European stocks and US Treasuries fell on Friday as investors reluctant to place bets on US employment data that could affect the course of monetary policy in the world’s largest economy.
The Stoxx Europe 600 Index opened 0.2 percent lower and stayed near its all-time high after seven months of gains driven by a strong rebound in corporate earnings after last year’s pandemic-induced downturn. The London FTSE 100 traded flat.
Futures markets signaled that Wall Street’s S&P 500 was also rebounding to a record high as corporate earnings improved and investors bet the Federal Reserve to make their $ 120 billion monthly bond purchases.
Economists polled by Reuters expect the non-farm payroll report, due later on Friday, to show US employers created 750,000 new jobs in August, up from 943,000 in July amid rising infections from the Delta variant of the coronavirus and supply chain bottlenecks impaired business confidence.
The Conference Board’s consumer sentiment index fell to its lowest level since February last month, while purchasing managers’ indices indicated that manufacturing activity had weakened slightly.
Fed chairman Jay Powell has signaled that the central bank will start tapering its bond purchases this year, but has also hinted that the labor market needs to make further progress.
Friday’s report “will likely help determine” whether the Fed will announce a tapering of its bond purchases at its meeting this month “or perhaps delay it until the next meeting in November,” Daiwa economist Chris Scicluna wrote in a research release .
The yield on the 10-year US government bond as a benchmark, which is moving in the opposite direction to the price, remained constant at 1.29 percent. That return has fallen from just under 1.8 percent in March as markets turned to coronavirus vaccines, which fuel a linear economic recovery from the pandemic and central banks quickly tighten monetary policy.
Stock and bond prices now indicated a “Goldilocks scenario of” [market interest] Interest rates stay lower, stocks rise and any Fed throttling is slowly starting, ”said Tatjana Greil Castro, Co-Head of Public Markets at loan investor Muzinich & Co.
The dollar index, which measures the US currency against six others, was trading at its weakest level in a month on Friday. The euro remained stable against the dollar, buying $ 1.1878. The pound sterling was also flat at $ 1.1383. Brent crude, the oil benchmark, fell 0.1 percent to $ 72.93.
In Asia, Japan’s Nikkei 225 closed more than 2 percent higher after the country’s Prime Minister Yoshihide Suga announced his resignation and traders bet that his successor will unleash further economic stimulus.
Hong Kong’s Hang Seng index fell 0.8 percent, dragged down by stocks in China’s tech sector, which has been the subject of intense regulatory crackdowns. The CSI 300 in mainland China lost 0.6 percent, with consumer, industrial and materials companies falling the hardest after the country’s manufacturing industry slowed and the government put in place tough measures to control new coronavirus outbreaks.