European stocks edged higher on Friday, hovering just below record highs reached in June, ahead of vital jobs numbers due out of the US later in the day.
The regional Stoxx 600 rose 0.4 per cent in morning trading, while the UK’s FTSE 100 gained 0.2 per cent, led by major energy producers such as BP and Royal Dutch Shell, as investors bet on the economic benefits of the lifting of Covid-19 restrictions despite the spread of the Delta variant of the virus.
“We think that the European market is really benefiting from euro depreciation,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management. “[Also] there are more cyclical stocks in European markets which benefits more from this reopening.”
Economists polled by Bloomberg expect the monthly non-farm payrolls report out of the US to show that 700,000 jobs have been added in June, up from 559,000 a month earlier, when the data are released later on Friday.
Strong jobs numbers after several months of below-forecast additions will give investors an indication of the strength of the US economic recovery. While policymakers at the US Federal Reserve have said they are willing to let inflation run above target temporarily, a sharp increase in job numbers will fuel speculation that the Fed will be pushed to rein in its pandemic-era support for the economy.
“I think it’s even more than usual a very important data point that could be very key for the coming weeks,” said Sophie Chardon, cross-asset strategist at Lombard Odier. “Non-farm payroll data could be one of the triggers, that’s why [markets] are in wait-and-see mode.”
In June, Fed officials revised their growth and inflation forecasts for the US upwards, bringing forward projections for the first post-pandemic rate rise by a year to 2023.
Futures tracking US indices indicated that the S&P 500 would probably open up 0.5 per cent, while those tracking the tech-heavy Nasdaq indicated it would be flat at the New York opening bell.
While some decision makers at the US central bank are beginning to talk more openly about the need to prepare for the gradual winding down of pandemic-era stimulus, in the eurozone the European Central Bank has maintained a more dovish stance, reflecting the different paces of recovery on both sides of the Atlantic.
“The European Central Bank is always very dovish, and you can see that there is a lot of pressure on the Fed to normalise its policy and taper its asset purchases,” Drut said. “The path will continue to diverge in coming quarters.”
Globally, bond yields fell slightly. US 10-year Treasuries dipped 0.014 percentage points to 1.466 per cent, while the yield on 10-year German Bunds was flat at minus 0.204 per cent.
Oil prices dipped after Thursday’s news that the Opec+ meeting of key oil-producing nations failed to reach an agreement on supply policy and production levels, with a decision expected on Friday. Nevertheless, Brent crude, the global oil benchmark, and the US benchmark West Texas Intermediate have remained over $75 a barrel.
Source: Economy - ft.com
