Global stocks fall as Fed warnings dent December cut odds to 51%

MSCI’s Asia ex-Japan index dropped about 1.6%, South Korea fell as much as 3.6%, and Japan’s Nikkei lost roughly 2% after Wall Street’s biggest one-day decline since April. U.S. Treasury yields eased and gold firmed, while oil ticked higher.

The risk-off tone started in Asia and fed into Europe and U.S. pre-market trade. Dealers tied the move to Fed officials’ warnings against premature easing, which knocked back bets on a near-term cut, and to China reports showing factory output and retail sales grew at their weakest pace in over a year. European equity futures were mixed to slightly lower and U.S. futures were soft following Thursday’s slide in New York.

Benchmark U.S. Treasury yields, which had popped earlier in the week, slipped as investors recalibrated the path for policy into year-end; the dollar, despite the risk-off in stocks, headed for a weekly decline as traders squared positions ahead of a backlog of U.S. data now that Washington has reopened. Strategists said the unusual combination — equities weaker but the dollar softer — speaks to position reduction rather than a clean flight to the greenback.

Alongside the soft October activity prints, new-home prices fell at their fastest pace in a year, highlighting persistent property-sector drag and fragile household confidence. The data reinforced concerns about domestic demand even after earlier easing steps, keeping regional risk appetite on the back foot.

Commodities showed a split screen. Gold found support on haven demand as stocks wilted, while crude edged higher after reports of a Ukrainian drone strike on a Russian oil depot, reminding traders that supply risks remain live into winter. Energy desks said positioning stayed light given the broader de-risking across equities and credit.

From an APAC-into-Europe handoff perspective, dealers described the session as a classic “de-risk and wait”: trim equity exposure, add duration at the margin, and reduce dollar longs until the data fog clears. With investors still digesting the effects of the U.S. shutdown on the economic calendar and parsing Fed commentary, risk assets lacked a near-term catalyst, leaving markets sensitive to headlines.