Wall Street equity futures and European stocks struggled to maintain gains on Friday as traders braced for US job numbers due later that will help chart the path forward for Federal Reserve monetary tightening. The dollar strengthened.
(Bloomberg) — Wall Street equity futures and European stocks struggled to maintain gains on Friday as traders braced for US job numbers due later that will help chart the path forward for Federal Reserve monetary tightening. The dollar strengthened.
S&P 500 contracts gave up most of an earlier advance, while those on the Nasdaq 100 slipped. Tesla Inc. fell in New York premarket trading after making another round of price cuts on its electric vehicles in China. The Stoxx Europe 600 Index was steady as data showed euro-area inflation returned to single digits for the first time since August. Among individual movers, Shell Plc rose after reporting higher gas-trading earnings.
Treasury 10-year yields steadied after climbing for the first time this week on Thursday following comments from Fed officials. A measure of dollar strength climbed for a second day, while the yen fell to levels not seen in a week, after the Bank of Japan unveiled further unscheduled bond buying to control its yield curve.
Estimates for US nonfarm payroll numbers peg a decline in new jobs added, indicating a cooling in the labor market that would in turn reduce the need for higher interest rates. However, private payrolls figures out on Thursday surpassed estimates and a surprise drop in new claims for unemployment benefits underscored a robust jobs market.
“What the Fed really wants to see is some slack build up in the labor markets, in hopes it can do this gently without creating much of a downturn,” Raghuram Rajan, a former governor of India’s central bank, said on Bloomberg Television. “But it may well be that by the time it seems that it will have raised rates enough, that the momentum takes us down to a mild recession at the very least.”
Market pricing for US interest rates to peak in June rose to above 5% following comments from Atlanta Fed President Raphael Bostic, who said the central bank still has “much work to do” to tame inflation. St. Louis Fed President James Bullard, who is no longer a voting member of the Federal Open Market Committee, said rates were approaching a sufficiently restrictive zone and that inflation expectations had retreated, offering investors some optimism.
At the same time, investors have responded to stubborn inflation and the threat of recession by starting the new year with a flight to cash from equities, according to strategists at Barclays Plc. Inflows into money market funds were at $112 billion for the week through Jan. 4, according to a research note citing EPFR Global. That’s the most since April 2020, when the pandemic was spreading globally.
Meanwhile, Citigroup Inc. strategists said European stocks are better prepared than their pricey US peers for a slide in earnings that’s set to take place this year. A team led by Robert Buckland raised European equities to overweight on Friday, saying valuations already discount a 15% drop in earnings. At the same time, they cut US shares to underweight on the grounds that earnings expectations are still too optimistic.
In Asia, a gauge of the region’s stocks rose in the first week of trading in 2023 amid China’s reopening moves and its measures to boost the economy.
Elsewhere, oil climbed after a string of declines that wiped nearly 10% from the price of crude. Gold was steady after retreating Thursday from a six-month high reached earlier in the week.
Key events this week:
- Eurozone retail sales, CPI, consumer confidence, Friday
- Germany factory orders, Friday
- US nonfarm payrolls, factory orders, durable goods, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 6:12 a.m. New York time
- Nasdaq 100 futures fell 0.1%
- Futures on the Dow Jones Industrial Average rose 0.2%
- The Stoxx Europe 600 rose 0.1%
- The MSCI World index was little changed
Currencies
- The Bloomberg Dollar Spot Index rose 0.2%
- The euro fell 0.1% to $1.0508
- The British pound fell 0.4% to $1.1861
- The Japanese yen fell 0.7% to 134.32 per dollar
Cryptocurrencies
- Bitcoin fell 0.6% to $16,744.07
- Ether fell 0.6% to $1,243.76
Bonds
- The yield on 10-year Treasuries advanced one basis point to 3.73%
- Germany’s 10-year yield declined one basis point to 2.30%
- Britain’s 10-year yield was little changed at 3.56%
Commodities
- West Texas Intermediate crude rose 0.5% to $74.04 a barrel
- Gold futures were little changed
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Tony Jordan and Richard Henderson.
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