- Markets are wary of US non-farm payrolls
- Investors are waiting for more signs of an opening in China
- US yields fall for third day in a row
- The euro is at a 5-month high against the dollar; yen at a 3-month high
LONDON, December 2. (Reuters) – European shares fell, Treasuries rose and the dollar suffered heavy losses on Friday ahead of U.S. non-farm payrolls data, the next big test for investors looking for more signs of rate policy. transition from the Federal Reserve.
Overnight data, including falling U.S. jobs and declining U.S. manufacturing activity, gave renewed hope for easing spending pressures and added to evidence that the Fed’s rate hikes may have cooled the economy.
But signs of the Fed’s shift in tone could not assuage broader economic concerns. European Central Bank President Christine Lagarde warned on Friday that the fiscal policies of some European governments could lead to excess demand and that fiscal and monetary policies must work in sync to achieve sustainable and balanced economic growth.
Bruno Schneller, CEO of INVICO Asset Management, said that while stocks have rallied recently, the key factor has been quantitative tightening, the process by which the Fed reduces bonds on its balance sheet.
“Global markets were focused on the Fed’s pace,” Schneller said.
“We don’t think the damage is done yet. All of the central bank liquidity that has flowed into and out of the economic system has a 70% correlation with stock market returns, and the liquidity drain will be difficult to combat.”
Schneller expected the stock market to decline by 10% by the end of the year and by 2023. at the end of the first quarter will fall even more.
European shares were lower, with London’s FTSE down 0.3% (.FTSE), German shares up just over 0.3% (.GDAXI) and France’s blue-chip CAC 40 (.FCHI) down 0.31%.
U.S. futures indicated an open flat for Wall Street stocks. US stocks ended mixed on Thursday after a big rally the day before, fueled by comments from Fed Chairman Jerome Powell that sounded less doomy than some had feared.
Economists polled by Reuters expect that at 1:30 p.m. GMT data showed the US economy added 200,000 new jobs in November, the lowest since 2020. December. Payrolls rose by 261,000 in October.
Alan Ruskin, a macro strategist at Deutsche Bank, said if non-farm payrolls rose by 50,000 to 150,000 in November, that would be good for bonds and stocks, while the U.S. dollar would remain lower.
Futures are fully pricing in a 50 basis point rate hike at the Fed’s December policy meeting, with rates now expected to be around 4.75% to 5% by the middle of next year, down from 5% to 5.25% previously.
Investors were also watching for more signs that China is relaxing its zero-covid policy and whether China will contribute more to global growth next year amid a looming global recession.
Sources told Reuters that China is set to announce in the coming days an easing of COVID-19 quarantine protocols and a reduction in mass testing, a sharp policy shift after anger over the world’s toughest curbs fueled widespread protests.
In bond markets, Treasury yields fell for the third day in a row.
The yield on the benchmark 10-year Treasury fell to 3.51 percent, near the lowest level not seen since September. Turbulence in UK markets pushed yields higher in other major bond markets.
The two-year Treasury yield, which is rising as traders expect higher Fed funds rates, fell to a near two-month low of 4.204%, having last traded down about 5 basis points on the day.
And in currency markets, the US dollar fell to a five-month low against a basket of other major currencies. A weekly drop of 1.4% was recorded.
The euro hit a new five-month high, just above $1.05, while the Japanese yen hit a new three-month high against the US dollar.
Prices on the oil market jumped ahead of an important meeting of recipient countries at the weekend. U.S. crude futures fell to $81.07 a barrel after hitting a two-week high of $83.34 in the previous session against a weaker dollar.
Brent crude futures also rose slightly to $86.90 a barrel.
Local gold rose to $1,800.10 an ounce.
Additional reporting by Stella Qiu; Edited by Kenneth Maxwell and Toby Chopra
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