LONDON (Reuters) - Global stock indices took a hit on Monday, as traders expressed skepticism about the likelihood of interest rate cuts in 2025. This follows a robust U.S. jobs report that reignited concerns about rising inflation just as earnings season commences.

The fear of inflation has been exacerbated by a spike in energy prices. Crude oil prices recently surpassed $80 a barrel, largely due to dwindling Russian exports amidst escalating U.S. sanctions. Additionally, European natural gas prices climbed 4% over the past month, following a cold snap and Ukraine's decision to suspend Russian gas supplies via pipeline, further straining the energy market.

In a separate development, the latest data indicated that China's export growth accelerated in December, with imports also regaining momentum. However, analysts are warning of rising trade risks with the impending U.S. administration.

European equities witnessed a decline for the second consecutive day, with the STOXX 600 down 0.7% and Germany's DAX losing 0.6%. Meanwhile, the UK’s FTSE 100 experienced a milder drop of 0.4%, held up slightly by a weaker pound as UK borrowing costs continued to rise.

Market sentiment has shifted, with traders scaling back expectations for Federal Reserve rate cuts, now predicting a mere 25 basis points for 2025, down from nearly 45 basis points prior to last Friday’s jobs report. Aditya Bhave, a deputy chief U.S. economist at Bank of America, emphasized that after a significant jobs report, "the cutting cycle is over," highlighting persistent inflation concerns.

Treasury yields reached a 14-month high of 4.79%, a trend that could escalate further depending on the upcoming consumer price index (CPI) report on Wednesday. This report is expected to be pivotal, as investors now largely dismiss the prospect of rate cuts for the remainder of the year.

The rise in bond yields is impacting corporate earnings discounting and raising borrowing costs for both businesses and consumers. This has spurred speculation that President-elect Donald Trump’s proposed tariffs could lead to increased import prices, potentially overshadowing corporate earnings optimism when major banks like Citigroup, Goldman Sachs, and JPMorgan report their earnings starting Wednesday.

Futures for the S&P 500 are down by 0.6%, while Nasdaq futures fell by 0.95%, indicating a continuation of losses for Wall Street. In Asia, a public holiday in Japan led to light trading, although Chinese blue chips declined by 0.3%, as export growth numbers adding pressure for tariffs on Chinese goods surged by 10.7%.

The recent 45-basis-point rise in Treasury yields has contributed to the dollar reaching its highest value since November 2022 against a basket of currencies. The British pound suffered notably, plummeting 4.4% during this period, trading at its lowest since early November 2023.

The global sell-off in bonds has also severely impacted the UK gilt market, pushing long-term yields to a staggering high not seen since 1998, amid fears that the UK government will have to ramp up borrowing to meet financial engagements. British finance minister Rachel Reeves assured that she would take necessary actions to uphold the government's fiscal rules.

In currency markets, the euro decreased by 0.3% to $1.0216, having dipped to its lowest since November 2022 earlier in the day. Conversely, while the dollar fell 0.1% against the yen to 157.535, it still remains close to six-month highs.

Adding to the market turbulence, oil prices increased by another 2% following reports of a drop in Russian seaborne exports, which has raised concerns over supply, further solidifying market uncertainty. Brent crude futures increased by 2.3% to $81.56 per barrel.

As the economic landscape shifts, all eyes are on upcoming reports and their potential implications for policy and market direction. Stay tuned for more updates as the situation develops.