(Bloomberg) — U.S. stock futures were flat on Friday as traders awaited a key U.S. jobs report for more evidence on whether the labor market is cooling fast enough for the Federal Reserve to cut interest rates. Bonds slipped.
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Contracts for the S&P 500 and Nasdaq 100 indexes rose 0.8% and 1.5%, respectively, on Thursday after interest in artificial intelligence and big tech opportunities. The 10-year yield rebounded to 4.18% from 4.25% earlier in the week, with Treasuries reeling ahead of the jobs report.
Friday’s nonfarm payrolls report is key for traders to assess whether dramatic Fed policy easing next year is justified — or has gone too far. Buoyed by signs that inflation and wage growth are cooling, traders are betting on cuts of at least 1.25 percentage points over the next 12 months. That’s twice as much as Fed officials, who have signaled that they have raised rates, while cautioning against any talk of cuts for now.
“There’s a very solid outlook for 2024, the battle against inflation has been won and there’s a sense that interest rates will come down. Now the question is,” said Gerry Thomas, global CIO for equities at Sarasin & Partners, “we have interest rates that are too high relative to where people think inflation will go. are available, which means everyone has a view on jobs data.”
According to the average forecast of economists surveyed by Bloomberg, payrolls may have increased by 183,000 last month, after rising by 150,000 in October, while the unemployment rate remained at 3.9%.
Fund managers pulled $4.8 billion from Treasuries, the biggest weekly outflow since August 2022, ahead of the labor market report, according to EPFR Global data.
Bond traders racing ahead of Fed face reality check on jobs data
The resolution of the United Garth Workers strike will boost November’s nonfarm payrolls, but a weak household survey will reveal rapidly cooling conditions in the labor market, Anna Wong and Stuart Ball at Bloomberg Economics note.
“It is difficult for job seekers to find work, and long periods of unemployment typically lead to persistent increases in the unemployment rate later,” they wrote in a report. “Our view is that the recession will start in October.”
Elsewhere, Europe’s Stoxx 600 index added 0.4%, keeping the benchmark on pace for a fourth straight week of gains.
In currency trade, the dollar mixed against major peers. The yen erased an advance that had brought it to its strongest level since August amid fuel speculation that the Bank of Japan will soon start raising its sub-zero benchmark rate.
Among commodities, oil advanced, but continued its long weekly losses since 2018 on concerns about a global glut. Gold headed for its first weekly decline in four weeks.
Highlights of this week:
Some key movements in the markets:
S&P 500 futures were little changed as of 6:09 a.m. New York time
Nasdaq 100 futures were little changed
The future of the Dow Jones Industrial Average was little changed
The Stoxx Europe 600 rose 0.4%
The MSCI World Index was little changed
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0785
The British pound fell 0.1% to $1.2578
The Japanese yen fell 0.3% to 144.53 per dollar
Bitcoin was little changed at $43,391.01
Ether fell 0.5% to $2,359.03
The yield on 10-year Treasuries rose three basis points to 4.18%.
Germany’s 10-year yield rose five basis points to 2.24%
Britain’s 10-year yield rose seven basis points to 4.04%.
This story was produced with the help of Bloomberg Automation.
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