European equities fall, oil recovers, traders wait for US job data

LONDON, Aug. 5 (Reuters) – European stocks fell slightly on Friday but were still poised for weekly gains as traders waited for US jobs data to come later in the session to provide clues to the health of the world’s largest economy.

The MSCI World Stock Index, which tracks stocks in 47 countries, rose 0.2% and is on track for a weekly gain of 0.7%, marking the third consecutive week of gains (.MIWD00000PUS).

Asian stocks rose overnight, but at 0823 GMT the STOXX 600 was down 0.1% (.STOXX), the French CAC 40 (.FCHI) and the German DAX (.GDAXI) were flat. London’s FTSE 100 fell 0.2% (.FTSE).

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Central banks around the world have raised interest rates in an effort to contain rising inflation, but European equities have recovered to their two-month high this week.

“Equity futures have become comfortable with the belief that the rate hikes the central banks are making will be enough to contain inflation in the longer term,” said Kiran Ganesh, multi-asset strategist at UBS.

But other asset classes are reflecting a slowdown.

The closely watched portion of the US Treasury yield curve that measures the difference between two- and 10-year Treasury yields reached 39.2 basis points on Thursday, the deepest inversion since 2000.

An inverted yield curve is often seen as an indicator of a future recession.

Oil rose and recovered from the previous session when prices hit their lowest level since February. Concerns about the supply shortage were enough to allay fears of declining demand for fuel. read more

Global crude oil markets remained firm in backwardation, where prompt prices are ahead of those in the coming months, pointing to tight inventories.

Investors will look to US jobs data to see if the aggressive pace of US Federal Reserve rate hikes is beginning to slow economic growth.

The data is expected to show that nonfarm payrolls jumped 250,000 jobs last month, after rising 372,000 in June.

“Until now, markets have reacted to stronger economic data as good news. But at some point, they may wonder whether the Fed tightening is having the desired effect if the economy remains strong,” ING economists wrote in a note. customers.

“At that stage, they could be concerned that rates could rise higher or stay higher for longer.”

UBS’s Ganesh said a nonfarm payroll in the 200,000 to 300,000 range would be consistent with a “soft landing” for the economy, while a higher figure would suggest the Fed needs to raise rates more to curb demand. to keep.

Data from Thursday showed that the number of Americans filing new jobless claims increased last week, suggesting a weakening job market may already be underway. read more

Cleveland Fed president Loretta Mester took an aggressive tone on Thursday, saying the Fed would need to raise interest rates above 4% to bring inflation back below its target. read more

The US dollar index rose about 0.2% and the euro fell 0.2% to $1.02265. The Australian dollar, which is seen as a liquid proxy for risk appetite, fell 0.1% to $0.6958. read more

The British pound fell 0.1% to $1.215.

The Bank of England raised interest rates by the most in 27 years on Thursday, warning that a long recession was imminent. read more

European government bond yields were typically 1 to 2 basis points higher, benchmarked at the German 10-year yield of 0.812%.

German industrial production showed an unexpected but modest increase in June, official data show.

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Reporting by Elizabeth Howcroft; Editing by Bradley Perrett

Our Standards: The Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds and the money that powers “Web3”.

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