US Index Futures Drop as Focus Turns To Jobs Data: Markets Wrap

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(Bloomberg) — US stock-index futures slid as investors awaited employment data to gauge whether the world’s largest economy can avoid a recession. The dollar was in demand.

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Contracts on the S&P 500 and Nasdaq 100 gauges fell at least 0.1% each, signaling US stocks will pare weekly gains. Treasuries rose and the 10-year yield lost 1 basis point. The Bloomberg Commodity Index saw its longest losing streak in a week since March 2020. Twitter Inc. fell in premarket New York trading after a report Elon Musk’s proposed acquisition of Twitter Inc. may fall apart.

As the Federal Reserve increases its rate of interest to control rising inflation, global markets are positioning themselves for a possible US recession. Two of the Fed’s most hawkish policy makers backed raising interest rates another 75 basis points this month, while playing down recession fears. Investors suspended their judgment on the question, keeping portions of the US yield curve inverted and awaiting Friday’s nonfarm payrolls report.

“With the recession talk taking centerstage, investors are increasingly focused on the jobs figures,” Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, wrote in a note. “A strong read could bring forward the idea that the US economy could soft-land despite tighter Fed policy, or that the Fed would allow itself to get more aggressive to fight inflation.”

Shockwaves spread through the markets as Japan’s former Prime Minister Shinzo Abe was assassinated. Asian stocks declined and the yen (a safe asset) strengthened. The possibility of China granting 1.5 trillion yuan ($220billion) of stimulus, mainly for infrastructure purposes, helped sentiment before the shooting.

On Thursday, Governor Christopher Waller, and James Bullard (president of the St. Louis Fed), both stressed the importance of moving policy into restrictive territory in order to face the most severe price pressures for 40 years. This could even mean slowing growth. They are both voting members of this year’s Federal Open Market Committee.

Treasuries rose this Friday, while the yield curve for the 10- and 2-year ten-years remained inverted for a forth day. Slowdown fears dogged Europe too, where the keenly watched yield spread between Italy and Germany narrowed 4 basis points, even as the region’s central bank was expected to begin monetary tightening.

The Bloomberg commodity gauge was headed for its fourth weekly loss. The West Texas Intermediate oil futures were trading below $103 per barrel. This puts the US benchmark on track for a weekly decline of over 5%.

Twitter dropped 4% in the early trading. Musk’s team has concluded that social-media company can’t verify its figures on the spam accounts and has “stopped engaging” in discussions around funding the deal, the Washington Post reported. This issue has put the acquisition “in serious jeopardy,” the newspaper said.

Europe’s Stoxx 600 Index erased a loss as carmakers rallied. Bitcoin declined, but remained above $21,000 per coin.

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Here are some of the major moves on markets:

Stocks

  • Futures on the S&P 500 fell 0.1% as of 6:15 a.m. New York time

  • Futures on Nasdaq 100 dropped 0.3%

  • Futures on Dow Jones Industrial Average had little change

  • Stoxx Europe 600 rose 0.2%

  • The MSCI World index did not change.

Currencies

  • The Bloomberg Dollar Spot Index rose by 0.2%

  • The euro fell 0.3% at $1.0130

  • The British Pound fell 0.4% to $1.1976

  • The Japanese yen rose 0.1% and reached 135.85 USD.

Bonds

  • The yield on 10-year Treasuries fell one basis point to 2.928%

  • Germany’s 10-year yield declined six basis points to 1.26%

  • Britain’s 10-year yield advanced two basis points to 2.14%

Commodities

  • West Texas Intermediate crude oil fell 0.2% and was $102.56 per barrel

  • Futures on gold fell 0.2% to $1.735.70 an ounce

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