Stocks Fall as Traders Take Cover Before Payrolls: Markets Wrap

(Bloomberg) — Global stock markets retreated on Friday as traders adopted a cautious stance ahead of US jobs data that will offer fresh insight into the health of the economy and the outlook for interest rates.

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Nasdaq 100 futures fell 0.3% while those for the S&P 500 pulled back 0.2%. A Chinese benchmark pushed toward a bear market. Europe’s Stoxx 600 was little changed.

Bonds markets echoed a similar guarded sentiment. UK gilts extended this week’s selloff, with the 10-year yield rising by a further three basis points to 4.84% alongside a retreat in government bonds across Europe. US Treasuries treaded water.

Financial markets have been volatile at the start of the year, with US yields marching higher as investors moderated their view on the pace of Federal Reserve easing. The anxiety comes as signals of a robust US economy and sticky inflation threaten to keep rates high.

Friday’s US nonfarm payrolls data is expected to show a slowdown in hiring in an otherwise robust labor market. Median estimates for the figures forecast that 165,000 jobs were added to the economy in December. The unemployment rate is forecast to hold steady at 4.2% and average hourly earnings growth is seen cooling a touch from a month earlier.

“Given how quickly the Fed hawks have gained ground in recent weeks — and how much more investors are excited by dovish signals — the market’s reaction to soft data could outweigh its response to strong figures,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Several Fed officials confirmed Thursday that the central bank will likely hold interest rates at current levels for an extended period, only cutting again when inflation meaningfully cools.

“The Fed is worried about the incoming administration,” Skyler Weinand, chief investment officer for Regan Capital, said on Bloomberg Television. The combination of the growing US fiscal deficit and a strong consumer could result in “higher interest rates for the next five to ten years,” he said.

An index of the dollar was little changed. The yen rose 0.2% against the greenback on the back of a report that Bank of Japan officials are likely to discuss raising their inflation outlook. The pound remained under pressure, falling 0.2% after slipping to a more than one-year low in the prior session.

Oil headed for a third weekly gain — set for the best run since July — as signs of market tightness, including falling US stockpiles, offset concerns about demand weakness in top importer China.

Stocks

The Stoxx Europe 600 was little changed as of 9:01 a.m. London time
S&P 500 futures fell 0.2%
Nasdaq 100 futures fell 0.3%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.8%
The MSCI Emerging Markets Index fell 0.6%

Currencies

The Bloomberg Dollar Spot Index was little changed
The euro was unchanged at $1.0300
The Japanese yen rose 0.2% to 157.85 per dollar
The offshore yuan was little changed at 7.3501 per dollar
The British pound fell 0.2% to $1.2286

Cryptocurrencies

Bitcoin rose 2.7% to $94,609.86
Ether rose 2.6% to $3,292.01

Bonds

The yield on 10-year Treasuries was little changed at 4.69%
Germany’s 10-year yield advanced two basis points to 2.59%
Britain’s 10-year yield advanced three basis points to 4.84%

Commodities

Brent crude rose 1.3% to $77.94 a barrel
Spot gold rose 0.5% to $2,679.85 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Richard Henderson.