(Bloomberg) — Stocks and US futures kept to narrow ranges as traders awaited a pivotal US jobs report for more evidence of whether the labor market is cooling fast enough to bring the Federal Reserve closer to reducing interest rates.
Most Read from Bloomberg
Europe’s Stoxx 600 Index crept higher, keeping the benchmark on pace for a fourth week of advances. Shares in Anglo American Plc sank 6.6%, the most in almost nine months, after the company said it will lower production across nearly all commodities next year in a bid to cut costs.
Contracts on the S&P 500 were little changed, while those on the tech-heavy Nasdaq 100 signaled a modest pullback from Thursday’s 1.5% rally. In Asia, Indian stock benchmarks, already at record levels, added to gains after the central bank’s decision to keep its rate unchanged, as expected.
Recent evidence of slowing US inflation and a cooling labor market has helped stoke optimism that the Fed may be near the end of its tightening campaign. Friday’s nonfarm payroll report is crucial for traders evaluating whether bets on monetary easing next year are justified — or have gone too far.
“There has recently been an uptick in jobless claims and continuing claims, suggesting that risks to this week’s NFP data are to the downside,” said analysts at Rand Merchant Bank in Johannesburg. “Any negative surprises will support the market’s view that the Fed will need to cut rates fairly early in 2024.”
The dollar traded mixed against major peers and Treasuries were little changed. Meanwhile, the yen was in focus as traders ratcheted up bets that the Bank of Japan is nearing the end of its negative interest rate policy. The Japanese currency surged as much as 1.1% in thin liquidity before largely erasing its rise. The advance sent the nation’s stocks and bonds lower.
Read More: Bond Traders Racing Ahead of Fed Face Reality Check on Jobs Data
Traders are also on the lookout for any clarification from BOJ Governor Kazuo Ueda of comments he made to lawmakers that his job was going to get more challenging from the year-end, helping fuel speculation the central bank will start lifting its sub-zero benchmark rate soon. The yen reached its strongest level since August as bets against the currency capitulated.
Some investors, however, are not convinced that the BOJ will shift policy significantly this month. Japan’s economy shrank more than expected in the third quarter, suggesting the recovery is more fragile than thought, which may give the central bank reason to delay normalizing policy.
The recent moves in the yen “certainly have been a surprise to us and we think markets are probably overshooting here,” Eddie Cheung, senior emerging markets strategist at Credit Agricole CIB, said on Bloomberg Television. “Around these levels though yen has overshot to the downside.”
Elsewhere in Asia, shares in Hong Kong and China reversed losses. Tencent Holdings Ltd., China’s most valuable company, on Friday revealed one of its most ambitious attempts at a big-budget console game as it bet that the new franchise will help its global expansion.
But Friday’s US job report commands top billing. Payrolls probably grew by 183,000 last month, after increasing 150,000 in October, while the unemployment rate held steady at 3.9%, according to the median forecast of economists surveyed by Bloomberg.
The resolution of the United Auto Workers strike in the US will boost November’s nonfarm payrolls, but the weaker household survey will be more revealing of rapidly cooling conditions in the labor market, according to Anna Wong and Stuart Paul at Bloomberg Economics.
“It’s harder for job seekers to find work, and longer stints of unemployment usually lead to persistent increases in the unemployment rate later,” they wrote in a report. “Our view is that a recession likely began in October.”
In commodities, oil advanced, but remained on course for the longest weekly losing streak since 2018 on concerns about a global glut. Gold headed for the first weekly drop in four weeks.
Key events this week:
Some of the main moves in markets:
The Stoxx Europe 600 rose 0.1% as of 8:18 a.m. London time
S&P 500 futures fell 0.2%
Nasdaq 100 futures fell 0.2%
Futures on the Dow Jones Industrial Average were little changed
The MSCI Asia Pacific Index fell 0.2%
The MSCI Emerging Markets Index rose 0.4%
The Bloomberg Dollar Spot Index was little changed
The euro was little changed at $1.0784
The Japanese yen was little changed at 144.18 per dollar
The offshore yuan was little changed at 7.1687 per dollar
The British pound fell 0.2% to $1.2566
Bitcoin fell 0.5% to $43,174.4
Ether fell 0.9% to $2,349.98
The yield on 10-year Treasuries advanced one basis point to 4.16%
Germany’s 10-year yield advanced three basis points to 2.22%
Britain’s 10-year yield advanced four basis points to 4.01%
This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu and Matthew Burgess.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.
Read More: Stocks Are Steady in Nervy Wait for US Jobs Data: Markets Wrap