BY EMMANUEL OGBONNA
Global stock markets drifted lower on Monday as caution rippled through trading floors from Tokyo to Frankfurt after the head of the Bank of Japan suggested the central bank may soon raise interest rates. The remarks, delivered just weeks before the BOJ’s next policy meeting, triggered a sharp sell-off in Japan and dampened sentiment across multiple regions already grappling with uncertainty surrounding manufacturing demand, inflation trends and the direction of U.S. monetary policy.
In early trading in the United States, futures tied to major indexes pointed firmly downward. Contracts for the S&P 500 dropped 0.6%, while Dow Jones Industrial Average futures slipped 0.5%, setting the tone for what could be a jittery start to the week on Wall Street. The mood was similar in Europe, where Germany’s DAX tumbled 1% to 23,589.90, France’s CAC 40 declined 0.5% to 8,079.94 and Britain’s FTSE 100 edged 0.1% lower to 9,707.68.
Japan, however, saw the steepest reaction. The Nikkei 225 sank 1.9% to 49,303.28 after Bank of Japan Governor Kazuo Ueda told reporters he expected the board to discuss the possibility of an interest rate increase at its December 19 meeting. Japan’s key policy rate, currently at 0.5%, has hovered close to zero for years as the country has attempted to steer its economy toward stronger growth and wage gains. But with inflation persistently above the BOJ’s 2% target and the yen’s weakness fueling higher import costs, the central bank is increasingly under pressure to shift course.
The suggestion of a rate hike placed additional scrutiny on economic indicators across Asia, particularly manufacturing data tied to regional supply chains. Investors remain alert to how global trade is adjusting to escalating tariffs introduced by U.S. President Donald Trump, a policy shift that has raised costs for exporters across the region.
Fresh survey data released Monday highlighted the strain on Japan’s industrial sector. The S&P Global Japan Manufacturing Purchasing Managers Index ticked up slightly to 48.7 in November from 48.2 in October but remained below the threshold of 50 that separates growth from contraction. It marked the fifth consecutive month of declining activity. Analysts noted that weak domestic and overseas demand continued to pressure Japanese factories, with new business orders falling at a pace that underscored the fragility of the sector.
China, the region’s dominant manufacturing power, also posted discouraging figures. An official survey showed factory activity shrinking for the eighth straight month in November, a reminder of the country’s ongoing challenges despite efforts to stabilize its economy following an extension of the U.S.-China trade truce. Yet, there were pockets of resilience: Hong Kong’s Hang Seng index rose 0.7% to 26,033.26, while the Shanghai Composite added 0.7% to 3,914.01. Elsewhere, South Korea’s Kospi dipped 0.2%, Australia’s S&P/ASX 200 declined 0.6%, Taiwan’s Taiex fell 1% and India’s Sensex slipped 0.1%.
Analysts noted that while factory output remains weak across Asia, improved export numbers over recent months suggest some stabilization may be underway. Several global economists said consumer spending tied to holiday shopping in the United States, including Black Friday and Cyber Monday, may help lift short-term sentiment, though uncertainty about the broader outlook remains.
U.S. markets had closed out last week with modest gains during a shortened post-Thanksgiving session, with the S&P 500 rising 0.5%, the Dow up 0.6% and the Nasdaq adding 0.7%. Technical issues disrupted trading for hours Friday after an outage at a CyrusOne data center affected systems at the Chicago Mercantile Exchange, halting futures trading before operations gradually resumed.
Despite the recent rebound in stocks, market volatility remains elevated. Much of the instability stems from shifting expectations surrounding the Federal Reserve’s next moves. Investors spent much of last week betting that the central bank may deliver another rate cut amid fading job growth and concerns about economic slowing. But those hopes remain in tension with rising inflation, leaving the Fed in a difficult position.
Minutes from the central bank’s October meeting revealed policymakers were divided over the merits of further rate reductions. Several members expressed caution about feeding inflationary pressures, while others argued that weakening employment data could necessitate additional support for the economy.
The uncertainty has weighed heavily on some of the most closely watched technology stocks. Nvidia slid 1.8% Friday, closing out the month with a steep loss. Oracle plunged 23% over the month, while Palantir dropped 16%. Not all tech names struggled—Alphabet recorded an almost 14% monthly surge, buoyed by strong interest in its newly launched Gemini artificial intelligence model.
In energy markets, oil prices surged more than a dollar per barrel as traders responded to renewed geopolitical tensions and expectations of tighter supply. U.S. benchmark crude climbed $1.14 to $59.69 a barrel, while Brent crude, the international benchmark, added the same amount to hit $63.52.
Currency markets also moved in response to the BOJ’s rate signals. The dollar weakened to 155.25 Japanese yen from 156.14 yen, reflecting expectations of possible policy tightening in Tokyo. The euro strengthened slightly, rising to $1.1622 from $1.1596.
Digital assets saw a sharp reversal, with Bitcoin falling 4.3% to $87,115 in early Monday trading, a drop analysts attributed to risk-off sentiment spreading across markets.
As investors prepare for a week marked by key economic reports and central bank commentary, many are bracing for further volatility. The trajectory of global markets, analysts say, will hinge not only on the BOJ’s next steps but also on whether incoming data reveals the U.S. economy is slowing more quickly than anticipated.
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