Global equities traded sideways and the dollar bounced as investors braced for a crucial U.S. jobs report later on Friday that may firm the Federal Reserve’s resolve to keep raising interest rates.
The MSCI World equity index was flat heading into U.S. morning trade, on course for its fifth consecutive weekly drop despite a brief rally earlier in the week.
U.S. E-mini stock futures were also flat, after a 1.16% overnight slide for the S&P 500 (.SPX) on Thursday following private payrolls data that showed a bigger than expected rise in employment and a drop in jobless claims.
Many investors hope to see sky-high inflation subside in coming months. But markets risk being further unsettled on Friday by any signals in the official non-farm payrolls report that may make the Fed more determined to prevent a loop of rising wages and prices. The world’s most influential central bank has already pulled benchmark borrowing costs up to their highest level in 15 years.
“Markets are on edge,” said Baylee Wakefield, multi-asset portfolio manager at Aviva Investors. “We’re all hoping for that turning point in where inflation peaks, so investors are looking at these (jobs) releases very closely,” she added. “This is an environment where you’re going to see a lot of volatility based on small details.”
The dollar index , which measures the greenback against six counterparts including the yen and euro, rose 0.4% to 105.56, taking its weekly gain to more than 2% and putting it on track for its best one-week performance since late September.
According to a Reuters survey of economists, the non-farm payrolls report is expected to show on Friday that 200,000 jobs were created in December, easing from November’s 263,000 pace but still about double the level the Fed considers sustainable.
“If we see payrolls below consensus (estimates) it won’t be surprising to see a sizeable positive reaction,” Wakefield said.
Traders will also zero in on any gains in hourly wages, Deutsche Bank strategist Jim Reid cautioned, “given the Fed’s focus on wage inflation” while there was “little doubting the still strong labour market.”
U.S. two-year Treasury yields , which track interest rate expectations, spiked to a more than two-month high of 4.497% overnight before easing to 4.4571% during European morning trading. The 10-year yield , which rose as high as 3.784% in New York on Thursday, was flat at 3.7088%.
In Europe, the broad Stoxx 600 equity index (.STOXX) edged 0.1% higher, despite data on Friday showing a sharp drop in eurozone inflation. Germany’s Xetra Dax (.GDAXI) traded flat.
The euro eased 0.3% lower to $1.04865, taking its fall against the dollar this month to 2.1%.
