(Bloomberg) -- European stock futures slipped, tracking losses in Asian equities ahead of US jobs data that will help shape the outlook for interest rates.
Euro Stoxx 50 futures declined 0.1%, while contracts for the S&P 500 index fell 0.3% after the US stock market was closed Thursday to observe a national day of mourning for former President Jimmy Carter. MSCI’s Asia benchmark dropped for a third session as shares in most markets retreated.
Treasuries were steady in Asian trading, following a rout earlier this week that drove 30-year yields to the highest since 2023. Chinese yields rose as the People’s Bank of China said it will temporarily halt its buying of government bonds, a surprise move that came after the benchmark yield slumped to a record low. The offshore yuan edged higher against the dollar.
“This should stem the decline in Chinese bond yields, and indirectly help support the yuan by narrowing the yield gap with the US slightly,” said Khoon Goh, head of Asia research for Australia & New Zealand Banking Group. However, should US yields rise further, “pressure on the yuan will remain,” Goh said.
Global financial markets have been volatile at the start of the year, with Treasury yields marching higher as investors moderated their view on the pace of Federal Reserve easing. That shift has reverberated through Asia, where a slowdown in Chinese growth had already sapped risk sentiment and pushed the MSCI China Index toward a bear market.
Several Fed officials confirmed Thursday that the central bank will likely hold interest rates at current levels for an extended period, only cutting again when inflation meaningfully cools.
“The Fed is worried about the incoming administration,” Skyler Weinand, chief investment officer for Regan Capital, said on Bloomberg Television. The combination of the growing US fiscal deficit and a strong consumer could result in “higher interest rates for the next five to ten years,” he said.
An index of the dollar was slightly stronger, extending a three-day advance. The yen slipped 0.1% against the greenback. Traders are on alert for the potential Japan will support the yen, with the US jobs report looming as a potential catalyst for sharp moves in the currency.
In corporate news, shares of Chinese toymaker Bloks Group Ltd. surged 82% in their Hong Kong trading debut.
US Jobs
Friday’s US nonfarm payrolls data is expected to show a slowdown in hiring in an otherwise robust labor market. Median estimates for the figures forecast that 165,000 jobs were added to the economy in December. The unemployment rate is forecast to hold steady at 4.2% and average hourly earnings growth is seen cooling a touch from a month earlier.
The jobs data will offer a litmus test for the market’s “hawkish Fed pricing,” according to strategists Ian Lyngen and Vail Hartman at BMO Capital Markets. They noted that the implication from the bounce in Treasuries is that the pre-payrolls setup will be slightly more balanced – despite a bias favoring a strong showing from the employment figures.
“The resulting skew will leave the Treasury market poised to respond with a stronger bid in the event of a downside surprise than any selling pressure that might emerge on a strong report,” they noted.
Elsewhere, the pound remained under pressure after slipping to a more than one-year low in the prior session as gilts sank on concern the UK’s Labour government will struggle to keep the deficit in check as borrowing costs surge. Australia’s 10-year yield climbed.
Oil headed for a third weekly gain as signs of market tightness, including falling US stockpiles, offset concerns about demand weakness from China.
Some of the main moves in markets:
Stocks
S&P 500 futures were little changed as of 6:35 a.m. London time
Nasdaq 100 futures fell 0.1%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.7%, more than any closing loss since Dec. 20
The MSCI Emerging Markets Index fell 0.4% to the lowest since Sept. 11
S&P 500 futures were little changed
S&P/ASX 200 futures fell 0.4%
Japan’s Topix fell 0.8%, falling for the third straight day, the longest losing streak since Dec. 20
Hong Kong’s Hang Seng fell 0.9%, falling for the fifth straight day, the longest losing streak since Nov. 15
The Shanghai Composite fell 0.9%, more than any closing loss since Jan. 3
Euro Stoxx 50 futures were little changed
Currencies
The Bloomberg Dollar Spot Index rose 0.2% to the highest in more than two years
The euro weakened 0.1%,falling for the fourth straight day, the longest losing streak since Dec. 12
The Japanese yen fell 0.1% to 158.35 per dollar
The offshore yuan was little changed at 7.3543 per dollar
The Sterling weakened 0.2%, falling for the fourth straight day, the longest losing streak since Nov. 15
Cryptocurrencies
Bitcoin rose 2% to $93,906.37
Ether rose 1.8% to $3,267.24
Bonds
The yield on 10-year Treasuries advanced zero basis points, climbing for the sixth straight day, the longest winning streak since Dec. 19
Germany’s 10-year yield advanced two basis points to 2.57%
Britain’s 10-year yield advanced two basis points to the highest in more than 16 years
Australia’s 10-year yield advanced six basis points to 4.55%
Commodities
Spot gold rose 0.4%, climbing for the fourth straight day, the longest winning streak since Dec. 11
West Texas Intermediate crude rose 0.5% to $74.29 a barrel
Spot gold rose 0.4%, climbing for the fourth straight day, the longest winning streak since Dec. 11
This story was produced with the assistance of Bloomberg Automation.
