European stocks weakened on Friday in a cautious session ahead
of a jobs report that will be scrutinized for signals about the
U.S. economy and central bank policy.
"Everybody's waiting to see what happens with the non-farm
payrolls. Basically everything is hinging on what the Fed may or
may not do. And this is the next big piece in that puzzle,"
Kleinwort Hambros said.
Stocks to Watch
The chairman of Credit Suisse said in a Bloomberg Television
interview aired on Friday that "the outflows have basically
stopped." However, he said share-price volatility will continue
until the bank completes its capital increase.
Credit Suisse shares rose 4% in Zurich, but the stock has lost
two-thirds of its value this year, and skidded 39% in just the last
Read more here .
U.S. employers are expected to have created 200,000 jobs in
November, down from 261,000 in October as job demand cools,
"Job openings, quits and surveys of hiring intentions are down
from their peaks, but the softening is only gradual, and the labor
market remains very tight."
Pay growth is expected to have increased 4.6% in November
compared with a year earlier, easing from the 4.7% gain registered
in October but still too high for the Fed's liking, UniCredit
The employment report is due at 1330 GMT.
Stock futures were little changed ahead of the jobs report,
while Treasury yields continued to fall.
NatWest said the move into bonds has been too strong, noting the
Fed is still hiking, there could be a reacceleration in core CPI,
and the easing in financial conditions is approaching the easy
levels seen in August before the Fed started pushing back.
"So in this light, we favor higher 10-year yields from here,
targeting 3.90%-4% over the next couple of weeks," NatWest
"Not a massive move, but it also fits with our view that U.S.
rates markets will be choppy within a volatile range for the next
month or two, so tactical positioning and flexibility around that
will be the approach to take."
The dollar hit its lowest in more than five months against a
basket of currencies and the euro, as the pace of Fed interest-rate
rises looks likely to slow, but the greenback's fall may not be as
smooth as its rise was previously, Swissquote Bank said.
It noted the market's pricing of the peak in U.S. rates fell to
4.9% this week, but the Fed has indicated rates will probably go
"Any piece of news or data that would rectify the Fed pricing
could reverse the dollar's latest losses."
The euro rose to a five-month high against the dollar as markets
seem to be ignoring the risks surrounding the energy crisis, ING
"The recovery in business sentiment in the eurozone has
undoubtedly been the result of lower gas prices, which have
benefitted from mild weather in Europe," ING said.
TTF natural gas contracts are trading at one-month highs and
could see further upside volatility in the near-term as
temperatures in northern Europe are expected to fall, ING said.
While EUR/USD could rise to 1.0600 in the near-term, a
significant recovery in gas prices would make the pair's rally
ING also said sterling could rise further against the dollar if
the nonfarm payrolls report fails to reverse the U.S. currency's
downward trend, but the pound's gains will be limited, ING
The data may indicate the jobs market remained extremely tight,
which may halt the dollar's fall but fail to invert it with the
balance of risks "titled to the downside," ING said.
GBP/USD could rise to around 1.2300-1.2350 after the data, ING
said. However, it isn't factoring in the implications of rebounding
gas prices and weak economic fundamentals so a "return to 1.1500
around the turn of the year seems appropriate."
German 10-year Bund yields have room to rise from current levels
to peak at 2.5% in the first quarter of 2023, before easing
gradually, Societe Generale said, with the peak "coinciding with
the highest point in core inflation and helped by large supply and
the start of [the ECB's]."
SocGen has forecast the yield to ease to 2.4% by the end of
second quarter, 2.3% by the third quarter end and 2.2% by the final
quarter end 2023.
Separately, SocGen said the sharp rally in Treasurys would
suggest a turn is underway but it might not be the case just
Jerome Powell is hopeful that inflation will moderate, "but it
is too early to call the turn," SocGen said. "With expectations for
75-100 bps in rate hikes at upcoming [Fed] meetings, the rally in
bonds seems a bit premature."
SocGen expects the 10-year UST yield at 3.65% at the end of the
first quarter of 2023, before a gradual easing to 3.5% by end of
the second quarter, 3.4% by the end of the third quarter and 3.25%
by the final quarter end.
SocGen also said the 10-year Treasury-German Bund yield
spread--currently 172 bps--could narrow close to 100 basis points
It said expectations that U.S. core inflation has likely peaked
while this isn't the case for eurozone core HICP is one of the
reasons for its view, with another being the ECB is likely to
deliver more interest-rate rises into the spring, while the Fed is
already "ahead of the game."
SocGen said the EUR real curve is consistent with a much more
accommodative policy stance.
Read Bond Yields Fall as Inflation Fears Ease
Oil prices held minor gains as investors awaited the outcome of
Sunday's OPEC+ meeting, with expectations the cartel is unlikely to
reverse policy course and keep production flat.
This "despite expectations for a drop in Russian production
following the imposition of the E.U.'s ban on seaborne imports of
Russian crude and the G-7 price cap," Fitch said.
Traders will also keep a close watch on the upcoming U.S. jobs
report for further clues about the health of the U.S. economy.
