Futures Fall As Jittery Traders Take Cover Ahead Of Payrolls

US equity futures are lower as traders took a cautious stance ahead of US jobs data that will offer fresh insight on the state of the economy. As of 8:00am, S&P 500 and Nasdaq 100 futures fell 0.2%, while in China stocks pushed toward a fresh bear market. Europe’s Stoxx 600 was little changed. Bond yields are largely unchanged, with the 10Y trading at 4.69%; while the week’s broad pullback in European government bonds persisted, pushing the yield on 10-year gilts remaining stuck near the highest level since 2008. Commodities are higher led by 2.3% gain in oil and 1.6% gain in aluminum. All eyes on NFP release today as equities continue to weigh on bond markets reaction. Consensus expects 165k jobs being added, with the unemployment rate unchanged at 4.2% (average hourly earnings are expected to rise +0.3% MoM and +4.0% YoY). In addition, Q4 earnings will begin today with DAL, STZ and WBA all reporting today. We will also receive the decision on TikTok’s SCOTUS hearing. Power utility Edison International and major US insurers slid in premarket trading as estimates of wildfire-related damages in Los Angeles soared.

In premarket trading, magnificent seven are trading modestly lower: Apple (AAPL) -0.2%, Nvidia (NVDA) -1%, Microsoft (MSFT) -0.1%, Alphabet (GOOGL) -0.3%, Amazon (AMZN) -0.3%, Meta Platforms (META) -0.4% and Tesla (TSLA) +0.1%. Allstate (ALL) falls 5%, down with insurance stocks, as analyst estimates of potential damages tied to the LA wild fires soar. Travelers (TRV) -4%, AIG (AIG) -3%. Southern California utility firm Edison International (EIX) slips 2% as the company is asked to preserve evidence in connection with the fires. Constellation Energy (CEG) climbs 6% after agreeing to acquire closely held Calpine Corp. for $16.4 billion to add scores of power generation assets across the US as the nation’s electricity demand is forecast to surge. Here are some more premarket movers:

• Delta Air Lines (DAL) rises 6% after beating Wall Street’s profit estimates for the final months of 2024, buoyed by gains in international and corporate travel.
• IGM Biosciences (IGMS) slumps 67% after the biotech halted the development of its Imvotamab and IGM-2644 treatments for autoimmune diseases.
• Joby Aviation (JOBY) slips 6% and Archer Aviation (ACHR) falls 3% as JPMorgan cut its rating on the pair, saying eVTOL stocks have been vastly outperforming the broader market.
• Microvast (MVST) rises 34% after announcing a milestone in the development of its true all-solid-state battery.
• Walgreens Boots Alliance (WBA) rises 11% after posting quarterly results that surpassed Wall Street’s expectations, easing pressure on the pharmacy chain as it mulls strategic options, including a sale.

Friday’s US nonfarm payrolls data is expected to show a slowdown in hiring (full preview here). Median estimates for the figures forecast that 165,000 jobs were added to the economy in December, which would mark a step down from November’s 227,000 advance, although the whisper number is at 183,000 while economists see a gain of 165,000. The unemployment rate is forecast to hold steady at 4.2% and average hourly earnings growth is seen cooling a touch from a month earlier.

“Given how quickly the Fed hawks have gained ground in recent weeks — and how much more investors are excited by dovish signals — the market’s reaction to soft data could outweigh its response to strong figures,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Several Fed officials confirmed Thursday that the central bank will likely hold rates at current levels for an extended period and only cut when inflation meaningfully cools.

“The Fed is worried about the incoming administration,” Skyler Weinand, chief investment officer for Regan Capital, said on Bloomberg Television. The combination of the growing US fiscal deficit and a strong consumer could result in “higher interest rates for the next five to ten years,” he said.

A hectic week for UK assets is coming to an end with the pound close to its weakest since late 2023, falling 0.1% to $1.2291. UK 10- and 30-year bond yields jumped more than 20 basis points over the past five sessions, the most in a year. Concerns over the state of the UK’s stretched public finances combined with persistent inflation have fueled the week’s selloff and drew comparisons with a market meltdown two years ago that toppled Liz Truss’ administration.

