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(Bloomberg) — Global stock markets retreated on Friday as traders took a cautious stance ahead of U.S. jobs data that will provide fresh insight into the health of the economy and the outlook for interest rates. interest
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Nasdaq 100 futures fell 0.3%, while S&P 500 futures retreated 0.2%. A Chinese benchmark pushed into a bear market. Europe’s Stoxx 600 was little changed.
Bond markets echoed a similar cautious sentiment. British gilts extended this week’s sell-off, with the 10-year yield rising another three basis points to 4.84% alongside a pullback in government bonds across Europe. US Treasuries treaded water.
Financial markets have been volatile at the start of the year, with US yields rising as investors moderated their view on the pace of Federal Reserve easing. The anxiety comes as signs of a robust US economy and sticky inflation threaten to keep rates high.
Friday’s U.S. nonfarm payrolls data is expected to show a slowdown in hiring in an otherwise robust labor market. Median estimates of the numbers forecast that 165,000 jobs were added to the economy in December. The unemployment rate is expected to hold steady at 4.2% and average hourly earnings growth is seen cooling slightly from the previous month.
“Given how quickly Fed hawks have gained ground in recent weeks, and how much more investors are excited by dovish signals, the market’s reaction to the soft data could outpace its response to the strong numbers.” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Several Fed officials confirmed Thursday that the central bank will likely keep interest rates at current levels for an extended period, only cutting again when inflation cools significantly.
“The Fed is concerned about the incoming administration,” Skyler Weinand, chief investment officer at Regan Capital, told Bloomberg Television. The combination of the growing U.S. fiscal deficit and a strong consumer could lead to “higher interest rates for the next five to 10 years,” he said.
A dollar index was little changed. The yen rose 0.2% against the greenback on a report that Bank of Japan officials are likely to discuss to boost their inflation outlook. The pound remained under pressure, falling 0.2% after falling to a more than one-year low in the previous session.
