Global shares slip again as rate cut euphoria fades

Global stock markets extended their New Year decline on Wednesday, while the dollar remained strong.

Market optimism about early U.S. interest rate cuts diminished, and escalating hostilities in the Middle East added to the negative sentiment. MSCI's broad index of world equities <.MIWDOO0OPUS> slipped 0.3% to its lowest level in almost two weeks, while U.S. stock futures pointed to a weak open for Wall Street.

a further sign that recent blistering gains for stocks and bonds were faltering, U.S. Treasury yields rose while European shares fell 0.7% (.STOXX) and Asia Pacific shares outside Japan shed over 1% (.MIAPJ0000PUS).

Caution was rising ahead of the release of minutes from the U.S. Federal Reserve's December meeting, due at 1900 GMT on Wednesday, as well as a slew of important U.S. data this week.

Fed officials in December predicted 75 basis points (bps) of rate cuts in 2024, driving money market bets for around double that amount of cuts that prompted a cross-market year-end rally.

"We had that whacking great rally at the end of last year when markets convinced themselves there would be a soft (economic) landing, cooling inflation and a rapid pivot to rate cuts," AJ Bell investment director Russ Mould said.