Stocks Tick Higher With Futures as Jobs Day Looms: Markets Wrap

(Bloomberg) — European stocks posted modest gains with U.S. equity futures as a cautious tone settled over markets the day before key U.S. jobs data that will shape bets on the path of Federal Reserve policy tightening.

Travel firms led the Stoxx Europe 600 higher for a second day, while consumer non-cyclicals and miners fell. S&P 500 futures also ticked higher after the main gauge closed flat on Wednesday. Ten-year U.S. Treasury yields were steady just below 1.30%. The dollar was little changed.

All eyes are turning to U.S. payrolls data due Friday for clues on the economy and the implications for a reduction in the Fed’s $120 billion of monthly bond purchases.

Investors are trying to assess when the delta-variant virus outbreak might peak and how that will play into timing of Fed bond taper plans. Global stocks are near record levels and gauges of implied financial market volatility are declining, suggesting many remain optimistic that the reopening from the health crisis will weather challenges.

At the same time, a move into defensive havens such as mega-tech stocks that epitomized the stay-at-home trade suggest investors remain wary of virus disruptions and a growth slowdown. The latest ADP Research Institute data showed U.S. companies added fewer jobs than expected in August. Manufacturing expanded at a stronger-than-estimated pace but faced supply snarls.

See more: Mega-Tech Stocks Reclaiming Throne Amid Defensive Tilt: Chart

Still, a handful of respected bond forecasters are backing the view that continued economic momentum will lead to higher yields. Famed investor Bill Gross said 10-year yields “have nowhere to go but up” and are set to reach 2% over the next year. The yield has scope to hit 1.90% in coming months, according to JPMorgan Chase & Co. technical strategist Jason Hunter.

“The market is fading Covid more as a risk in terms of really hampering economic activity,” Tracie McMillion, head of global asset allocation strategy at Wells Fargo Investment Institute, said on Bloomberg Television. “We think the Fed is going to stick with their word and they will start tapering later this year. But we don’t think they are going to be in any hurry to raise interest rates.”

Elsewhere, Chinese tech shares listed in Hong Kong came off their highs after criticism of ride-hailing firms highlighted risks from the nation’s ongoing crackdown on private industries. China’s overall market was steady, with traders assessing a central bank step to cushion the economy by helping smaller firms.

Oil edged higher after OPEC+ stuck with a plan to boost crude production, with wagers that the market can absorb the additional supply.

Here are some key events to watch this week:

U.S. factory orders, durable goods, trade balance, initial jobless claims ThursdayU.S. jobs report Friday

For more market analysis, read our MLIV blog.

Some of the main moves in markets:

Stocks

Futures on the S&P 500 Index gained 0.2% as of 10:26 a.m. London time.The Stoxx Europe 600 Index rose 0.2%.The MSCI Asia Pacific Index increased 0.1%.The MSCI Emerging Market Index was little changed.

Currencies

The Bloomberg Dollar Spot Index fell 0.1%.The euro gained 0.1% to $1.1846.The British pound jumped 0.1% to $1.3786.The onshore yuan was little changed at 6.462 per dollar.The Japanese yen was little changed at 109.97 per dollar.

Bonds

The yield on 10-year Treasuries declined one basis point to 1.29%.Germany’s 10-year yield decreased two basis points to -0.39%.Japan’s 10-year yield increased one basis point to 0.036%.Britain’s 10-year yield sank two basis points to 0.673%.

Commodities

West Texas Intermediate crude increased 0.4% to $68.85 a barrel.Brent crude gained 0.4% to $71.88 a barrel.Gold strengthened 0.1% to $1,815.22 an ounce.

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Roy Walsh

Roy Walsh

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