US stock futures declined as investors braced for Friday’s pivotal nonfarm payrolls report. The data will significantly influence the Federal Reserve’s decision on the size of an interest rate cut later this month.
Key points from the report:
Market reactions:
Nasdaq 100 contracts fell over 1%.
S&P 500 futures indicated a fourth consecutive day of declines.
Stoxx 600 dropped 0.5%, heading for its worst week since early August.
Bloomberg’s dollar gauge retreated amid expectations of a larger-than-expected rate cut.
10-year Treasury yield decreased by 3 basis points to 3.7%.
Economic outlook:
-The jobs report will help determine whether the US economy is on track for a soft landing or a recession.
-Swap traders are fully pricing in a 25 basis point cut at the upcoming Fed meeting, with a 35% chance of a 50 basis point reduction.
-Barclays strategists believe the report is crucial for assessing recession worries and influencing equity direction.
-Forecasters anticipate a rebound in hiring and a slight decrease in the unemployment rate in August.
Currency market:
The dollar’s retreat due to rising rate cut expectations has increased currency trader activity.
Options for gauging dollar swings against major trading partners reached the highest level since March 2023.
Risk reversals indicate bearish sentiment towards the US dollar, and some traders are avoiding short-term bets.
Currency strategists predict a potential test of the yen’s August high against the dollar if the payrolls data support a 50 basis point rate cut.
Commodity market:
Oil prices were on track for their biggest weekly loss in almost a year due to concerns about soft demand and ample supply.
Iron ore remained at its lowest level since March, reflecting weakness in China’s steel market.
Key events this week:
Eurozone GDP on Friday
US nonfarm payrolls on Friday
Fed’s John Williams speech on Friday
Market movements (as of 8:47 a.m. London time):
Stocks:
-Stoxx Europe 600: -0.5%
-S&P 500 futures: -0.7%
-Nasdaq 100 futures: -1.1%
-Dow Jones Industrial Average futures: -0.4%
-MSCI Asia Pacific Index: +0.2%
-MSCI Emerging Markets Index: +0.1%
Currencies:
-Bloomberg Dollar Spot Index: -0.2%
-Euro: unchanged at $1.1111
-Japanese yen: +0.8% to 142.25 per dollar
-Offshore yuan: little changed at 7.0829 per dollar
-British pound: unchanged at $1.3180
Cryptocurrencies:
-Bitcoin: -0.8% to $55,651.28
-Ether: -1.2% to $2,339.9
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Bonds:
-10-year Treasury yield: -3 basis points to 3.70%
-Germany’s 10-year yield: -4 basis points to 2.17%
-Britain’s 10-year yield: -3 basis points to 3.88%
Commodities:
-Brent crude: +0.4% to $72.98 a barrel
-Spot gold: little changed
