LDN - Business

Markets on tenterhooks ahead of US jobs data, yen jumps

[September 06, 2024] By Nell Mackenzie and Stella Qiu

LONDON/SYDNEY (Reuters) -World shares held near three-week lows on Friday, the dollar nursed losses and crude oil languished near this year's lows, as investors waited for U.S. jobs data that could decide the size and speed of coming rate cuts in the world's largest economy.

Oil prices are staring down 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 in the day. [O/R]

European shares opened lower and slipped for a fifth straight session on Friday. The pan-European STOXX 600 index was last down 0.6%.

Germany's DAX index was down 0.5% after data showed the country's industrial production fell by 2.4% in July, compared with analysts' prediction of a 0.3% 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 labor 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%.

TD Securities' Rossiter said the unemployment rate was key. A rise to 4.3% or 4.4% 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 jobs data, which could give markets more clues on the scale of a Fed 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 downwards. Nasdaq futures fell 1.15%, while S&P futures slipped 0.6%.

MSCI's broadest index of Asia-Pacific shares outside Japan edged 0.2% higher, heading towards a 2.8% drop for the week.

[to top of second column]

A Chipotle restaurant advertises it is hiring in Cambridge, Massachusetts, U.S., August 28, 2023. REUTERS/Brian Snyder/File Photo

The Shanghai Composite index closed down 0.81% at 2,765.81 points, while the blue-chip CSI300 index ended 0.81% 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 dropped 0.7% as the yen jumped, weighing on the outlook for Japanese exports. The index is down about 4% this week.

The yen rose 0.5% to 142.68 per dollar, bringing the weekly gain to roughly around 3%, although a strong payrolls report could see that reverse.

Kristina Clifton, an economist at the 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%, trading around their lowest since early 2023.

Ten-year yields have fallen around 18 bps this week to 3.73%, 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. [O/R]

Brent crude futures recovered some ground on Friday up 32 cents at $73.01 a barrel, but were down over 7% so far in the week.

Gold steadied at just over $2,517 an ounce.

(Reporting by Nell Mackenzie and Stella Qiu; Editing by Dhara Ranasinghe, Sam Holmes and Mark Potter)

Back to top