European equities fell after days of turmoil across global financial markets, while traders waited for monthly U.S. job data that could bolster the case for the first U.S. pandemic-era rate hike.
The local Stoxx 600 stock index is 0.5 percent lower in early trades. This followed a bumpy trading day in the previous session when the European stock meter fell 1.3 percent and Wall Street stock markets whipped. London’s FTSE 100 fell 0.2 percent on Friday morning.
In Asia, Hong Kong’s Hang Seng index rose 1.8 percent, while futures following Wall Street’s S&P 500 stock index were steady.
Economists polled by Reuters expect the non-farm payroll report, published later Friday by the Labor Department, to show that employers in the world’s largest economy added 400,000 new workers last month.
A separate report from the payroll processor ADP showed private payrolls on Wednesday increased with the most in seven months in December.
Investors are likely to scrutinize Friday’s job report after minutes from the Federal Reserve’s most recent meeting revealed that officials are considering a faster-rate timetable for rate hikes this year than investors expected, to curb rising US inflation.
Some Fed officials suggested the US Federal Reserve could raise rates even before its target of maximum employment was reached, in a revelation that put great pressure on technology stocks this week. The sector, home to a string of fast-growing groups, has been lifted in recent years by low interest rates, boosting the current value of companies’ expected future profits.
“Markets are ripe for a correction, or more, at this point,” said Phillip Toews, CEO of the U.S. Asset Manager Toews Corporation.
“The combination of rising interest rates and inflated asset prices usually does not end well.”
Last few years double digit profits as global equities were fueled by the Fed and other central banks pushing borrowing costs to record lows as they bought large amounts of government bonds to protect financial markets from the shocks of coronavirus.
“One of the biggest market themes of 2022 is probably how different assets perform when central banks start scraping back their monetary policy support,” says Deutsche Bank strategist Jim Reid.
US bond markets were steady ahead of the working data. Yields on the benchmark 10-year U.S. Treasury note were flat at 1,725 percent, after climbing from about 1.53 percent in early January.
However, European government bonds continued to respond to the Fed’s falconry earlier this week. Germany’s 10-year Bund yield rose 0.01 percentage points to minus 0.06 percent and Italy’s equivalent bond yield added 0.04 percentage points to 1,306 percent.
Foreign exchange markets were stable, with the dollar index, which measures the US currency against six others, 0.1 percent lower.
Brent crude, the oil benchmark, rose 0.3 percent to $ 82.24 a barrel.