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European equities and Wall Street futures began in the red on Monday after turbulent trading last week, when traders were uneasy about stagflation and central banks withdrawing monetary stimulus from the pandemic.
The Stoxx Europe 600 equities index fell 0.5 percent in early trading, while the UK’s FTSE 100 was flat. In the US, futures markets indicate that the S&P 500 stock index would lose 0.3%.
The US Federal Reserve, which focuses on employment as well as inflation, has promised to continue its $ 120 billion monthly mortgage purchases, which have suppressed borrowing costs and raised equity valuations, until it sees ‘significant further progress’ towards its targets.
Analysts polled by Bloomberg expect Friday’s non-farm payroll report to let U.S. employers hire nearly half a million new workers last month, while Fed Chairman Jay Powell hinted that the central bank already in November may announce a reduction in its debt purchases.
“All roads point to payrolls this week on Friday,” said Deutsche Bank strategist Jim Reid. “Unless there is a significant decline in the whole range of labor market indicators in the report, it will probably be the catalyst to boost the November decline.”
Daiwa economist Chris Scicluna said a job report that met expectations was likely to provide the ‘outcome’ that Jay Powell is trying to confirm the start of QE [quantitative easing] decrease ”at the December meeting of the central bank.
The Stoxx and S&P 500 both fell more than 2 percent last week, hit by rising oil and natural gas prices and fears of tighter monetary policy while the Delta coronavirus variant continues to soar across the US.
The Bank of England warned last month that British inflation could rise by 4% until next year, while the central bank of Norway raises interest rates. The Reserve Bank of New Zealand, which will hold its next monetary policy meeting on 6 October, is expected to increase borrowing costs by a quarter of a percentage point to curb rising inflation.
The Purchasing Managers’ Index of the Institute for Supply Management for the US Services Sector is expected to show ‘reduced momentum in US activity on Tuesday amid a greater risk of infection due to the Delta variant’, Barclays analysts said in a research note .
The yield on the US Treasury bond, which is reversing its price, was stable at 1.47 percent after rising from about 1.3 percent at the end of September.
The dollar index, which measures the US currency against six others, including the euro and the British pound, was just below the one-year high reached last week.
In Asia, the Hang Seng stock index in Hong Kong fell 2.3%, prompted by concerns about a slowdown in China’s key real estate sector amid a debt crisis at major home builder Evergrande.
Chinese media reported on Monday that Evergrande will sell a half stake in its property management business while the trading of its Hong Kong shares is suspended. Beijing has decided to curb leverage and real estate speculation, which according to Michael Stanley’s strategist at Morgan Stanley said would weigh on China’s growth “in a way that is” probably not fully priced “globally. markets.
The Nikkei 225 stock index of Tokyo fell 1.1% while the Chinese stock markets closed for the holidays.
Brent crude, the international benchmark, fell 0.5% to $ 78.86 a barrel but remained near a three-year high.
Unhedged – Markets, finance and strong opinion
Robert Armstrong analyzes key market trends and discusses how Wall Street’s best minds react to them. Sign in here to send the newsletter directly to your inbox every weekday