Risk Aversion Sends Cryptos and Equities into Retreat

Market jitters are intensifying as a wave of risk aversion sweeps across global financial markets. Tuesday’s European stock opening looks set to extend Monday’s decline, with cryptocurrencies bearing the brunt of the selloff and economic headwinds adding fuel to the fire.

Crypto Capitulation Amid Market Deleveraging

Bitcoin, Ethereum, XRP, and Dogecoin all posted sharp losses on Monday as investors scrambled to exit riskier positions. The selloff wasn’t isolated—it’s part of a broader deleveraging wave triggered by surging Japanese government bond yields and a strengthening yen, which threatened to unwind carry trade positions that have been profitable for decades. This forced liquidation cascade rippled through both crypto and traditional equity markets, wiping out gains indiscriminately.

Economic Data Looms Large Over Fed Expectations

With the Federal Reserve set to announce its next policy decision next week, this week becomes critical for gauging U.S. economic momentum. The delayed September Personal Consumption Expenditures (PCE) Index—the Fed’s inflation barometer—arrives Friday and could signal whether price pressures are stabilizing or remain sticky. Investors are also watching November ADP employment numbers and December consumer confidence readings for clues about the economy’s health. Federal Reserve Chair Jerome Powell notably stayed quiet on Monday, avoiding any commentary on conditions or policy outlook.

Stock Markets Stumble as Risk Aversion Spreads

U.S. markets ended firmly negative despite a five-day win streak, with the Dow falling 0.9 percent, Nasdaq shedding 0.4 percent, and S&P 500 declining 0.5 percent. The shift reflects deepening risk aversion as Treasury yields climbed following weakness in Japanese and European bonds.

European stocks mirrored the downside, with the Stoxx 600 sliding 0.2 percent after Eurozone manufacturing contracted in November. Germany’s DAX lost 1 percent, France’s CAC 40 dipped 0.3 percent, and the U.K.'s FTSE 100 fell 0.2 percent. Asian markets showed mixed resilience, though regional gains couldn’t withstand the pressure from crypto liquidations and rising Treasury yields.

Dollar and Commodities React to Shifting Dynamics

The U.S. dollar faced headwinds as weak manufacturing data bolstered expectations for a Fed rate cut next week. Gold retreated after hitting a six-week peak Monday, while oil remained relatively flat despite earlier supply-driven gains. Treasury yields stabilized after Monday’s curve-wide decline, though elevated levels continue to pressure equities and risk sentiment across the board.

The convergence of crypto liquidations, economic uncertainty, and policy anticipation is keeping investors in defensive mode. Until clearer signals emerge from upcoming economic reports and Fed communications, risk aversion is likely to remain the dominant market force.