Markets settled into a holding pattern ahead of Friday’s key US jobs data, with stocks and American equity futures little changed, Treasury yields flat and a gauge of the dollar steady.
Energy majors were among the gainers in the Stoxx Europe 600 index as crude oil headed for the biggest weekly advance since April. Miners outperformed as China’s latest stimulus measures boosted prices of some industrial metals. Among individual movers, Aurubis AG slumped more than 15% after Europe’s top copper producer said it faces large losses due to a massive metal theft.
Friday’s payrolls report may provide further evidence of slight cooling in the US labor market. The question is whether that will be enough to stall the Federal Reserve’s tightening cycle or even lead to early rate cuts amid signs that the economy is slowing. Meanwhile, hot price data and bearish comments from European Central Bank officials fueled concern the euro region may be heading for stagflation.
“Markets’ more cautious stance on risk assets is set to continue as the support from resilient US growth is increasingly offset by the need for high rates for longer,” said Thomas Hempell, Head of macro and market Research at Generali. “We still expect more economic pain to erode corporate margins, especially in the euro area, while elevated equity valuations look vulnerable to a correction.”
Elsewhere, the British pound declined after a major UK mortgage lender said average house prices fell the most in 14 years in July. UK stocks edged higher, outperforming their euro-region peers.
China’s fresh efforts to rescue an ailing economy sent the MSCI Asia Pacific Index toward a second straight week of gains, the longest such streak since mid-June. The government will allow the nation’s largest cities to cut down payments for home buyers and encouraged lenders to lower rates on existing mortgages as well as on deposits.
Mainland China shares traded higher and metals looked set to extend this week’s advances. Hong Kong’s market is shut on what may be the strongest storm to hit the city in at least five years.
The yuan also strengthened after China’s central bank reduced the foreign exchange reserve requirement ratio for financial institutions in a bid to support the currency. The currency has since pared its gains. Sentiment was further buoyed by an unexpected rise in manufacturing data that advanced to 51 in August, the highest reading since February, according to a Caixin survey.
Back in Asia, Japan’s Topix index posted its eighth consecutive month of increase in August — the longest winning streak since 2013 — and the gauge was now set for the best weekly advance since October. Data earlier showed companies’ profits rose 11.6% on an annual basis in the second quarter.
Elsewhere, oil is set for a weekly gain after Russia signaled that it would extend export curbs and US inventories dropped further. Gold headed for the second weekly advance.
Key events this week:
- Eurozone S&P Global Eurozone Manufacturing PMI, Friday
- South African central bank governor Lesetja Kganyago, Atlanta Fed President Raphael Bostic, BOE’s Huw Pill, IMF’s Gita Gopinath on panel at the South African Reserve Bank conference, Friday
- Boston Fed President Susan Collins speaks at virtual event, Friday
- US unemployment, nonfarm payrolls, light vehicle sales, ISM manufacturing, construction spending, Friday
Some of the main moves in markets:
- The Stoxx Europe 600 was little changed as of 8:20 a.m. London time
- S&P 500 futures were little changed
- Nasdaq 100 futures were little changed
- Futures on the Dow Jones Industrial Average rose 0.2%
- The MSCI Asia Pacific Index rose 0.4%
- The MSCI Emerging Markets Index rose 0.3%
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0848
- The Japanese yen was little changed at 145.49 per dollar
- The offshore yuan rose 0.1% to 7.2661 per dollar
- The British pound was unchanged at $1.2673
- Bitcoin was little changed at $25,996.55
- Ether fell 0.2% to $1,645.52
- The yield on 10-year Treasuries was little changed at 4.11%
- Germany’s 10-year yield advanced two basis points to 2.49%
- Britain’s 10-year yield advanced two basis points to 4.38%
- Brent crude rose 0.4% to $87.18 a barrel
- Spot gold was little changed