European stocks are little changed, with utilities and retail stocks dropping the most while energy and auto stocks outperform. Here are the biggest movers Friday:

• Novo Nordisk shares climb as much as 1.1% after Goldman Sachs and Deutsche Bank analysts reaffirm their buy ratings on the stock — though trim their price targets following last month’s disappointing trial results
• Ambu shares rise as much as 18%, the most since February 2023, after the Danish medical equipment company reported better-than-expected preliminary revenue for the first quarter and boosted its outlook for the year
• Deutsche Telekom rises as much as 2.1% as UBS upgrades the stock to buy in a sector review  on account of its defensive qualities related to US expsure, calls recent pull-back a “buying opportunity”
• Clarkson shares rise as much as 9.3%, the most since November, after the shipping company said its annual results for 2024 will be slightly ahead of current market expectations
• Alliance Pharma shares rise as much as 39% after the consumer health care firm agrees to be bought by its largest shareholder in a deal valuing it at about £349.7 million
• E.ON falls as much as 3.6%, to the lowest level since October 2023, after BofA cut the stock to neutral from buy, saying December’s adverse court ruling in Germany undermined the potential for growth upgrades
• Traton shares fall as much as 6.4% in Frankfurt. Jefferies and BNP Paribas Exane analysts write that the German truckmaker hosted a pre-close call on Thursday
• Sainsbury shares drop as much as 2.8% after the supermarket chain reported third-quarter results. While analysts viewed the company’s grocery performance as solid, Citi noted that general merchandise was disappointing
• Ubisoft shares slide as much as 11% to the lowest levels since October, after the French video-game maker reduced guidance for fiscal 3Q net bookings, citing lower-than-expected sales from Star Wars Outlaws
• Serco shares drop as much as 3.1% after Jefferies downgrades the outsourcing services firm that is facing headwinds from immigration contracts and UK national insurance, with earnings momentum muted

Earlier in the session, Asian stocks headed for a weekly loss as cautious sentiment took hold with traders mulling the prospect of slower interest rate cuts by the Federal Reserve. Chinese shares were set for a bear market. The MSCI Asia Pacific Index dropped as much as 0.9%, with Fast Retailing among the biggest drags after results from the Japanese fashion retailer raised concern over a slowdown in its China business. Benchmarks in China and Japan led declines in the region. The MSCI China Index fell more than 1%, extending its decline from an October high to around 20%, as investors continued to stay on alert for the nation’s mounting deflationary pressure as well as external risks. “This year will actually be a pivotal year for stress testing China’s policy commitments,” Christy Tan, an investment strategist at Franklin Templeton said in a Bloomberg TV interview. At the same time, there are external headwinds ranging from potential risks of tariffs and sanctions on tech firms, which “set the stage for a lot more volatility.” Elsewhere, sentiment was cautious as Treasury yields rose further amid a dialing back of bets on the Fed’s monetary easing this year. A slowdown in Chinese growth and rising geopolitical risks are also keeping a lid on sentiment. The regional stock benchmark was set for an almost 2% drop this week.

In FX, the Bloomberg Dollar Spot Index hovered near the highest level in over two years, while the broader FX market traded in a tight range. The yen is the best performing G-10 currency, rising 0.2% against the greenback after a report that said the Bank of Japan is likely to discuss raising their inflation outlook. The kiwi dollar is the weakest, falling 0.4%.  “Given the persistent strength of the USD lately, and heavy long positioning, I think the NFP’s impact will be asymmetric,” said Alvin T Tan, head of Asia FX strategy at RBC Capital Markets. “We will likely get a bigger downside reaction to weak US employment data than an upside reaction to strong data."

