By Yoruk Bahceli
LONDON, Dec 8 (Reuters) – By Yoruk Bahceli, markets correspondent
What matters in U.S. and global markets today
The Federal Reserve meeting is fast approaching on Wednesday – and the stakes are high. Rising bets for a December cut seem to have saved equities from AI jitters for now. But the effect on the dollar, which dipped further on Monday, has been more pain.
I’ll get into all the market news below.
But first check out Mike Dolan’s latest column where he discusses what is at the heart of the problem facing the Federal Reserve this week and throughout 2026.
And listen to the latest episode of the new Morning Bid daily podcast. Subscribe to hear Mike and other Reuters journalists discuss the biggest news in markets and finance seven days a week.
Today’s Market Minute
The final Fed countdown
No surprise: It’s all about the Fed this week, with traders pretty confident — and hopeful — the bank will deliver a 25 basis-point rate cut on Wednesday.
After all, bets that the Fed will cut rates have helped the S&P 500 bounce back from AI woes and jump 5% since late November, so equity traders need Jerome Powell and co to deliver.
As for the dollar, the market verdict is more pain.
The greenback was down a touch in early London trade on Monday, after two straight weeks of losses which has seen it drop more than 1% against peers, having hit its highest since late May before Fed bets gained traction.
A pause rather than a cut would come as a shock to markets. So the real focus will be on how many policymakers, who are looking increasingly divided, dissent from the decision. The Fed’s decision-making committee has not had three or more dissents at a meeting since 2019 and even before that it was a rarity, happening just nine times since 1990.
This week is not all about the Fed though, with central banks in Canada, Switzerland and Australia also meeting, though they’re all expected to hold rates.
But the focus was also on the European Central Bank on Monday, where Isabel Schnabel, a leading policy hawk, said Frankfurt’s next move could be a rate hike rather than a cut as some expect, though it won’t happen in the near future.
Markets are now pricing a small probability of an ECB hike next year — one they had priced out previously. Traders already expect rate hikes in Japan, Australia and Canada, moves that could put further pressure on the dollar if they materialise.
It was no surprise then that the U.S. dollar dropped more than 1% against its Canadian peer on Friday, when Canada’s unemployment rate once again defied expectations and fell to a 16-month low.
In bond markets, Germany’s 30-year bond yield rose to its highest level since 2011, in the latest sign that long-end debt pressures are building back up. Japanese bond yields rose to fresh multi-year highs while U.S. 30-year Treasury yields touched their highest since September.
In geopolitics, the focus remains on Ukraine peace talks, where progress has been slow, with President Volodymyr Zelenskiy set to meet European leaders in London.
Chart of the day
Market bets that the Fed will cut rates in December, which gained traction after November 21, have sent the S&P 500 5% higher since then, while the U.S. dollar has dropped against a basket of peers.
Today’s events to watch
* U.S. earnings: Toll Brothers, Phreesia, Oil-Dri Corporation of America, Ooma, Star Group LP, Compass Minerals International, Mama’s Creations
* U.S. bills, three-year note auctions
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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(By Yoruk Bahceli; Editing by Lawson Hugh)
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