(Bloomberg) — Global stock markets retreated on Friday as traders took a cautious stance ahead of U.S. jobs data that will offer new insights into the health of the economy and the outlook for interest rates.
Read More from Bloomberg
Nasdaq 100 futures fell 0.3% while those for the S&P 500 retreated 0.2%. The Chinese benchmark pushed towards a bear market. Europe's Stoxx 600 was little changed.
Bond markets echoed similar guarded sentiment. UK gilts extended a sell-off this week, with the 10-year yield rising another three basis points to 4.84% alongside a retreat in government bonds across Europe. US Treasuries were treading water.
Financial markets have been volatile at the start of the year, with US yields marching higher as investors moderated their views on the pace of Federal Reserve easing. The concern comes as signs of a robust US economy and sticky inflation threaten to keep rates high.
US non-farm payrolls data on Friday is expected to show a slowdown in hiring in an otherwise robust labor market. Median estimates for the figures predict that 165,000 jobs were added to the economy in December. The unemployment rate is forecast to remain steady at 4.2% and average hourly earnings growth is seen to cool slightly from a month earlier.
“Given how quickly the Fed hawks have gained ground in recent weeks – and how much more investors are excited by signs of easing – the market's reaction to soft data could be overwhelming response to strong figures,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Several Fed officials confirmed on Thursday that the central bank will likely maintain interest rates at current levels for an extended period, cutting again when inflation cools meaningfully.
“The Fed is worried about the incoming administration,” said Skyler Weinand, chief investment officer of Regan Capital, on Bloomberg Television. The combination of a growing US fiscal deficit and a strong consumer could lead to “higher interest rates for the next five to ten years,” he said.
There was little change to the dollar index. The Yen rose 0.2% against the greenback on the back of a report that Bank of Japan officials are likely to discuss raising their inflation forecasts. The pound remained under pressure, falling 0.2% after sliding to its lowest level for more than a year in the previous session.