Stronger U.S. jobs data pushes back Fed rate-cut hopes and weighs on global stocks

Global markets today are being driven primarily by a sharp reset in expectations for how quickly the U.S. Federal Reserve will cut interest rates, following a much-stronger-than-expected U.S. jobs report. The latest U.S. non-farm payrolls data for January showed job gains of about 130,000, more than double what economists had forecast, while the unemployment rate unexpectedly fell to 4.3%. This confirms that the U.S. labor market remains resilient and the broader economy is still on solid footing. However, this strength is forcing investors to rethink how soon and how aggressively the Fed can start lowering interest rates. Market-based odds of a June rate cut dropped from nearly certain to closer to a coin flip, and expectations for a March cut fell to very low levels. Bond markets reacted with a bear-flattening move in the yield curve, signaling reduced confidence in near-term monetary easing. For global equities, this creates a push-pull dynamic: strong economic data is good for corporate revenues and growth, but the prospect of higher-for-longer interest rates pressures stock valuations, especially in rate‑sensitive and growth-oriented sectors. As a result, stock indices that initially benefited from the solid economic backdrop have given back gains as investors price in a slower path to cheaper borrowing costs. Looking ahead, markets are now highly focused on upcoming U.S. inflation data, particularly Friday’s CPI report, which could further shift expectations for Fed policy. A hotter inflation print would reinforce the idea of delayed rate cuts and could weigh further on global risk assets, while a softer reading might partially restore hopes for earlier easing. Overall, the dominant driver for global markets today is the repricing of U.S. interest-rate expectations after the strong labor report, with investors balancing healthy economic momentum against the drag from potentially prolonged tight monetary policy.