Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., December 1, 2025. REUTERS/Brendan McDermid

By Mike Dolan

Dec 2 - What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

Last month showed that 'buy the dip' stock market behavior is alive and well, but Wall Street has yet to regain early November peaks and tariff angst is proving hard to shake.

The final month of the year is off to a bumpy start. U.S. manufacturers registered an ongoing contraction of activity as input price growth turned higher again from already elevated levels, with tariffs widely blamed.

ISM's November factory readout was enough to lift Treasury yields sharply across the curve on Monday and sowed a kernel of doubt about this month's widely expected Federal Reserve interest rate cut. A third Fed cut of the year on December 10 had been almost fully priced prior to the report, but the chances of a move have been pared back slightly to just over 80%.

Fed policymakers are in their traditional quiet period ahead of the meeting, so no more public guidance is expected before then. But the ISM report re-introduced the tariff question.

With the Supreme Court yet to rule on the legality of President Donald Trump's use of emergency powers to introduce the levies, retailers too were emphasizing the pressure.

Costco became the latest firm to sue the U.S. government to ensure it will receive refunds if the Supreme Court rejects Trump's sweeping authority to impose those tariffs.

The discomfort spread to stock and bond markets on Monday, with the S&P 500 falling back about 0.5% - irked additionally by the ongoing shakeout in crypto markets. Bitcoin lost more than 5% on Monday, relapsing back below $90,000 before steadying earlier today, and crypto stocks were hit too.

Firmer crude oil prices also weighed after the weekend decision from OPEC+ to keep output levels unchanged early next year.

But with Tuesday's calendar thin, world markets have calmed somewhat before today's bell.

U.S. stock index futures crept back higher, with European stocks higher too. South Korea's Kospi benchmark outperformed again with gains of almost 2%.

U.S. Commerce Secretary Howard Lutnick on Monday confirmed the general tariff rate on imports from South Korea, including on autos, would drop to 15% from last month because South Korea has introduced legislation in parliament to implement the country's strategic U.S. investment commitments.

Japan's Nikkei also held the line after a heavy loss there on Monday on stepped up speculation about a Bank of Japan interest rate rise this month. Japanese government bond yields and the yen eased back a bit after a decent 10-year debt auction there.

There was better news from the Organisation for Economic Cooperation and Development, which lifted its U.S. economic growth forecasts for this year and next to 2.0% and 1.7% respectively. It also nudged up euro zone forecasts, but said global trade growth would almost halve to 2.3% in 2026 due to tariffs.

Euro zone inflation for November, meantime, came in a touch above expectations at 2.2%

In Britain, the Bank of England cut the amount of capital it estimates lenders need to hold in a bid to boost lending and stimulate the economy, in what will be its first reduction to bank capital demands since the global financial crisis. The major UK bank stocks rose about 1%.

In Tuesday's column, I take a look at the mostly bullish market calls for 2026 and explore a peculiar phenomenon at the heart of many of them.

Today's Market Minute

* No matter how Donald Trump’s latest push to end the war inUkraine pans out, Europe fears the prospect of a deal that wouldnot punish or weaken Russia sufficiently, placing thecontinent’s security in greater jeopardy. * "The Big Short" investor Michael Burry took aim atelectric automaker Tesla in a blog post, saying the ElonMusk-led company is "ridiculously overvalued". * Warner Bros Discovery has received a second round of bids,including a mostly cash offer from Netflix, in an auction thatcould conclude in the coming days or weeks, a source familiarwith the matter told Reuters on Monday. * Changes OPEC+ is making to its oil production quota systemwill likely spark a wave of upstream investments among members,diminishing concerns about long-term supply shortages, writesROI Energy Columnist Ron Bousso. * Recent U.S. electric vehicle sales data has sparkedconcerns about a U-turn in American clean car momentum, writesROI Global Energy Transition Columnist Gavin Maguire.

Chart of the day

U.S. manufacturing contracted for the ninth straight month in November, with factories facing slumping orders and higher prices for inputs as the drag from import tariffs persisted.

Today's events to watch

* Federal Reserve Vice Chair for Supervision Michelle Bowman testifies to the House Financial Services Committee on financial regulation; Bank of England policymaker Swati Dhingra speaks

* U.S. corporate earnings: CrowdStrike, Gitlab

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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

(By Mike Dolan; Editing by Sharon Singleton)