Stocks were subdued as investors prepared for another round of US jobs numbers to gauge if they will back new bets for more Federal Reserve interest rate hikes.
(Bloomberg) — Stocks were subdued as investors prepared for another round of US jobs numbers to gauge if they will back new bets for more Federal Reserve interest rate hikes.
US equity futures steadied after Thursday’s losses in the S&P 500 and Nasdaq 100 benchmarks triggered by stronger-than-expected private hiring data. Shares in Europe erased early declines, but were still on course for their worst week since the middle of March.
In corporate news, Alibaba Group Holding Ltd. rose in US premarket trading, tracking gains in Hong Kong after Reuters said Chinese authorities will wrap up a probe on Ant Group Co. as soon as Friday with a fine of more than $1.1 billion, capping years of scrutiny over the fintech giant.
Just Eat Takeaway.com NV shares slumped after analysts at Exane and JPMorgan Chase & Co. turned bearish on the food-delivery company. Persimmon Plc was among UK homeowners trading lower after Halifax said house prices are falling at their fastest annual pace since 2011.
Traders added to wagers of more rate hikes as ADP Research Institute data on Thursday showed US companies added the most jobs in more than a year in June. Friday’s US nonfarm payrolls and unemployment reports will be key to any more revisions in rate-hike expectations after the blowout ADP numbers prompted a spike in Treasury yields.
“One thing is for certain: given yesterday’s moves, a mild upside surprise is already in the price,” Julien Lafargue, chief market strategist at Barclays Private Bank, said in a note. “Should the NFP send a similar message as the ADP figure, the market will gain confidence that the well-anticipated recession is being pushed back and that the Fed may need to be more aggressive.”
Treasury yields ticked higher again in Friday trading, with the policy sensitive two-year yield near 5%, while the 10-year hovered close to the highest since March.
Stocks have been losing ground in July after a strong first half of the year as hawkishness from central banks from the US to the UK damps hopes of a soft landing for the global economy. Technology shares have been one of the hottest trades, driven by the buzz around artificial intelligence, but Bank of America Corp. strategists said investors who piled into the sector risked being caught off-guard in the selloff sparked by rate hikes.
“We say ‘sell the last hike’ will hit tech hardest,” the BofA team led by Michael Hartnett wrote in a note. But if excitement over AI continues, they said the “baby bubble” that currently exists in a handful of Big Tech shares will mature into a larger one in the second half.
Swap contracts linked to the Federal Reserve’s future policy decisions price in a quarter-point interest-rate hike by July 26 and show a growing likelihood of an additional move by year-end. This expectation for higher rates is reinforcing bets on tighter monetary policy globally as central banks struggle to rein in inflation.
Dallas Fed President Lorie Logan voiced her concerns on Thursday that inflation was still running too hot and more tightening was needed. Policymakers elsewhere share that view, with European Central Bank President Christine Lagarde saying there is still “work to do” to bring inflation under control.
In Asia, US Treasury Secretary Janet Yellen held informal talks with China’s former Vice Premier Liu He and the People’s Bank of China governor Yi Gang as she began two days of talks designed to stabilize fraught ties between the two superpowers.
Investors also remained on the lookout for any stimulus decision by the Chinese government after Premier Li Qiang pledged to “spare no time” in implementing a batch of targeted policies to strengthen the country’s economic recovery. The Hong Kong government announced it will relax its residential mortgage rules for the first time since 2009 in a bid to boost a weakening property market.
Key Events This Week:
- US unemployment rate, nonfarm payrolls, Friday
- ECB’s Christine Lagarde addresses an event in France, Friday
Some of the main moves in markets today:
Stocks
- S&P 500 futures were little changed as of 7:09 a.m. New York time
- Nasdaq 100 futures fell 0.1%
- Futures on the Dow Jones Industrial Average were unchanged
- The Stoxx Europe 600 rose 0.2%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0890
- The British pound rose 0.2% to $1.2761
- The Japanese yen rose 0.6% to 143.21 per dollar
Cryptocurrencies
- Bitcoin fell 0.5% to $30,157.2
- Ether fell 1.1% to $1,862.68
Bonds
- The yield on 10-year Treasuries advanced three basis points to 4.06%
- Germany’s 10-year yield advanced one basis point to 2.64%
- Britain’s 10-year yield advanced two basis points to 4.68%
Commodities
- West Texas Intermediate crude rose 0.5% to $72.18 a barrel
- Gold futures rose 0.4% to $1,922.30 an ounce
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tassia Sipahutar and Macarena Muñoz.
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