(Bloomberg) — Global stocks fell Friday as traders took a cautious stance ahead of U.S. employment data that will provide new insights into the health of the economy and the interest rate outlook.
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Nasdaq 100 futures were down 0.3% and S&P 500 futures were down 0.2%. Chinese benchmarks have been pushed towards a bear market. The Stoxx 600 in Europe was largely unchanged.
Bond markets reflected similar defensive sentiments. UK gilts extended their sell-off this week as 10-year yields rose 3 basis points to 4.84%, along with a decline in government bonds across Europe. U.S. Treasury bonds tumbled.
The financial market has been highly volatile since the beginning of the year. U.S. yields edged higher as investors softened their views on the pace of Federal Reserve easing. The anxiety comes as signs of a strong U.S. economy and sticky inflation threaten to keep interest rates high.
Friday’s U.S. nonfarm payrolls data is expected to show a slowdown in hiring in a robust labor market. The median estimate for that figure predicted 165,000 jobs would be added to the economy in December. The unemployment rate is expected to remain steady at 4.2%, and the average hourly earnings growth rate is expected to be slightly lower than the previous month.
“Given how quickly Fed hawks have gained ground in recent weeks and how many more investors are excited by dovish signals, the market reaction to soft data has been stronger than the reaction to hard numbers,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “It could be big,” he said.
Several Federal Reserve officials confirmed Thursday that the central bank is likely to keep interest rates at their current levels for an extended period of time and will cut them again only when inflation cools meaningfully.
“The Fed is worried about the incoming administration,” Skyler Weinand, chief investment officer at Regan Capital, said on Bloomberg Television. He said the combination of a growing U.S. fiscal deficit and strong consumers “could push interest rates higher over the next five to 10 years.”
The dollar index was little changed. The yen rose 0.2% against the U.S. dollar, boosted by a report that Japanese bank officials may be discussing raising inflation forecasts. The pound remains under pressure, down 0.2% after falling to its lowest in more than a year in the previous session.