In rates, treasuries held small losses in early US trading, trailing steeper declines in most European bond markets as crude oil holds a weather-related surge to three-month highs. US yields remain inside weekly ranges ahead of US December jobs report release at 8:30am New York time.  Front-end Treasury yields are higher by ~2bp with longer maturities little changed on the day, flattening the yield curve; 2s10s spread reached widest level since 2022 this week; 10-year is little changed around 4.695% with bunds and gilts in the sector cheaper by 1bp and 2bp.  UK government bond yields rose although not with the same velocity observed earlier this week and are still some distance below Thursday’s extremes -  30-year borrowing costs climb 2 bps to 5.40% having topped 5.47% at yesterday’s open. The pound also steadies around $1.23.

In commodities, oil rose to a three-month high after another contraction in US crude stockpiles, driven by frigid winter weather, reflected a tighter global market and helped push WTI crude oil as much as 3.8% higher.

On today's economic calendar we get the December jobs report (8:30am) and January preliminary University of Michigan sentiment (10am). The Fed speaker slate includes Goolsbee at 10:04am, appearing on CNBC.

Market Snapshot

• S&P 500 futures down 0.3% to 5,940.25
• STOXX Europe 600 down 0.1% to 515.15
• MXAP down 0.8% to 177.97
• MXAPJ down 0.8% to 560.31
• Nikkei down 1.0% to 39,190.40
• Topix down 0.8% to 2,714.12
• Hang Seng Index down 0.9% to 19,064.29
• Shanghai Composite down 1.3% to 3,168.52
• Sensex down 0.4% to 77,291.45
• Australia S&P/ASX 200 down 0.4% to 8,294.07
• Kospi down 0.2% to 2,515.78
• German 10Y yield little changed at 2.59%
• Euro little changed at $1.0301
• Brent Futures up 2.1% to $78.56/bbl
• Gold spot up 0.5% to $2,680.31
• US Dollar Index little changed at 109.14

Top Overnight News

• US President Biden said the federal government will cover 100% of the disaster response costs for 180 days for California and noted that three major fires are still burning, while he added Congress will have to step up when they ask for more help on LA fires and that they will go back to Congress for more help on this.
• President-elect Donald Trump has pushed back his campaign pledge to end the war in Ukraine “24 hours” to several months, in a shift European partners have interpreted as a sign that his administration will not immediately abandon support for Kyiv. FT
• Kremlin says a meeting with Russian President Putin and US President-Elect Trump is being set up; no details yet.
• The PBOC will suspend buying government bonds, its latest attempt to temper investor bets on weak economic growth that have undermined the currency and sapped confidence among businesses and consumers. BBG
• China will adopt a proactive fiscal policy and speed up the implementation of pro-growth measures, Vice Finance Minister Liao Min said. BBG
• BOJ policymakers will probably discuss raising their inflation outlook at their meeting later this month, people familiar said. That’s mainly due to surging rice prices and the depreciation of the yen since the last outlook report in October. BBG
• The ECB is considering pushing banks to use loan data from the region’s historic banking crisis when predicting future credit defaults, which may result in lower capital strength for some lenders. BBG
• Fed’s Bowman said the December rate cut should be the final one for the cycle as policy is near neutral while the disinflationary process seems to have stalled. NBC. Fed’s Schmid said the current policy rate is “near” neutral, signaling a reluctance to ease further. RTRS
• Scott Bessent’s confirmation hearing (scheduled for Thurs 1/16) will be a critical event for Treasuries as Trump’s Treasury Sec nominee is asked on the spending, tax, and tariff plans of the incoming administration. Politico
• December Payrolls Preview: Goldman estimates nonfarm payrolls rose by 125k in December, below consensus of +165k and the three-month average of +173k. Alternative measures of employment growth generally indicated a sequentially slower pace of job creation, and seasonal headwinds amount to roughly 50k. Goldman
• Apollo may take a $9.5 billion stake in the planned management buyout of Seven & i, people familiar said. The firm would join the Ito family and Itochu as key investors in what would be one of the largest buyouts on record, with total equity of ¥4 trillion ($25 billion). Seven & i shares rose. BBG