Read OPEC+ Likely Shy of Spotlight Ahead of Russian Price Cap,
Base metals edged higher in early trade, with gold futures
Macro factors have been a heavy influence in metals pricing this
year, and a weaker dollar on top of a change in the Fed's rate
stance has helped copper rally 5% this week, while gold is up
Covid-19 controls in China are also easing in China, further
helping metals demand, Marex said.
DOW JONES NEWSPLUS
Ukraine Hunts the World for Parts to Fix Crippled Energy
As Russia targets Ukraine's energy grid with missiles and
drones, Kyiv is running out of vital parts needed to repair a
network that provides electricity for homes, businesses and
Moscow has deliberately attacked Ukraine's ability to generate
and transport power in a bid to sap the country's morale, leaving
millions without heat and light as temperatures fall below
Germany Trade Surplus Increased by More Than Expected in
Germany posted a larger-than-expected trade surplus in October,
as imports declined more than exports.
Germany's trade surplus--the country's balance of exports and
imports of goods--was 6.9 billion euros ($7.3 billion) in calendar
and seasonally-adjusted terms in October, rising from a EUR2.8
billion surplus in September, according to data from German
statistics office Destatis released Friday.
Biden Is Open to 'Tweaks' to Subsidies That Angered U.S.
WASHINGTON-President Biden said he was open to making
concessions to American allies who have objected to new U.S.
subsidies for North American manufacturers, but he didn't commit to
specifics after a meeting with French President Emmanuel Macron, as
the two leaders sought to project unity following months of
Mr. Biden said he makes no apology for the Inflation Reduction
Act, which provides subsidies to U.S. manufacturers and tax
incentives for electric vehicles and other products that are
assembled in North America. But he said changes might be needed to
ensure that the law doesn't have unintended consequences.
Russia Says Strikes on Ukraine's Infrastructure Aimed at Slowing
Delivery of Foreign Arms
Russia's foreign minister said that waves of Russian strikes on
Ukraine's civilian infrastructure that have left six million people
without power were intended to slow the delivery of foreign weapons
"The infrastructure that is now under attack is the
infrastructure that provides the combat potential of the Ukrainian
armed forces, the nationalist battalions," Russian Foreign Minister
Sergei Lavrov said on Thursday, according to Russian state
EU Asks Members to Set Russia Oil-Price Cap at $60
The executive body of the European Union has asked its 27 member
countries to cap the price of Russian oil at $60, officials and
diplomats involved in the discussions said.
The plan, using the clout of the EU's insurance and shipping
industries, is part of the West's effort to crimp Moscow's ability
to wage war in Ukraine while keeping global crude prices steady.
But whether that plan can go forward hinges on a response from
November Employment Report Will Update on Tightness of U.S.
Friday's employment report will reveal how the labor market
fared in November amid rising interest rates and high
The job market has remained resilient this year, with employers
still seeking to hire despite an uncertain economic outlook and
elevated recession fears. Low unemployment and wage gains have
helped fuel consumer spending, the economy's main engine.
Cash-Hungry Companies Get Creative Raising Capital
The end of the era of easy money is forcing companies that need
cash to get creative.
Dozens of companies have recently raised money through so-called
structured private funding rounds, and bankers and lawyers say
there are many more in the works.
Chinese Solar Manufacturers Dodged U.S. Tariffs, Probe Finds
WASHINGTON-Four leading Chinese solar-cell manufacturers
circumvented U.S. tariffs by routing some of their operations
through Southeast Asia, a Commerce Department investigation found,
according to people familiar with it.
The preliminary findings from the closely watched probe-expected
to be unveiled Friday-are likely to accelerate importers' race to
find alternative sources either domestically or from other places
abroad to meet soaring demand for solar panels.
DOJ Watchdog Calls for Independent FTX Probe in Bankruptcy
A U.S. Justice Department bankruptcy watchdog called for an
independent investigation into FTX's collapse, comparing the
cryptocurrency platform's sudden failure to the fall of Lehman
U.S. Trustee Andrew Vara, an official at the Justice Department
unit monitoring bankruptcy courts, asked the judge overseeing FTX's
chapter 11 case to appoint an independent examiner to provide a
transparent account of FTX's failure because of the wider
implications the exchange's collapse has on the crypto
Biden EPA Proposes to Bump Share of Renewable Fuels in Blended
The Environmental Protection Agency on Thursday issued a draft
proposal that would force oil refiners to use more biofuel to blend
with their products.
The proposal sets the volumes of renewable fuel that refiners
are required to blend with transportation fuel under federal
standards to 20.82 billion gallons in 2023 up from 20.63 billion
gallons in 2022, an amount that would gradually rise to reach 22.68
billion gallons in 2025.
Fed's Top Banking Regulator Signals Tougher Bank-Capital
WASHINGTON-The Federal Reserve's new regulatory chief on
Thursday signaled plans to beef up big-bank capital requirements,
potentially revisiting financial rules that were eased during the
Michael Barr, the Fed's vice chairman for banking supervision,
said that the central bank is still conducting a broad review of
its capital requirements but suggested the overall requirements
appeared to be lower than they ought to be.
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(END) Dow Jones Newswires
December 02, 2022 06:12 ET (11:12 GMT)
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