European stocks are struggling ahead of US jobs
LONDON, July 8 (Reuters) – European stocks opened slightly lower on Friday, struggling to recover after the shooting of Japan’s former prime minister caused a decline in Asian stocks, while investors waited for key US job data later in the session.
Investor sentiment had been positive earlier in the session, which analysts said was due to attempts by US central bankers̵[ads1]7; policy makers to ease recession fears and news of Chinese fiscal stimulus.
US indices had a positive end on Thursday after Fed Governor Christopher Waller called the fear of recession “exaggerated”, while St. Louis Fed Bank President James Bullard said he saw a “good chance” of a soft landing for the economy. read more
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But Asian stocks gave up some of their gains, and the safe Japanese yen rose after news that Shinzo Abe was in serious condition, after being shot while fighting for a parliamentary election. read more
Abe resigned in 2020 citing ill health, but he continues to be a dominant presence over the ruling Liberal Democratic Party (LDP), which controls one of its largest factions.
The long-term effect of the shooting on the markets was unclear, said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors, adding that he did not think it would affect Japan’s choice this weekend.
At 0751 GMT, MSCI’s world stock index, which tracks stocks in 50 countries, was down 0.1% on the day, but set at an overall weekly gain of 1.4% (.MIWD00000PUS).
Europe’s STOXX 600 was up 0.1% (.STOXX), while France’s CAC 40 was 0.2% higher (.FCHI) and Germany’s DAX was down 0.1% (.GDAXI).
MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) was still up 0.3% on the day, but had retreated from the 8-day high earlier in the session.
The Japanese yen rose as much as 0.5% immediately after the news of Abe’s shooting, before stabilizing at around 135,835. read more
The latest indicator of the health of the US economy comes later in the day with the release of US non-farm wage data. The consensus expectation is that 268,000 jobs will have been added in May.
“Employment is important because job security underpins the economic recovery,” wrote Paul Donovan, chief economist at UBS Global Wealth Management, in a note to customers.
“Today’s data should show a certain decline in job creation, but the wage and working hour figures have recently remained completely inconsistent with some ideas of a recession.”
The dollar index rose ahead of the data, up 0.6% on the day, the highest since 2002.
The British pound fell 0.7 percent against the stronger dollar after British Prime Minister Boris Johnson withdrew on Thursday. ING analysts said that the markets probably welcomed the change in leadership, but that it was too early to say what effect it will have on the pound.
The euro was at $ 1.00895. It has slipped towards parity with the dollar as investors worry that an energy crisis caused by the uncertainty in Russia’s gas supply could tip the continent into recession.
“Europe may still be lagging behind due to the uncertainty surrounding the energy issue,” said Avivas Paillat.
Germany’s reference 10-year bond was two basis points lower at 1.275%, while the US 10-year yield was around 2.9798%.
The two-year, ten-year part of the government yield curve turned on Tuesday for the first time in three weeks. An inversion in this part of the curve is seen as a reliable indicator that a recession will follow in one to two years. .
Oil prices were down, with Brent oil futures and US West Texas Intermediate crude set at a weekly loss. read more
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Reporting by Elizabeth Howcroft; Editing Kim Coghill
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