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Stocks Tick Higher in Nervy Wait for US Jobs Data: Markets Wrap

(Bloomberg) — Stocks rose while bonds slipped Friday as traders awaited a pivotal US jobs report for more evidence of whether the labor market is cooling fast enough for the Federal Reserve to cut interest rates.

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Europe’s Stoxx 600 Index added 0.6%, keeping the benchmark on pace for a fourth week of advances. Shares in Anglo American Plc sank 6.6%, the most in almost nine months, after the company said it will lower production across nearly all commodities next year in a bid to cut costs.

Contracts on the S&P 500 clung to a narrow range, along with those on the Nasdaq 100, following Thursday’s 1.5% rally for the tech-heavy index. Treasuries wavered before the jobs report, with the 10-year yield rising back to 4.18%, after falling from 4.25% at the start of the week.

Friday’s nonfarm payroll report is crucial for traders evaluating whether bets on dramatic Fed policy easing next year are justified — or have gone too far. Buoyed by signs that inflation and wage growth are cooling, traders have ignited bets that cuts of at least 1.25 percentage points are in store over the next 12 months. That’s more than twice as much as Fed officials themselves, who while signaling they’re likely done raising rates have also been quick to caution that any talk of cuts is premature for now.

“The bond market will be on tenterhooks today ahead of the US job report with traders seeking validation of the recent record-breaking bond market rally driven by expectations for a rapid succession of rate cuts next year,” according to strategists at Saxo Bank A/S. “Friday’s report is expected to show moderating employment and wage growth in November but no major deterioration in hiring.”

Payrolls probably grew by 183,000 last month, after increasing 150,000 in October, while the unemployment rate held steady at 3.9%, according to the median forecast of economists surveyed by Bloomberg.

Fund managers pulled $4.8 billion from Treasuries, the biggest weekly outflow since August 2022, in the run-up to the labor market report, according to EPFR Global data.

Bond Traders Racing Ahead of Fed Face Reality Check on Jobs Data

The resolution of the United Auto Workers strike in the US will boost November’s nonfarm payrolls, but the weaker household survey will be more revealing of rapidly cooling conditions in the labor market, according to Anna Wong and Stuart Paul at Bloomberg Economics.

“It’s harder for job seekers to find work, and longer stints of unemployment usually lead to persistent increases in the unemployment rate later,” they wrote in a report. “Our view is that a recession likely began in October.”

The yen reached its strongest level since August amid fuel speculation the Bank of Japan will start lifting its sub-zero benchmark rate soon.

The dollar was mixed against major peers.

Elsewhere in Asia, shares in Hong Kong and China reversed losses. Tencent Holdings Ltd., China’s most valuable company, on Friday revealed one of its most ambitious attempts at a big-budget console game as it bet that the new franchise will help its global expansion.

In commodities, oil advanced, but remained on course for the longest weekly losing streak since 2018 on concerns about a global glut. Gold headed for the first weekly drop in four weeks.

Key events this week:

Some of the main moves in markets:

Stocks

  • The Stoxx Europe 600 rose 0.6% as of 10:03 a.m. London time

  • S&P 500 futures were little changed

  • Nasdaq 100 futures were little changed

  • Futures on the Dow Jones Industrial Average were little changed

  • The MSCI Asia Pacific Index fell 0.2%

  • The MSCI Emerging Markets Index rose 0.4%

Currencies

  • The Bloomberg Dollar Spot Index was little changed

  • The euro fell 0.1% to $1.0779

  • The Japanese yen was little changed at 144.24 per dollar

  • The offshore yuan fell 0.1% to 7.1725 per dollar

  • The British pound fell 0.3% to $1.2561

Cryptocurrencies

  • Bitcoin fell 0.6% to $43,132.29

  • Ether fell 0.9% to $2,349.02

Bonds

  • The yield on 10-year Treasuries advanced three basis points to 4.18%

  • Germany’s 10-year yield advanced four basis points to 2.23%

  • Britain’s 10-year yield advanced six basis points to 4.03%

Commodities

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu and Matthew Burgess.

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©2023 Bloomberg L.P.

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