Markets on tenterhooks ahead of US jobs data

LONDON :World shares held near three-week lows on Friday, while the dollar regained some ground and crude oil steadied as investors waited for U.S. jobs data that could decide the size and speed of coming interest rate cuts in the world’s largest economy.
Oil prices face their worst week in more than a year, hovering just above a critical chart level, with their near-term fate depending on the U.S. payrolls report due later.
European shares opened lower and slipped for a fifth straight session, with the pan-European STOXX 600 index last down 0.4 per cent.
Germany’s DAX index remained down 0.5 per cent after data showed the country’s industrial production fell by 2.4 per cent in July, compared with analysts’ prediction of a 0.3 per cent drop.
“Germany has become the sick child of Europe again recently, and there is a lot of worry on the health of the economy,” said James Rossiter, head of global macro strategy at TD Securities.
This would be overshadowed by the U.S. job numbers, he added.
There is a lot riding on the U.S. non-farm payrolls report after Federal Reserve Chair Jerome Powell said policymakers do not welcome any further weakening in the labour market, laying the ground for imminent rate cuts.
Analysts are looking for the number of new jobs, due at 8:30 a.m. ET (1230 GMT), to rise by 160,000 and for the unemployment rate to dip to 4.2 per cent.
TD Securities’ Rossiter said the unemployment rate was key. A rise to 4.3 per cent or 4.4 per cent would probably push the Fed to call a 50 basis point rate cut, he said.
Influential Fed governor Christopher Waller and New York Fed President John Williams are due to speak just after the data, which could give markets more clues on the scale of a rate cut on Sept. 18.
“They will both have had a chance to comb through this latest data and we’ll see if there is push back on a 50 basis point cut,” said Rossiter.
Ahead of the announcement, U.S. equity markets meandered lower. Nasdaq futures fell 1.22 per cent, while S&P futures slipped 0.7 per cent.
“A weak number would reignite hard-landing fears,
while a strong number may see the market chalk up July’s weakness to weather or other one-off effects and increase soft-landing positioning,” Citi analysts said in a note.
MSCI’s broadest index of world shares was flat, hovering around a 2.5 per cent drop for the week.
The Shanghai Composite index closed down 0.81 per cent at 2,765.81 points, while the blue-chip CSI300 index ended 0.81 per cent lower at 3,231.35 points. Both recorded their lowest closing levels since Feb. 5.
Hong Kong stock markets were shut ahead of Super Typhoon Yagi’s expected landfall along the coast of Hainan province.
The Nikkei .N225 closed 0.72 per cent lower at 36,391.47 points, after a weekly loss of more than 5 per cent in its worst week since July 26, weighing on the outlook for Japanese exports.
The yen rose 0.4 per cent to 142.87 per dollar, bringing the weekly gain to roughly around 3 per cent, although a strong payrolls report could see that reverse.
Kristina Clifton, an economist at Commonwealth Bank of Australia, noted that market caution in the lead up to the U.S. data has driven safe haven flows into the yen.
Globally, jittery investors poured $61 billion into cash-like money market funds in the week to Wednesday, Bank of America said on Friday.
Treasury yields slipped on Friday, extending their declines this week. Two-year Treasury yields are down around 20 basis points (bps) so far this week to around 3.71 per cent, trading around their lowest since early 2023.
Ten-year yields have fallen just over 20 bps this week to 3.70 per cent, with the spread over two years on the verge of turning positive.
Oil is facing the worst week since October 2023 as demand worries weigh against a big withdrawal from U.S. inventories and a delay to output increases by OPEC+ producers.
Brent crude futures recovered some ground on Friday to be up around 4 cents at $72.75 a barrel while West Texas Intermediate crude futures gave up earlier gains, trading flat at 69.15, but were down more than 8 per cent and 9 per cent respectively so far in the week.
Gold ticked up 0.1 per cent at just over $2,519 an ounce.