STOXX 600 up 1.5%
China reopening hopes lift shares
U.S. jobs data in focus
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HERE COMES NFP (1207 GMT)
Eyes today are understandably on the labour market report from the United States.
The U.S. is expected to have added 200k jobs in October, the unemployment rate is seen ticking up to 3.6% and growth in average hourly earnings is expected to slow to 4.7% on an annual basis, according to economists surveyed by Reuters.
If realised, job growth of 200k would be the smallest in two years, and down from the 263k jobs created in September.
That softening of the labour market will likely feed into the narrative that the Fed was right to signal it might slow the pace of tightening next month, even as it suggested rates would remain higher for a longer period of time.
On the other hand, Commonwealth Bank of Australia Carol Kong says "another solid US non-farm payrolls result today can support hawkish pricing for the Fed funds rates."
However, with the next Fed meeting not until the Dec. 14, the central bank will have a lot more data to pour over before deciding whether to slow the pace of rate hikes.
"There's still next month's jobs report as well as a further two CPI prints ahead of the next Fed meeting, so there's plenty to digest before they have to make that decision," Deutsche Bank research team say in a note.
Goldman Sachs, which is forecasting slightly above consensus payrolls growth, says a reading in line with their expectations would likely add further weight to the divergence that is opening between the Fed and other central banks.
GS recently revised their 3-month call for EUR/USD down to 0.94, in part due to growing policy divergence between the Fed and ECB.
"This divergent policy outlook could come into sharper focus in the months ahead if the ECB has to slow the pace of hikes," GS writes.
And one quick reminder for those in Europe. Today's labour market report will be released an hour earlier than usual: 1230 GMT/1330 CET.
PIVOT OR NOT PIVOT? (1033 GMT)
Markets expect -- or better, hope for -- pivots in the Russia-Ukraine war, China’s zero COVID policy, and Fed tightening cycle.
After the U.S. central bank disappointed market participants by suggesting rates will likely remain higher for longer, it makes sense to wonder what happens if, we have an L-shaped 2023 with no pivots at all.
George Saravelos, global head of forex research at Deutsche Bank, looks at the impact of this backdrop on the U.S. dollar.
“Our work throughout the year has emphasized that the dominant driver of dollar strength this year has been a historically unprecedented safe-haven flight into USD cash,” he says in a note.
“We expect the combination of policy pivots above (war, China and Fed) would lead to a quick normalization of the USD risk premium and a sharp drop in the dollar similar to 1985.”
If pivots don’t materialize, “the dollar may well peak, but the turn is slow and noisy – an environment more similar to 2001-02. It just so happens that this was one of the longer-lasting and choppiest equity bear markets in history."
CHINA-SENSITIVE STOCKS LIFT EUROPEAN BOURSES (0727 GMT)
European stocks are in positive territory thanks to a lift from China following reports that suggested country's COVID-19 restrictions could ease, even if Chinese foreign ministry spokesman Zhao Lijian said he was not aware of the issue.
The pan European index is up 0.6%, led by gains in the basic resources sector, which is up 3.4%. China is the world's largest commodities consumer. Other China-exposed sectors luxury stocks, with shares in jewellery and watchmaker Richemont surging almost 4% and Gucci owner Kering up 3.2%.
Also supporting Kering are media reports that the French luxury group is in advanced discussions to buy fashion brand Tom Ford.
In terms of single stocks, medical equipment GN Store is the best performer in percentage terms with a 10% gain, after shareholder William Demant increased its aggregate shares in the company.
RELIEF, HOPE AND SPECULATION (0658 GMT)
Investors have been looking for just about any positive sign to pick up beaten down Hong Kong and China stocks. And on Friday, they got a new reason too.
Renewed speculation over an imminent relaxation of China's COVID-19 curbs alongside reports that the initial U.S. inspection of Chinese company audits was completed ahead of schedule lifted investor sentiment, after hawkish comments from Federal Reserve Chair Jerome Powell earlier rattled markets.
Earlier this week, rumours based on an unverified social media note that China was planning a reopening in March led to a sharp rally. The rumour was shot down almost immediately but investors it seems remain hopeful even as COVID cases in China climb.
Asian stocks are up, the dollar is retreating and the yuan has rebounded. And in the background lurks the Fed and its hawkish policy, with U.S. payrolls report due on Friday. Economists polled by Reuters expect non-farm payrolls to have increased by 200,000 jobs in October and any upside surprise will embolden the central bank's stance.
Meanwhile, sterling was up 0.54%, recouping some of its losses from a 2% slide after the Bank of England said that rates may go up by less than markets have priced in.
Over in the corporate world, Twitter, now owned by Elon Musk, will tell employees by email on Friday whether they have been laid off, after temporarily closing its offices and preventing staff access, according to a memo seen by Reuters.
Key developments that could influence markets on Friday:
Economic events: U.S. Oct non-farm payrolls report; Canada Oct jobs
Speaker: ECB Vice-President Luis de Guindos
Earnings on the deck: Hershey, Duke Energy, Telefonica as well as SocGen
EUROPEAN STOCKS SEEN HIGHER, CHINA COVID MEASURES IN FOCUS (0650 GMT)
European shares are seeing opening higher getting a boost from China-exposed stocks amid renewed hopes that China will relax its strict COVID measures.
Futures indicated stocks were set to gain, with the Eurostoxx 50 futures, German DAX futures and FTSE futures all up more than 0.5%.
Easing some of those hopes, a few minutes ahead of the opening, Chinese foreign ministry spokesman Zhao Lijian said that he was not aware of the media report that said China was preparing a plan to end COVID-19 flight suspensions.
Global stocks have been rattled since comments from Fed Chair Jerome Powell on Wednesday that it was "very premature" to be thinking about pausing its rate hikes. They will watch closely U.S. job data later in the day.