A more detailed look at global markets courtesy of Newsquawk

APAC stocks were mostly subdued in the absence of a lead from Wall St owing to the National Day of Mourning and as participants braced for US jobs data. ASX 200 was dragged lower by weakness in financials and consumer stocks, while Australian Household Spending data disappointed. Nikkei 225 retreated with heavy losses seen in index heavyweight Fast Retailing, despite a jump in Q1 profit, as its China operations suffered a decline in revenue and a sharp contraction in profits, while the better-than-expected Household Spending from Japan did little to spur risk appetite. Hang Seng and Shanghai Comp conformed to the downbeat mood but with further downside stemmed after the announcement that the PBoC and China's FX regulator will hold a briefing on financial support for the economy on January 14th, while heavy losses were seen in property developer Sunac China after it received a liquidation petition in Hong Kong.

Top Asian News

• BoJ said to be mulling the rate decision for January, according to Bloomberg sources; mulls upgrading core-core inflation forecasts for FY24 and FY25; said to be mulling raising inflation forecast amid JPY; no decision made on raising rates. Intends to wait until the very last moment before deciding on increasing rates.
• Chinese Finance Ministry official says will firmly ban new hidden debt and speed up the reform and transformation of LGFVs. Will extend policies of reducing social insurance rates and one-off employment subsidies for some people in 2025. Will roll out new measures to boost employment in sectors including culture, tourism and foreign trade.
• PBoC is to temporarily suspend purchases of government bonds in the market during January and may resume government bond trading depending on supply and demand, while the decision was made due to short supply of treasury bonds.
• China's Vice Finance Minister says can expect more proactive fiscal policy in 2025, in terms of its strength, efficiency, and timing. Adds, fiscal policy has abundant policy room and tools. Will speed up fiscal spending in a bid to formulate actual spending and drive up more social investment. In front of new conditions and problems both domestically and externally, fiscal policy has abundant policy room and tools. Has relatively big room for the raising of debt and the deficit. To step up coordinated efforts between fiscal and monetary policy in 2025.
• Chinese economist warned against aggressive easing bets and said should avoid over-interpretation of moderately loose monetary policy in China, according to PBoC-backed Financial News.

European bourses opened with a slight negative bias, continuing the mostly subdued mood in APAC trade overnight. Since, trade has been choppy, briefly climbing into positive territory before once again dipping lower. European sectors hold a slight negative bias, and with the breadth of the market fairly narrow. Basic Resources tops the pile, propped by the continued strength in metals prices. Telecoms follows behind, with Media completing the top 3. Retail is underperforming today, hampered by post-earning losses in Sainsbury’s.

Top European News

• UK Chancellor Reeves is, according to The Times, planning a significant speech on growth in January and has asked ministers to draft concrete measures to bolster activity and to "cease anti-growth measures".

FX

• USD is broadly steady vs. peers after advances in the JPY dragged DXY lower (see JPY section for details). Attention today is on the December US jobs report which is expected to see a slowdown in jobs growth to 160k from 227k and the unemployment rate hold steady at 4.2%. For now, DXY is tucked within yesterday's 108.94-109.37 range with focus to the upside on the current YTD peak at 109.57.
• EUR is flat vs. the USD with fresh EZ-specific drivers on the light side and a 25bps rate cut by the ECB later this month near-enough fully priced by the market. EUR/USD has pivoted around the 1.03 mark in early trade in a 1.0282-1.0311 range.
• JPY the best performer across the majors following source reporting via Bloomberg suggesting that the BoJ is still mulling its rate decision for January and is mulling raising its inflation forecasts on account of JPY softening. As it stands, odds of a 25bps hike for the 24th January meeting are seen as a near coin-flip. The source reporting knocked USD/JPY back below the 158 mark with a current session trough at 157.63 which is just a touch above yesterday's 157.57 base.
• GBP is unable to launch much of a recovery vs. the USD as traders remain wary over the UK's fiscal position and recent rise in yields. On which, reporting via The Times suggests that UK Chancellor Reeves is planning a significant speech on growth in January and has asked ministers to draft concrete measures to bolster activity and to "cease anti-growth measures"; details remain light at this stage. For now, Cable has stabilised above yesterday's 1.2239 low.
• Antipodeans are both at the foot of the G10 leaderboard. AUD/USD failed to capitalise on the upside overnight triggered by news that the PBoC is to temporarily halt bond purchases and has returned to a 0.61 handle but is thus far managing to hold above yesterday's 0.6171 base which was the lowest level since October 2022.
• CAD is a touch softer vs. the Greenback in the run up to the Canadian and US labour market reports. For now, USD/CAD sits just above the 1.44 mark with focus on the 2024, multi-year peak at 1.4467.
• PBoC set USD/CNY mid-point at 7.1891 vs exp. 7.3138 (prev. 7.1886).

