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European and Asian stock markets edged lower along with the dollar on Friday as traders awaited U.S. payrolls data that is likely to determine the size of the Federal Reserve’s interest rate cut this month.
The benchmark Stoxx Europe 600 index fell 0.3 percent in morning trade, led by declines in energy and financial stocks. Japan’s Topix closed down 0.9 percent on Friday, while South Korea’s Kospi fell 1.2 percent and China’s CSI 300 index fell 0.8 percent.
Germany’s Dax fell 0.6 percent while the FTSE 100 in London and the Cac 40 in Paris fell 0.4 percent and 0.2 percent respectively. Futures pointed to a more mixed start in New York, with contracts tracking the S&P 500 and Nasdaq 100 down 0.7 percent and 1.2 percent respectively.
Investors are awaiting August payrolls data, ahead of the U.S. market open, as a guide to the Fed’s meeting later this month. Investors are looking for signs that the U.S. economy has cooled faster than expected, potentially prompting the central bank to cut interest rates more aggressively.
The Fed is widely expected to make its first rate cut from its current range of 5.25 percent to 5.5 percent, but Fed Chairman Jay Powell said last month that he was focused on the risks of a weaker labor market. He cautioned that the timing and pace of rate cuts depended on economic data.
Economists polled by Reuters expect US employers to have added 160,000 jobs in August – up from 114,000 the previous month.
Traders are divided on whether the Fed will cut by a quarter point or a half point. The swaps market is pricing in a cut of just over 1 percentage point by the end of December. August jobs data is also weighing in after a weaker-than-expected forecast a month ago sparked a sharp sell-off in markets around the world.
“Risk appetite is heavily focused on US data… as China’s growth slows,” said Trinh Nguyen, senior economist for emerging Asia at Natixis in Hong Kong.
“The market will need reassurance that the US economy is not too slow but at the same time weak enough that the Fed is not worried. [an] “reinflation”
Market sentiment weakened following disappointing data on Thursday from payroll processor ADP, which showed U.S. private employers created the fewest jobs in more than three years in August.
The dollar index, which tracks the U.S. currency against a basket of other currencies, fell 0.1 percent. The yen rose as much as 0.6 percent to 142.50 dollars, its highest since January.
U.S. Treasury bonds rose, with the yield on the rate-sensitive two-year note falling 0.04 percentage point to 3.716 percent. The yield on the benchmark 10-year Treasury note fell 0.03 percentage point to 3.7 percent.
Crude oil rises after OPEC+ members agree late Thursday delay planned production increase in at least two months, as prices fell to a yearly low earlier in the week. Brent, the international benchmark, rose 0.2 percent to $73.83 while West Texas Intermediate, its U.S. counterpart, also rose 0.2 percent to $69.25.
