Stocks fall as traders hunker down before payrolls: Markets wrap

(Bloomberg) — Global stock markets fell on Friday as traders adopted a cautious stance ahead of U.S. jobs data that will provide new insight into the health of the economy and interest rate expectations.

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Nasdaq 100 futures fell 0.3%, while S&P 500 futures fell 0.2%. The Chinese index rushed into a bear market. The European Stoxx 600 index was little changed.

Bond markets echoed similar cautious sentiments. British Treasuries continued the sell-off seen this week, with the 10-year bond yield rising another three basis points to 4.84% alongside a decline in government bonds across Europe. US Treasuries are treading water.

Financial markets were volatile at the start of the year, with US bond yields rising as investors moderated their views on the pace of Federal Reserve easing. The concern comes as signs of a strong US economy and steady inflation threaten to keep interest rates high.

Friday’s US non-farm payrolls data is expected to show a slowdown in hiring in a strong labor market. The average estimate for the numbers expects 165,000 jobs to be added to the economy in December. The unemployment rate is expected to remain steady at 4.2%, and average hourly earnings growth is expected to cool slightly from the previous month.

“Given how quickly Fed hawks have made gains in recent weeks — and how excited investors are about dovish signals — the market’s reaction to weak data could outweigh its response to strong numbers,” said Ipek Ozkardskaya, senior analyst at Swissquote Bank.

Several Federal Reserve officials confirmed Thursday that the central bank is likely to keep interest rates at current levels for an extended period, and will cut them again only when inflation calms meaningfully.

“The Fed is concerned about the incoming administration,” Skyler Weinand, chief investment officer at Reagan Capital, told Bloomberg TV. The combination of a growing US fiscal deficit and a strong consumer could lead to “higher interest rates over the next five to 10 years,” he said.

There was little change in the dollar index. The yen rose 0.2% against the dollar on the back of a report that Bank of Japan officials are likely to discuss raising their inflation forecasts. The British pound remained under pressure, falling by 0.2% after falling to its lowest level in more than a year in the previous session.

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