Global stocks fell on Friday and the dollar’s sell-off eased as investors awaited the release of a fresh set of US jobs numbers, with any signs of slowing demand for labor likely to fuel hopes of easing inflationary pressures.
The regional Stoxx Europe 600 index slipped 0.4 percent in early trade and London’s FTSE 100 fell 0.4 percent. Contracts tracking Wall Street’s benchmark S&P 500 fell 0.1 percent, while contracts tracking the tech-heavy Nasdaq 100 fell 0.2 percent.
A measure of the dollar against six other major currencies fell 0.2 percent after falling 1.2 percent on Thursday, as traders increased bets that the Federal Reserve will slow rate hikes if it relaxes later this year month, potentially mitigating an aggressive monetary tightening campaign that has sent shockwaves through global markets this year.
“It is now evident that markets have undergone a structural shift towards a bearish dollar narrative,” said Francesco Pesole, FX Strategist at ING.
The currency has fallen more than 8 percent from its September peak to trade at levels last seen in early August and is likely to weaken further “unless we see a convincingly strong payroll later on Friday.” , added Pesole.
Bureau of Labor Statistics data is expected to show that the pace of US job growth slowed again in November. Non-farm payrolls are expected to have risen by 200,000 in the past month, according to a consensus of economists’ forecasts compiled by Bloomberg. That would be down from the 261k rise in October and the 315k rise in September. The unemployment rate is expected to remain stable at 3.7 percent.
A slowing labor market would reinforce the argument from Fed Chair Jay Powell, who made the point in a speech on Wednesday that “the time to slow the pace of rate hikes could come as early as the December meeting.”
Investors used the comments as evidence that the central bank was winning its battle against rampant inflation after October inflation showed signs of slowing. Inflation was 7.7 percent, down from 8.2 percent in September.
Trading in the futures markets shows that investors rate a 0.5 percentage point rate hike by the Fed later this month as about a 90 percent probability. The central bank has hiked borrowing costs by 0.75 percentage points over four consecutive meetings, bringing the federal funds rate to a range of 3.75 percent to 4 percent.
Investors now expect the Fed to hike its main interest rate to a peak of about 4.9 percent next year, from a forecast of 5 percent earlier this week and a high of 5.14 percent in early November.
Asian stocks fell on Friday, with Japanese markets leading the losses as the strengthening yen put downward pressure on the country’s stocks. The Japanese Topix lost 1.6 percent. The yen rallied as much as 1.1 percent to peak at ¥133.76 per dollar and looked set to continue its five-day rally prompted by growing expectations of a so-called Fed pivot that would reduce the interest rate differential between the two countries.
Hong Kong’s Hang Seng Index fell 0.3 percent and China’s CSI 300 fell 0.6 percent. Chinese stocks had gained in the last two sessions after signs Beijing was relaxing its strict zero-Covid approach.
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