European Stocks Fall, Oil Rebounds, Traders Await US Jobs Data

LONDON, Aug 5 (Reuters) – European stocks fell slightly on Friday but were still headed for a weekly gain, as traders awaited U.S. jobs data due later in the session for clues on health. of the world’s largest economy.

The MSCI World Equity Index, which tracks stocks in 47 countries, rose 0.2% and is headed for a weekly gain of 0.7%, marking its third consecutive week of gains (.MIWD00000PUS).

Asian stocks rose overnight, but as of 0823 GMT, the STOXX 600 was down 0.1% (.STOXX), France’s CAC 40 (.FCHI) and Germany’s DAX (.GDAXI) were flat. London’s FTSE 100 was down 0.2% (.FTSE).

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Central banks around the world have been raising interest rates in a bid to limit rising inflation, but European stocks have rallied this week to nearly two-month highs.

“Equity futures have become comfortable with the idea that the interest rate hikes being implemented by central banks will be enough to contain long-term inflation,” said Kiran Ganesh, multi-asset strategist at UBS.

But other asset classes are reflecting a slowdown.

The closely watched portion of the US Treasury yield curve that measures the gap between two-year and 10-year Treasury yields hit 39.2 basis points on Thursday, the deepest inversion since 2000. .

An inverted yield curve is often considered an indicator of a future recession.

Oil rose, recovering after prices hit their lowest levels since February in the previous session. Concerns about supply shortages were enough to override fears of weakening fuel demand. read more

Global crude oil markets remained firmly in retreat, with immediate prices higher than those in future months, signaling tight supplies.

Investors will watch US jobs data to see if the aggressive pace of rate hikes from the US Federal Reserve is starting to cause economic growth to slow.

The data is expected to show nonfarm payrolls rose by 250,000 jobs last month, after rising by 372,000 in June.

“So far, markets have been responding to stronger economic data as good news. But at some point, they may wonder if the Fed’s tightening is having the desired effect if the economy remains strong,” the economists wrote. ING in a note to clients.

“At that stage, they might start to worry that rates could go higher or stay higher longer.”

UBS’s Ganesh said a nonfarm payrolls figure in the 200,000-300,000 range would be consistent with a “soft landing” for the economy, while a higher figure would suggest the Fed needs to raise interest rates further to contain the spread. demand.

Data on Thursday showed that the number of Americans filing new claims for jobless benefits had risen last week, suggesting a weakening in the labor market may already be underway. read more

Cleveland Fed President Loretta Mester struck a hawkish tone Thursday, saying the Fed would need to raise interest rates above 4% to get inflation back on target. read more

The US dollar index was up around 0.2% and the euro was down 0.2% at $1.02265. The Australian dollar, which is seen as a liquid gauge of risk appetite, was down 0.1% at $0.6958. read more

Sterling was down 0.1% at $1.215.

The Bank of England raised interest rates to the highest in 27 years on Thursday and warned that a long recession was looming. read more

European government bond yields were mostly 1-2 basis points higher, with the German 10-year benchmark yield at 0.812%.

German industrial production posted an unexpected but modest rise in June, official data showed.

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Information from Elizabeth Howcroft; Edited by Bradley Perrett

Our standards: the Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds, and the “Web3” that powers money.

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