Global stock markets moved in differing directions Wednesday while the U.S. dollar weakened ahead of the release of key U.S. employment data, as investors assessed the Federal Reserve’s interest rate path and processed corporate earnings.
Market sentiment was influenced by expectations for monetary policy. Traders increased the perceived probability of three interest rate cuts by the Federal Reserve this year, following unexpectedly flat U.S. retail sales for December and warnings from White House economic adviser Kevin Hassett of potential soft economic readings. This shift comes after the Fed held rates steady in January, ending a sequence of three consecutive cuts. The upcoming nonfarm payrolls report is now a critical indicator for confirming or reversing these expectations.
U.S. stock futures pointed to a marginal gain, reflecting a cautious optimism. However, concerns about technology sector valuations persisted. Investors worry that massive corporate investments in artificial intelligence may not yield near-term returns, a sentiment reinforced by Alphabet’s swift $30 billion debt issuance to fund AI capabilities and news of a new tax-strategy tool from startup Altruist Corp that rattled financial services stocks.
European equities traded mostly lower, in contrast to gains in major Asian markets. Notable movers included Heineken, up 2.1% after announcing a restructuring with 6,000 job cuts, and TotalEnergies, which rose 1.8% despite a 17% drop in annual net profit after launching fresh share buybacks. Siemens Energy gained 4.6% on higher demand for electricity linked to AI. Conversely, Dassault Systèmes fell over 19% after disappointing sales figures.
Crude oil prices rose by more than 1%, buoyed by heightened Middle East tensions. Israeli Prime Minister Benjamin Netanyahu is expected to press President Donald Trump for a tougher stance in nuclear negotiations with Iran, adding a geopolitical risk premium.
Currency markets saw the dollar weaken against major peers. The euro strengthened to $1.1925, the pound rose to $1.3706, while the dollar fell to 153.31 yen. The euro slipped slightly against the pound.
Key indices at 1100 GMT showed a mixed picture: the FTSE 100 in London rose 0.5%, while the CAC 40 in Paris and DAX in Frankfurt each fell 0.4%. In Asia, the Hang Seng Index and Shanghai Composite closed up 0.3% and 0.1% respectively. U.S. markets were closed for a holiday.
The data underscores a market in a holding pattern, with the upcoming U.S. jobs report set to provide crucial clarity on the economic trajectory and the Federal Reserve’s policy timetable.
