FX.co ★ U.S. Stocks May See Further Downside After Friday's Sell-Off

U.S. stock index futures suggest a lower opening on Monday, likely extending the sell-off from last Friday. Market sentiment is being dampened by concerns over rising U.S. Treasury yields, as the ten-year yield surpassed 4.6% for the first time since late May.

The climb in Treasury yields reflects the Federal Reserve's latest forecast indicating fewer rate cuts than previously anticipated in 2025. Additionally, there's apprehension regarding President-elect Donald Trump's potential budget policies and their impact on the U.S. deficit.

Boeing (BA) shares might further pressure the Dow following an order from South Korea's Transport Ministry to inspect B737-800 aircraft in light of the fatal Jeju Air incident over the weekend.

Overall, trading volume is expected to be light with many traders likely taking an early holiday break ahead of New Year's Day.

Friday's market drop saw all major averages close significantly lower, with the Nasdaq experiencing the biggest hit as the ten-year yield reached an eight-month high. The Dow fell 333.59 points, or 0.8%, settling at 42,992.21, after reaching an intraday low of 42,761.56. The S&P 500 dropped 66.75 points, or 1.1%, closing at 5,970.84, off its low of 5,932.95, while the Nasdaq declined 298.33 points, or 1.5%, to finish at 19,722.03, recovering from 19,533.40.

Despite Friday’s losses, the Dow registered a weekly gain of approximately 1.4%, and both the S&P 500 and Nasdaq rose over 1.5% for the week. Notably, Tesla closed nearly 5% lower, with Apple, Nvidia, Alphabet, Microsoft, Amazon, Oracle, Netflix, Accenture, Morgan Stanley, and Micron Technology recording losses between 1% and 3%.

Economically, U.S. retail inventories, excluding the automotive sector, rose 0.6% from the previous month in November, following a revised 0.3% increase in October according to preliminary estimates.

**Commodities and Currency Markets**

In the commodities space, crude oil futures increased by $0.38 to $70.98 per barrel, following a gain of $0.98 the prior session. Gold futures gained $4 to trade at $2,635.90 an ounce after a previous $22 drop.

Currency-wise, the U.S. dollar is trading at 157.49 yen, down from 157.87 yen in New York on Friday. Against the euro, the dollar is slightly changed at $1.0432 from Friday's $1.0426.

**Asia Markets**

Asian markets delivered mixed outcomes on Monday amidst a cautious tone as the year-end approaches. Higher U.S. yields supported the dollar, while oil and gold saw marginal fluctuations.

China's Shanghai Composite edged up 0.2% to 3,407.33 in anticipation of Tuesday's manufacturing PMI data. However, Hong Kong's Hang Seng Index decreased by 0.2% to 20,041.42, with tech player Baidu sliding 1.4%.

Japan's Nikkei 225 Index ended a three-day winning streak, dropping 1% to 39,894.54 due to declines in technology and heavyweights, while the broader Topix Index fell 0.6% to 2,784.92. SoftBank Group decreased by 0.8% and Fast Retailing by 1.6%.

Seoul's Kospi Index dipped 0.2% to 2,399.49 amid political tensions around President Yoon Suk Yeol, coupled with disappointing industrial output data. Jeju Air shares nosedived 8.7% following a fatal crash involving the carrier.

In Australia, markets reversed gains with financial, property, and technology sectors leading the decline. The S&P/ASX 200 Index was down 0.3% to 8,235, and the All Ordinaries fell 0.3% to 8,496, though energy and coal stocks managed gains, with Woodside Energy and Whitehaven Coal up by 1% and 2.5%, respectively.

Conversely, New Zealand's S&P/NZX-50 Index rose by 0.5% to 13,270.01.

**Europe Markets**

European markets are trading mostly lower, continuing the cautious trend from the U.S. following Friday’s decline, affecting the anticipated seasonal Santa Claus rally. With New Year's Day approaching, several regional markets plan to close early on Tuesday.Over the weekend, Robert Holzmann, a member of the European Central Bank's Governing Council, indicated to the Austrian publication Kurier that the ECB might postpone its forthcoming interest rate cut in response to the recent surge in inflation.

In Italy, the Senate, on Saturday, approved the government's budget plan for 2025 aimed at reducing the deficit through tax cuts and debt management strategies.

Meanwhile, in France, the new finance minister stated in a newspaper interview that the delayed 2025 budget would aim for a deficit marginally over 5 percent, prioritizing economic growth protection.

Market movements reveal a 0.3 percent decline in France's CAC 40 Index, with both the U.K.'s FTSE 100 Index and Germany's DAX Index experiencing a 0.4 percent drop.

Italian energy giant Eni saw a 0.5 percent increase after announcing the commencement of phase two production in its Baleine oil field, located off the coast of Ivory Coast.

Novartis AG's share price remained relatively stable following the release of positive results from the Phase III STEER study involving intrathecal onasemnogene abeparvovec.

Siemens Healthineers experienced a decline of over 1 percent after Ralf Thomas, CFO of Siemens AG, revealed in an interview with Handelsblatt that the company is reviewing its controlling interest in its medical technology subsidiary.

BayWa's shares surged by 13 percent subsequent to the renewable energy firm's declaration of plans to downsize its workforce from 4,250 to 1,500 by the end of 2027 as part of a strategic restructuring.

Ahead of the upcoming release of Chinese manufacturing PMI data on Tuesday, companies with China exposure such as LVMH, Hermes International, and Kering were all seeing declines.

**U.S. Economic News**

MNI Indicators is set to publish its December report on business activity in the Chicago area at 9:45 a.m. ET. The Chicago business barometer is anticipated to rise to 42.5 in December from 40.2 in November, though any reading under 50 would still signify contraction.

At 10 a.m. ET, the National Association of Realtors is expected to release its November data on pending home sales, forecast to increase by 0.7 percent following a 2.0 percent rise in October.