Fixed Income

• USTs are softer, but lifting back towards the unchanged mark as the European risk tone deteriorates a touch. The benchmark came under modest pressure on the BoJ sources (see JGB section) this morning but otherwise action has been relatively minimal thus far as participants return from the Federal Holiday; in a slim 108-02+ to 108-09 band. The main event today is December’s jobs report, where the pace of payroll growth is seen easing for the month.
• JGBs are softer, hit by a Bloomberg sources piece that the BoJ is said to be considering increasing the inflation forecast for FY25 and intends to wait until the very last moment before deciding on increasing rates. An article which weighed on fixed generally and pushed JGBs below the 141.00 handle to a 140.84 session trough.
• Gilts gapped lower by 28 ticks and then slipped a touch further to an 89.53 base and has remained in proximity to the trough since. While pressured, the benchmark is comfortably above Thursday’s 89.00 contract low but significantly shy of the 92.02 open from Monday.
• Bunds are in the red, with general fixed price action. Though, as the European risk tone deteriorates, EGBs have lifted off lows with Bunds attempting to return to the upper-end of a 131.07-131.37 band.
• OATs are the relative EGBs outperformer after a Politico piece on Thursday around potential pension reforms as a way of getting support from left-wing parties.

Commodities

• Overall, an upbeat Friday thus far for the crude oil complex on the back of some jawboning from China in early hours coupled with geopolitical updates. Significant upside was seen following reports that Israeli Defence Minister Katz said he has ordered the IDF to present him with a plan "for the complete defeat of Hamas in Gaza,". Brent Mar sits at the upper end of a USD 77.03-78.65/bbl.
• Firm trade across precious metals but to varying degrees. Palladium outperforms alongside a strong performance in the Auto stocks, whilst gold and silver are underpinned by the softer Dollar and recent geopolitical updates.
• The base metal complex hold an upward bias amid broader strength in industrial commodities following commentary from China ahead of next week's GDP release. 3M LME copper found resistance at USD 9,150.00/t to trade in a current USD 9,098.50-9,150.00/t parameter.
• Shanghai Warehouse Stocks: Aluminium -11.07k/T (prev. -7.9k/T), via the exchange.
• India's Gas Exchange exec. says they intend to launch 3-6month gas contracts.
• Slovakian PM Fico says Russian President Putin guaranteed Russia will meet its gas supply commitments. Says he spoke to Russian President Putin about the gas contract which Gazprom must deliver gas to Slovakia; says some Russian gas can be delivered through the southern corridor.

Geopolitics: Middle East

• Israeli Defence Minister Katz says he has ordered the IDF to present him with a plan "for the complete defeat of Hamas in Gaza," if there is no hostage deal by the time incoming US president Trump takes office (Jan 20th), according to ToI journalist.
• US President Biden said they are making progress on a Gaza deal and he is still hopeful there will be a prisoner exchange.

Geopolitics: Russia-Ukraine

• US President-elect Trump said Russian President Putin wants to meet and 'we' are setting it up.
• Japan is to impose additional sanctions against Russia-related individuals and entities.
• French President Macron said he and UK PM Starmer reaffirmed commitment to supporting Ukraine, while they also discussed the situation in the Middle East and the UK-EU relationship.

