Stocks retreat before US jobs data, as rate cut hopes fade
European and Asian stock markets slid Friday before US jobs data and after separate employment figures out of the word's biggest economy poured cold water on hopes the Federal Reserve will cut interest rates in the next few months.
There was another insipid showing on Wall Street Thursday amid concerns that rallies for global equities at the end of 2023 were overdone, leading investors to pull out of big players such as Apple and Amazon.
Data on Thursday from payroll firm ADP showed far more US private-sector jobs were created last month than forecast and significantly more than in November.
While the figures also showed wage growth slowing, the reading reinforced the view that the labour market was still very tight and posed a threat to the Federal Reserve's goal of bringing inflation down to its two percent target. It currently stands at 3.3 percent.
That shook optimism that the central bank would cut interest rates as soon as the first quarter of this year, with Bloomberg News saying traders now see about a 65 percent chance of that, compared with around 85 percent last week.
The prospect of a longer wait for rate cuts boosted the dollar.
"There was nothing within the data that would suggest any urgency from policymakers to begin normalising rates lower during the first quarter," said Ian Lyngen of BMO Capital Markets.
The figures came a day after minutes from the Fed's December meeting showed officials expected to keep borrowing costs at a two-decade high for some time as they want to make sure they have inflation under control.
Attention now turns to the release Friday of the closely-watched US non-farm payrolls report, which could play a major role in Fed decision-making.
"A too strong report could be a setback for stocks, aligning with expectations of rate cuts in the second half of 2024," said SPI Asset Management's Stephen Innes.
"If the report aligns with or falls slightly short of expectations, it may reinforce beliefs in an imminent rate cut, potentially sparking a rally. On the other hand, a significantly weaker reading could renew concerns about a looming recession."
- Key figures around 1115 GMT -
London - FTSE 100: DOWN 0.9 percent at 7,653.79 points
Paris - CAC 40: DOWN 1.1 percent at 7,367.17
Frankfurt - DAX: DOWN 0.8 percent at 16,479.38
EURO STOXX 50: DOWN 1.0 percent at 4,427.66
Tokyo - Nikkei 225: UP 0.3 percent at 33,377.42 (close)
Hong Kong - Hang Seng Index: DOWN 0.7 percent at 16,535.33 (close)
Shanghai - Composite: DOWN 0.9 percent at 2,929.18 (close)
New York - Dow: FLAT at 37,440.34 points (close)
Euro/dollar: DOWN at $1.0924 from $1.0952 on Thursday
Dollar/yen: UP at 145.33 yen from 144.61 yen
Pound/dollar: DOWN at $1.2652 from $1.2682
Euro/pound: DOWN at 86.26 pence from 86.32 pence
West Texas Intermediate: UP 0.5 percent at $72.55 per barrel
Brent North Sea Crude: UP 0.4 percent at $77.90 per barrel
M.Webber--RTC
