LONDON, June 3 (Reuters) – European stocks were mostly higher on Friday as investors await a key jobs report that will help gauge the strength of the US economy and provide clues to the pace of the Federal Reserve’s monetary tightening in the second half of the year to give year.
The pan-European STOXX 600 (.STOXX) rose 0.16% after a strong overnight trading session in Asia-Pacific and a positive session on Wall Street.
The MSCI World Stock Index (.MIWD00000PUS), which tracks stocks in 50 countries, rose 0.17% and is on track for its second consecutive weekly gain after seven weeks of losses.
Sign up now for FREE unlimited access to Reuters.com
Japan’s Nikkei 225 rose 1.27% and Australia’s commodity-heavy ASX 200 (.AXJO) closed 0.88% higher.
Markets in China, Hong Kong and UK are closed on public holidays.
Investors are awaiting the US Department of Labor’s comprehensive jobs report, due at 12:30 GMT, for evidence of a slowdown in the labor market, which could give the Fed an opportunity to slow or even suspend rate hikes in the second half of the year.
“Employment will play a bigger role in the coming months as income and job security become more important,” said UBS GWM chief economist Paul Donovan, adding that consumption will be driven by income — or income plus access to credit.
“When demand normalizes, whether companies start shedding workers will matter to the balance between consumer spending and savings,” Donovan added.
A Reuters poll of analysts expects 325,000 nonfarm payrolls to be lost in May, with average gains slowing to 5.2% on an annualized basis from 5.5% in April.
The balance between growth and inflation prospects is a major concern for central bank policymakers as they seek to avoid a hard landing and plunge economies into recession.
Euro-zone inflation rose to another record high in May, which markets see challenging the European Central Bank’s view that gradual rate hikes will be enough to tame rapid price growth. Continue reading
“The inflation numbers in the eurozone were confirmation that even the ECB is now being forced to hike rates despite the possibility it is facing a recession, perhaps faster or more aggressively than previously expected,” said Jeroen Blokland, head of research at the Investment Research Platform Real Insights.
“I would imagine we’ll be retesting the lows somewhere in the coming weeks, maybe months,” Blokland added.
Money markets are now fully pricing in a 25bp rate hike by the ECB at their July meeting, with around 124bp tightening priced in by the end of the year, equating to nearly five 25bp hikes.
Markets also locked in consecutive 50 basis point rate hikes by the Fed in June and July, but uncertainty remains about what happens after that.
European government bonds traded slightly higher with lower trading volumes than usual due to the holiday season.
The 10-year German government bond yield rose 2 basis points to 1.247% after briefly hitting a fresh eight-year high of 1.263% earlier in the session.
Italy’s 10-year yield briefly rose in earlier trade, but with futures markets little action, traders said it was due to a lack of liquidity in cash bonds on Friday.
The US dollar edged lower as traders await the US jobs report.
The dollar index, which measures the greenback against a basket of six major currencies, was down 0.08% to 101.68.
Oil prices fell as markets adjusted to the OPEC+ oil-producing countries’ decision to ramp up production. Continue reading
Brent futures fell 1.2% to $116.25 a barrel, while US West Texas Intermediate crude fell 1.3% to $115.38.
Gold prices fell 0.1% after previously hitting $1,873 an ounce, its highest level since May 9.
Sign up now for FREE unlimited access to Reuters.com
Reporting by Samuel Indyk in London, additional reporting by Kanupriya Kapoor in Singapore; Editing by Christina Fincher
Our standards: The Thomson Reuters Trust Principles.
Comments are closed.