monday as the U.S. dollar surged to its highest level in over two years, propelled by stronger-than-expected U.S. jobs data, signaling less likelihood of further interest rate cuts by the Federal Reserve.

The dollar index rose by 0.23 per cent to 109.91, reaching a peak of 110.17, reflecting growing confidence in the currency among investors. This surge was largely attributed to the U.S. Labor Department’s December jobs report, which showed an unexpected addition of 256,000 nonfarm payrolls, far exceeding the anticipated 160,000. This robust job growth, the largest since March, raised concerns over inflation, leading investors to speculate that the Fed may hold off on additional rate cuts.

U.S. Treasury yields also saw an uptick, with the 10-year note rising to 4.799 per cent, its highest level in 14 months, before retreating slightly to 4.788 per cent . The performance of major stock indices mirrored the dollar’s rise, with the S&P 500 falling 0.43 per cent to 5,801.96, and the Nasdaq Composite dropping 1.10 per cent to 18,951.26, led by declines in the tech sector. However, the Dow Jones Industrial Average managed to rise 0.46 per cent to 42,131.46, driven by strong performances in industrial stocks.

European and global stocks followed the downtrend, with MSCI’s global index falling 0.62 per cent to 828.72, and the STOXX 600 index slipping by 0.44 per cent . Investor attention is now focused on the upcoming U.S. Consumer Price Index data, expected to show a 2.9 per cent annual increase, along with a 0.3 per cent monthly rise. Producer price data is also anticipated on Tuesday, adding further weight to investor sentiment.

In the commodities market, U.S. crude oil prices saw a significant rise, increasing by 2.42 per cent to $78.42 per barrel, while Brent crude gained 1.6 per cent to $81.04 per barrel. On the other hand, gold prices fell by 0.7 per cent to $2,670.86 per ounce, pressured by the strengthening dollar.

Currency markets also reflected the dollar’s strength, with the euro dipping 0.44 per cent to $1.0199 and the dollar edging slightly weaker against the yen, trading at 157.56.

Reuter reports that market analysts have pointed to uncertainties surrounding U.S. President-elect Donald Trump’s economic policies particularly potential tariffs, migration reforms, and tax cuts as contributing factors to market volatility. These developments, compounded by rising energy prices, have stoked concerns over persistent inflation, leaving investors cautious ahead of more economic data releases. “Investors also worry whether inflation could pick up as a result of the policies on tariffs, migration, and taxes of U.S. President-elect Donald Trump’s incoming administration.”

Esther Agbor

Esther is a graduate of History and International Relations. She writes on healthcare and the impact of economic policy on society.

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