Global Markets Slide as Fed Officials Signal Caution on Rate Cuts

Asian markets extended a global downturn on Friday after a wave of hawkish remarks from Federal Reserve officials dampened hopes for a U.S. interest rate cut next month. Investors reacted swiftly as uncertainty surrounding inflation, economic data, and monetary policy pressured equities, bonds, and even traditionally safe-haven assets.

Japan’s Nikkei plunged 1.8%, marking one of its sharpest daily declines in weeks, while Australia’s resource-focused index slipped 1.5%. South Korea’s market saw an even steeper 2.3% drop. Sentiment was further weighed down as traders awaited fresh economic reports from China, with recent weak lending figures fueling concerns about slowing household and business activity.

The selloff on Wall Street intensified the global downturn, led by steep losses in Nvidia and other major AI-driven stocks due to valuation worries. Expectations for a December Fed rate cut fell from 63% to just 51% in a single day, pushing Treasury yields higher. The two-year Treasury yield held at 3.597% after a 3-basis-point jump, while the 10-year yield edged up to 4.125%.

Despite rising yields, the U.S. dollar weakened, slipping 0.2% against major currencies. The yen gained ground, trading at 154.7 per dollar after hitting a nine-month low, while the Swiss franc strengthened 0.6%. The British pound declined 0.3% following reports that U.K. leaders scrapped plans for income tax increases.

Investors were further unsettled by the White House announcement that the October U.S. unemployment rate may never be released, limiting visibility into labor market conditions. Fed officials added to the cautious mood, with St. Louis Fed President Alberto Musalem warning against easing too quickly and Cleveland Fed President Beth Hammack stressing that policy must remain restrictive. Minneapolis Fed President Neel Kashkari also signaled uncertainty regarding December’s decision.

Oil prices rose slightly but remained on track for a third weekly loss, while spot gold inched higher to $4,183 per ounce after breaking a four-day winning streak.