Markets brace for US jobs data as Fed hike looks more likely

Stocks declined as investors prepared for another round of US jobs numbers to gauge if they will back new bets for more Federal Reserve interest rate hikes.

Shares in Europe headed for their worst week since the middle of March. US equity futures signaled more of the losses seen Thursday in the S&P 500 and Nasdaq 100 benchmarks after stronger-than-expected private hiring data. Asian stocks slid for a third day.

In corporate news, Just Eat Takeaway.com NV shares slumped after analysts at Exane and JPMorgan Chase & Co. turned bearish on the food-delivery company. Persimmon Plc was among UK homeowners trading lower after Halifax said house prices are falling at their fastest annual pace since 2011. 

Alibaba Group Holding Ltd. rose in US premarket trading, tracking gains in Hong Kong after Reuters said Chinese authorities will wrap up a probe on Ant Group Co. as soon as Friday with a fine of more than $1.1 billion, capping years of scrutiny over the fintech giant. 

Traders added to wagers of more rate hikes as ADP Research Institute data on Thursday showed US companies added the most jobs in more than a year in June. Friday’s US nonfarm payrolls and unemployment reports will be key to any more revisions in rate-hike expectations after the ADP numbers prompted a spike in Treasury yields.

“If we get a consensus-type report, it is possible that the market takes yields off their extremes into the weekend,” ING Groep NV rates strategists led by Antoine Bouvet wrote in a note. “But we’d still maintain that there has been enough in the past few days of data for any pullback to be reversed next week, and for the push higher in yields to continue.”

Treasuries steadied in Friday trading, with the policy sensitive two-year yield near 5%, while the 10-year hovered close to the highest since March.

Stocks have been losing ground in July after a strong first half of the year as hawkishness from central banks from the US to the UK damps hopes of a soft landing for the global economy. One of the hottest trades has been technology shares, driven by the buzz around artificial intelligence, but Bank of America Corp. strategists said investors who piled into the sector risked being caught off-guard in the selloff sparked by rate hikes.

“We say ‘sell the last hike’ will hit tech hardest,” the BofA team led by Michael Hartnett wrote in a note. But if excitement over AI continues, they said the “baby bubble” that currently exists in a handful of Big Tech shares will mature into a larger one in the second half.

Swap contracts linked to the Federal Reserve’s future policy decisions almost fully price in a quarter-point interest-rate hike by July 26 and show a growing likelihood of an additional move by year-end. This expectation for higher rates is reinforcing bets on tighter monetary policy globally as central banks struggle to rein in inflation.

Dallas Fed President Lorie Logan voiced her concerns on Thursday that inflation was still running too hot and more tightening was needed. Policymakers elsewhere share that view, with European Central Bank President Christine Lagarde saying there is still “work to do” to bring inflation under control.

In Asia, US Treasury Secretary Janet Yellen held informal talks with China’s former Vice Premier Liu He and the People’s Bank of China governor Yi Gang as she began two days of talks designed to stabilize fraught ties between the two superpowers.

Investors also remained on the lookout for any stimulus decision by the Chinese government after Premier Li Qiang pledged to “spare no time” in implementing a batch of targeted policies to strengthen the country’s economic recovery.

Key Events This Week:

• US unemployment rate, nonfarm payrolls, Friday
• ECB’s Christine Lagarde addresses an event in France, Friday

Some of the main moves in markets today:

Stocks

• The Stoxx Europe 600 fell 0.3% as of 9:40 a.m. London time
• S&P 500 futures fell 0.2%
• Nasdaq 100 futures fell 0.2%
• Futures on the Dow Jones Industrial Average fell 0.2%
• The MSCI Asia Pacific Index fell 0.7%
• The MSCI Emerging Markets Index fell 0.7%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro fell 0.1% to $1.0878
• The Japanese yen rose 0.7% to 143.06 per dollar
• The offshore yuan rose 0.2% to 7.2432 per dollar
• The British pound was little changed at $1.2743

Cryptocurrencies

• Bitcoin fell 0.8% to $30,087.04
• Ether fell 1.3% to $1,859.43

Bonds

• The yield on 10-year Treasuries was little changed at 4.04%
• Germany’s 10-year yield was little changed at 2.63%
• Britain’s 10-year yield was little changed at 4.66%

Commodities

• Brent crude rose 0.4% to $76.80 a barrel
• Spot gold rose 0.2% to $1,914.04 an ounce

This story was produced with the assistance of Bloomberg Automation.

--With assistance from Tassia Sipahutar.