Market Jitters: Investors Brace for Fed's Interest Rate Direction

Global equities and bond markets reacted cautiously ahead of the U.S. Federal Reserve's meeting next week, where a pause in rate cuts is anticipated. Investors are closely watching inflationary pressures and central bank policy signals. Currencies and commodities reflected these mixed expectations.

Global equity markets showed signs of unease on Friday, as bond yields climbed ahead of the U.S. Federal Reserve's upcoming meeting. Benchmark 10-year U.S. Treasuries reached a three-week high, indicating investor expectations that Fed Chair Jerome Powell will hint at a pause in easing policy following an anticipated rate cut.

The U.S. faces persistent inflation challenges, currently above the 2% annual target. November's producer prices were higher than anticipated, and import prices showed minimal rises. The market is betting on policy pauses to manage inflationary and labor-market dynamics, despite consensus on a December rate cut.

Dollar strength continues, with potential slower rate cuts bolstering its performance. Oil prices surged on supply constraints from geopolitical tensions, while gold edged lower as U.S. and European interest rate actions withhold definitive market direction.

(With inputs from agencies.)