European Midday Briefing: Stocks Steady Ahead of U.S. Jobs Data

MARKET WRAPS

Stocks were steady on Friday ahead of the most important data point of the week, U.S. nonfarm payrolls at 1230 GMT.

"Today's jobs data will be very important in providing a final conclusion to the week's so far stronger-than-expected U.S. jobs figures, " Swissquote Bank said, referring to ADP private payrolls data and the Job Openings and Labor Turnover Survey.

A soft nonfarm payrolls report would potentially boost rate-cut expectations and keep appetite in equities robust, while stronger-than-expected figures would damp rate-cut bets and weigh on equities.

A.P. Moeller-Maersk and Hapag-Lloyd stock however fell sharply after U.S. dockworkers agreed to end a three-day strike, removing the prospect of an earnings boost from higher freight rates.

U.S. Markets

Stock futures were flat before the payrolls data, which economists expect to show the labor market is continuing to gently cool.

However, some economists are hoping to see that payrolls rebounded slightly last month from the recent spate of tepid hiring.

Either way, Federal Reserve officials will be watching closely to determine the size of interest rate cuts to levy at their next decision on November 7, a few days after the release of October's jobs report.

Forex:

The euro faced further declines against the dollar even if nonfarm payrolls data offered some brief respite by showing a higher unemployment rate, ING said.

"Ultimately, the less supportive rate differentials, risk sentiment instability and a turbulent EU budget season mean EUR/USD could stay under pressure."

If the euro breaks below the $1.1000 support level, the move could quickly extend to $1.0900.

On Monday Christine Lagarde boosted October interest rate-cut expectations while Jerome Powell dampened aggressive rate-cut bets.

The dollar fell as investors turned cautious ahead of the nonfarm payrolls.

"We expect a further deceleration in U.S. net-jobs creation from 142,000 in August, together with a modest pickup in the jobless rate to 4.3%," Unicredit Research said.

Another soft report might take some shine off this week's dollar recovery whereas stronger-than-expected data could boost the currency after Powell recently damped bets for further aggressive rate cuts.

Sterling edged slightly higher after BOE chief economist Huw Pill signalled gradual interest-rate cuts .

Bonds:

Yields on eurozone and U.K. government bonds rose ahead of the U.S. jobs data as investors seek clues on the Fed's next move.

"As long as the data remains broadly consistent with a soft landing rather than a recession, the Fed does not appear to be under pressure to follow up with another 50bp cut," Commerzbank said, adding that recent strong demand for safe-haven assets due to geopolitical tensions has faded too.

Energy:

Oil prices were broadly stable in early trade after jumping 5% on growing fears that Israel would retaliate against Iran by targeting its oil facilities.

Both benchmarks surged in the previous trading session, boosted by U.S. President Joe Biden's comments suggesting officials are considering whether to support an Israeli strike on Iranian oil facilities.

A strike on oil infrastructure would boost the risk premium priced into the market, given that Iran is the seventh largest oil producer in the world.

Still, further price gains are limited by concerns over global demand and prospects of a supply surplus after OPEC member Libya resumed production Thursday and as OPEC+ prepares to hike output in December.

Metals:

Gold futures rose close to records ahead of the key U.S. data.

Gold Chart

Gold might retest resistance at $2,700 and if a bullish breakout above this level occurs, Comex gold futures could extend gains toward $2,775, RHB Retail Research said, based on the daily chart.

Comex gold futures formed a "Doji" candlestick pattern with a "long lower shadow" on Thursday and recent positive price movements and rising relative strength index suggest bullish momentum gathering pace again, it said.

EMEA HEADLINES

U.K. Retail Footfall Rises for First Time in a Year Amid Better Weather

U.K. retail footfall rose for the first time in more than a year in September, boosted by the mild temperatures, according to a study.

The number of visits to stores-comprising high-street shops, retail parks and shopping centers-for the five weeks ended Sept. 28 increased by 3.3% from the same period a year earlier, compared with a 0.4% decline in August, according to data from British Retail Consortium and Sensormatic Solutions IQ published Friday.

French Factory Production Shows Signs of Recovery

French manufacturing output grew more quickly than expected in August, a rare bright sign in a sector that has struggled to recover from recent shocks.

Output from goods-producing industries was 1.6% higher over the month, according to figures set out Friday by France's statistics agency. That was a significantly faster rise than the 0.2% increase expected by economists, according to a poll compiled by The Wall Street Journal.

Norwegian Air Shuttle Warns on Costs as Boeing Delivery Delays Drag On

Norwegian Air Shuttle said it would prioritize cost-saving measures as a strike at Boeing further delays deliveries of new aircraft.

The low-cost carrier has 50 Boeing 737 Max aircraft on order that had been due for delivery from 2025, but it has previously warned of delivery delays that will hit its growth next year.

Springer Nature Shares Jump in Stock Market Debut

Springer Nature shares rose as the company started trading on the Frankfurt Stock Exchange, implying a market valuation of 44.63 billion euros ($49.24 billion).

Shares of the publisher of the scientific journal Nature and Scientific American magazine were trading at 24.34 euros in early trading compared with its initial public offering price of 22.50 euros.

GLOBAL NEWS

U.S. Port Workers Agree to End Their Strike

U.S. dockworkers agreed to return to work after port operators sweetened their contract offer, ending a three-day strike that threatened to disrupt the American economy.

The breakthrough Thursday came after port employers offered a 62% increase in wages over six years, according to people familiar with the matter.

BOE's Pill Sees Need for Caution in Cutting Key Rate

The Bank of England should proceed cautiously in lowering borrowing costs as inflation cools, Chief Economist Huw Pill said Friday.

In a speech, Pill said inflation would only decline if the central bank continued to restrain households and businesses through its key interest rate.

Food Prices Rose at Fastest Rate in 18 Months in September, UN Says

Food prices saw their fastest increase in 18 months in September, with the prices of all commodity groups rising, led by sugar, the Food and Agriculture Organization of the United Nations said.

The FAO's food price index, which tracks global prices for a basket of staple foods, averaged 124.4 points in September, up 3.0% from August and 2.1% higher on year. The index increased at the fastest on-month rate since March 2022. In August, food prices stood at 120.7 points.

Heavy Israeli Airstrikes Target Likely Successor to Hezbollah Leader in Beirut

BEIRUT-Israel targeted Hezbollah's likely successor to slain leader Hassan Nasrallah with heavy airstrikes on Beirut's southern suburbs Friday, as it continues to try to dismantle the Lebanese militant group's leadership structure.

The attempt on Hashim Safieddine was the latest in a series of aggressive Israeli attacks on the group, including an intelligence operation that caused thousands of electronic devices carried by Hezbollah to explode at roughly the same time, an airstrike that killed most of the leadership of the group's elite Radwan force, and an air campaign that has hit more than 3,000 targets across Lebanon.

Key U.S. Military Base Secured as U.K. Returns Disputed Islands to Mauritius

LONDON-The sun has now officially set on Britain's African empire.

On Thursday, the British government struck a deal with Mauritius, an island country off East Africa, to hand over a cluster of 58 tiny islands in the Indian Ocean known as the Chagos archipelago, ending a protracted battle over the U.K.'s last remaining African overseas territory.

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(END) Dow Jones Newswires

October 04, 2024 05:29 ET (09:29 GMT)

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