LIVE MARKETS European bourses cautious ahead of EZ, U.S. data

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EUROPEAN BOURSES CAUTIOUS AHEAD OF EZ, U.S. KEY DATA (0845 GMT)

European bourses open mostly flat to higher on the day but quickly edged into negative territory, with investor focusing on inflation data for the euro zone and U.S. jobs data due later in the day for clues on the pace of policy tightening.

In a few minutes, the pan European STOXX 600 (.STOXX) slipped 0.5%, to its lowest level in almost two weeks after opening flat, while the London (.FTSE) blue chips quickly turned negative, edging 0.2% lower.

The biggest drag are travel and leisure stocks (.SXTP), down 1.5% and real estate (.SX86P), down 1.4%.

But some are coping better, basic resource stocks (.SXPP) are up 1.4%. Banks (.SX7P) are up 0.5% and are set for their best week in eleven months boosted by the U.S. Federal Reserve’s signal this week that it could raise rates faster than expected. read more

(Joice Alves)

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NOT IF OR WHEN BUT HOW FAST? (0747 GMT)

That the U.S. Federal Reserve will hike rates this year is a no brainer, surely? So the key question then is how fast will it tighten policy given uncomfortably high inflation.

Cue Friday’s non-farm payrolls report, which could help provide an answer.

The latest U.S. jobs report takes on added significance after minutes from the Fed’s December meeting on Wednesday, showed some policymakers want to move even quicker to tighten policy, including by shrinking the Fed’s $8 trillion-plus balance sheet.

Economists polled by Reuters forecast the U.S. economy created 400,000 new jobs last month versus 210,000 in November. Should payrolls meet expectations, a whopping 6.5 million jobs would have been created in 2021. read more

The data could trigger fresh volatility across world markets – consider that rate-sensitive two-year U.S. bond yields are up almost 15 bps this week and set for their biggest weekly jump since late 2019 . A bond market volatility gauge (.MOVE) is creeping up to its highest levels since March 2020.

A Reuters poll meanwhile shows currency analysts expect the dollar to extend its dominance well into 2022 given the focus on the Fed policy outlook.

Nearly two-thirds of 49 foreign exchange strategists polled by Reuters between Jan. 4-6 said interest rate differentials would dictate sentiment in major FX markets in the near term, with only two concerned about new coronavirus variants. read more

Ahead of the payrolls data, the flash estimate of euro zone inflation in December also has the potential to stir things up. Data from Germany on Thursday shows inflation in Europe’s biggest economy remains high but may be peaking.

Asian shares meanwhile were on firmer ground, breaking two days of losses. European and U.S. stock futures are also higher, while oil prices were heading for their best week since mid-December on supply worries amid escalating unrest in Kazakhstan and outages in Libya.

Key developments that should provide more direction to markets on Friday:

– Samsung Electronics Q4 profit jumps read more

– German exports rise, output falls slightly in November read more

– UK December construction PMI

– Euro area December flash CPI, November retail sales, final December consumer confidence,

– US December nonfarm payrolls data, November consumer credit

– Fed’s Daly and Bostic speak

(Dhara Ranasinghe)

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STOXX SET FOR THIRD WEEKLY GAINS (0735 GMT)

European bourses are seen regaining some grounds. That would set the pan European STOXX 600 (.STOXX) to its third consecutive weekly gains.

EUROSTOXX 50 Futures are up 0.2%, while FTSE and Dax Futures are flat as investors get ready to buy the dip after Thursday’s post-Fed minutes sell off.

In a busy day for economic data, euro zone inflation data is due at 1000 GMT. U.S. jobs data are due later in the day, with investors taking the view that the numbers could reinforce the need for faster U.S. interest rate hikes.

(Joice Alves)

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