Global Markets Waver Amid U.S. Fiscal Concerns and Geopolitical Tensions

Global stock markets remained subdued while the U.S. dollar slipped on Wednesday as investors grew increasingly uneasy over mounting fiscal concerns in developed economies. Market sentiment was particularly affected by President Donald Trump’s push for significant tax cuts, which analysts say could worsen the already massive $36 trillion U.S. debt load. This anxiety has been compounded by Moody’s recent downgrade of the U.S. credit rating, sparking fears of long-term economic instability and reduced investor confidence.

Simultaneously, rising geopolitical tensions further unsettled markets. Crude oil prices jumped over 1% following a CNN report that Israel is preparing a strike on Iranian nuclear facilities, raising alarms about potential supply disruptions from the Middle East. This development added a layer of uncertainty to already fragile investor sentiment, shifting focus back to global geopolitical risks.

In the bond market, U.S. Treasury yields stayed elevated, with 30-year bonds hitting 5%. However, this failed to bolster the dollar, which faced heavy selling as investors turned to traditional safe-haven currencies like the Japanese yen and Swiss franc. European equities saw modest losses, while U.S. stock futures pointed toward a weaker Wall Street open. Meanwhile, the British pound strengthened following a surprise rise in inflation, reaching a three-week high.

Asian markets saw relative optimism, with MSCI’s broad Asia index (excluding Japan) climbing to a seven-month high. However, Japanese bond investors remained cautious after a sharp selloff in long-dated government bonds. Concerns persist over Japan’s ability to fund fiscal stimulus measures while its central bank attempts to scale back ultra-loose monetary policies. U.S. tariffs also cast a shadow, with Japanese exports to the U.S. declining despite overall export growth.

Finally, gold prices surged to a one-week high as the dollar weakened, reflecting a broader investor shift toward safe-haven assets. Attention is now on the G7 finance ministers’ meetings in Canada, with markets hoping for signs of a more cooperative global trade stance. However, the uncertainty surrounding U.S. fiscal and trade policy under Trump continues to cast a long shadow over economic outlooks worldwide.

Source: Reuters