Stocks Dip as Traders Brace for US Jobs Report: Markets Wrap

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(Bloomberg) — Stocks in Europe and US equity futures struggled for direction as investors brace for the monthly US jobs report that’s likely to enliven the recession debate. The dollar rebounded from two days of declines.

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The Stoxx Europe 600 Index dipped, weighed by energy and media firms. Contracts on the Nasdaq 100 and S&P 500 erased an earlier advance to trade flat, with the Nasdaq stopping just short of a 20% rebound from its June low that would meet the technical definition of a bull market. 

A global equity index is set for a third weekly advance and near a two-month peak in a recovery from bear-market lows, helped by resilient US company profits. The durability of the bounce remains in doubt as central banks around the world speed up rate hikes and risk economic downturns. 

That’s even as the inversion between two-year and 10-year yields remains near the deepest since 2000, harkening imminent recession. 

Stocks rebounded last month on speculation that runaway inflation may have peaked and the Fed can temper interest-rate increases. With US payrolls Friday data a closely-monitored Fed indicator, an above-expectation reading could provoke a negative reaction by traders because it would be seen as emboldening the US central bank to press on with outsized hikes.

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Hiring likely softened in July but the labor market remains consistent with an expanding rather than recessionary economy and the Fed will persevere, according to Bloomberg Economics.

“The equity market in the last month has managed to turn both hawkish and dovish data into a reason for cheer, which obviously is rather self-serving and unsustainable in the medium term,” said James Athey, investment director at Abrdn. “I would continue to be a seller of equity strength given my view that the path for the economy most certainly remains down.”  

The 10-year Treasury yield was steady at about 2.69% after sinking from an 11-year high of almost 3.5%. That’s driven a move back into defensive shares, especially tech stocks, that typically benefit from ebbing duration risk.

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What to watch this week:

Some of the main moves in markets:

Stocks

Currencies

Bonds

Commodities

• Brent crude was little changed
• Spot gold fell 0.3% to $1,786.75 an ounce