Markets endured a sharp shift in sentiment after traders dialed back expectations for a December Federal Reserve rate cut, viewing the outcome as increasingly uncertain. A series of hawkish signals from Fed officials—including warnings about limited room to ease and the need to keep policy restrictive—pulled stocks, Treasuries, and the U.S. dollar lower. Futures now imply roughly a 50% chance of a quarter-point cut, down notably from the prior day. At the same time, disappointing data from China showed industrial output and retail sales growing at their slowest pace in over a year, adding pressure to global risk sentiment.

The cautious mood weighed heavily on Asian trading, with regional equities slipping and U.S. futures giving back early gains. European markets opened mixed while currency markets saw the dollar index slip despite higher Treasury yields. In the U.K., the pound fell after reports that the government abandoned plans for income tax increases ahead of its upcoming budget. Oil prices firmed, boosted by supply risks following a Ukrainian drone strike on a Russian fuel depot. Overall, the global backdrop remains fragile as investors balance shifting monetary expectations with weakening economic indicators.