Global Markets Wobble Amid Fed Rate Cut Anticipations and Oil Price Fluctuations

Global stock indexes eased, U.S. Treasury yields rose, and energy shares declined as the Federal Reserve's interest rate cuts were anticipated. China’s central bank stimulus impacted the yuan. Key U.S. economic data influenced market movements, while oil and gold prices reflected broader economic sentiments.

Global stock indexes mostly eased on Wednesday along with energy shares, while U.S. Treasury yields rose as investors maintained confidence in the Federal Reserve's ability to achieve a soft landing for the U.S. economy. China's yuan returned earlier gains after the country's central bank introduced its most significant stimulus since the pandemic to combat deflation and steer the economy towards growth targets.

In the U.S., new home sales data for August had minimal market impact. However, Tuesday's data showing a significant drop in U.S. consumer confidence in September provoked labor market concerns. The U.S. central bank commenced the expected series of interest rate cuts with a hefty half-percentage-point reduction last week.

Market participants are now betting on 59% odds of a 50-basis point cut at the Federal Reserve's November 7 meeting, up from 37% the previous week, while a 25-basis point reduction holds a 41% chance according to CME Group's FedWatch Tool. According to Chip Hughey, managing director of fixed income at Truist Advisory Services in Richmond, Virginia, "We're seeing yields trend broadly higher, which is a little counter-intuitive at the start of the Fed cutting cycle."

Investors are poised to observe U.S. weekly jobless claims due Thursday and the personal consumption expenditures price index expected on Friday. On Wall Street, the Dow and S&P 500 closed lower, whereas Nasdaq remained flat.

Energy sector led declines in S&P 500, dropping 1.9%, with oil prices also closing lower. The Dow Jones Industrial Average slid 293.47 points or 0.70% to 41,914.75, the S&P 500 fell 10.67 points or 0.19% to 5,722.26, and the Nasdaq Composite rose 7.68 points or 0.04% to 18,082.21.

MSCI's gauge of global stocks dipped 0.11% to 843.61 while the STOXX 600 index also fell by the same percentage.

The dollar rebounded from a 14-month low against the euro in volatile trading, with the euro last down 0.41% at $1.1134 after previously peaking at $1.1214, its highest since July 2023. The dollar index surged 0.68% to 100.91, after previously touching 100.21, matching a low from September 18 and the weakest level since July 2023. The greenback rose 1.03% against the Japanese yen to 144.68, reaching 144.75, the highest since September 3.

The dollar was last up 0.33% at 7.033 yuan in offshore trading following a peak of 6.9952, the strongest since May 2023. U.S. 10-year Treasury yields rose by 4.9 basis points to 3.784%, with a 3 bps increase since the rate cut on September 18.

Oil prices fell as supply disruption concerns in Libya eased. U.S. crude dropped $1.87 to $69.69 per barrel, and Brent crude fell $1.71 to $73.46 per barrel. Meanwhile, spot gold reached a record high, as expectations for another major Fed rate cut buoyed its rally. Gold climbed 0.2% to $2,662.00 per ounce by 1750 GMT after peaking at $2,670.43 earlier.

(Additional reporting by Tom Wilson in London and Gertrude Chavez-Dreyfuss in New York; Editing by Chizu Nomiyama, Richard Chang, Nick Zieminski, and Aurora Ellis)

(With inputs from agencies.)