Geopolitics: Other

• Venezuelan opposition leader Maria Corina Machado was arrested after leaving a march in her first public appearance in months but was later freed after a brief detention, while a White House spokesperson said the US calls for the right of Venezuela’s Machado to speak freely and for President Maduro and representatives to cease harassment of the opposition.

US Event Calendar

• 08:30: Dec. Change in Nonfarm Payrolls, est. 165,000, prior 227,000
  • Dec. Change in Manufact. Payrolls, est. 5,000, prior 22,000
  • Dec. Change in Private Payrolls, est. 140,000, prior 194,000
  • Dec. Unemployment Rate, est. 4.2%, prior 4.2%
  • Dec. Labor Force Participation Rate, est. 62.5%, prior 62.5%
  • Dec. Underemployment Rate, prior 7.8%
  • Dec. Average Weekly Hours All Emplo, est. 34.3, prior 34.3
  • Dec. Average Hourly Earnings YoY, est. 4.0%, prior 4.0%
  • Dec. Average Hourly Earnings MoM, est. 0.3%, prior 0.4%
• 10:00: Jan. U. of Mich. Sentiment, est. 74.0, prior 74.0
  • Jan. U. of Mich. 1 Yr Inflation, est. 2.8%, prior 2.8%
  • Jan. U. of Mich. 5-10 Yr Inflation, est. 3.0%, prior 3.0%
  • Jan. U. of Mich. Current Conditions, est. 75.1, prior 75.1
  • Jan. U. of Mich. Expectations, est. 72.7, prior 73.3

DB's Jim Reid concludes the overnight wrap

The global bond selloff showed few signs of letting up over the last 24 hours, with long-term borrowing costs continuing to move higher across the board. The UK was particularly in the spotlight, as its 10yr gilt yield (+1.5bps) hit another post-2008 high of 4.81%, whilst the 30yr yield (+2.2bps) hit a post-1998 high of 5.37%. But even though the UK might appear the most striking in terms of when yields last traded at these levels, other countries have experienced a similar pattern too. For instance, the French 10yr yield hit its highest since October 2023, whilst the German 10yr bund yield hit its highest since July. In the meantime, US Treasuries showed some signs of stabilising, but even there the 10yr yield is still at 4.69% this morning, on track to close at its highest level since April, and Japan’s 10yr yield is at its highest since 2011.

That focus on the UK was clear from several angles, as the pound sterling fell to its weakest level against the US Dollar since November 2023, at $1.2308. That made it the worst-performing G10 currency for a second day running, and that closing value was actually a recovery from the morning, when it fell as low as $1.2239. What makes the current situation particularly noteworthy is that higher interest rates normally help strengthen the currency, so the fact we’re seeing the pound weaken even as gilt yields rise goes to demonstrate how nervous investors are right now.

There’s been some debate as to why the UK has found itself the centre of attention in global markets. But a key point is that its twin deficits are the second-largest in the G7, only behind the US, who have the benefit of the world’s reserve currency. So the UK is reliant on overseas investors, with around 30% of gilts held abroad. On top of that, the combination of sluggish growth and above-target inflation are adding to investors’ nerves, and the current pattern of market moves (with yields up and sterling down) is reminiscent of previous episodes of turmoil. So that’s drawn parallels to periods like the 2022 LDI crisis when Liz Truss was PM, along with the sterling crisis of 1976 that culminated in an IMF bailout. Nevertheless, the size of the moves are nowhere near the scale of what happened in 2022, when the 10yr gilt yield moved up by more than 100bps in the three sessions after the mini-budget took place.

Elsewhere in Europe, the bond losses continued, albeit without the sharp currency declines seen in the UK, with the Euro only down -0.17% against the US Dollar. For instance, yields on 10yr bunds (+1.9bps) were up to 2.56%, their highest level since July. In fact, barring a sharp decline in yields today, the 10yr bund yield is on track to post its 6th consecutive weekly increase for the first time since 2022, back when inflation was raging and the ECB were hiking by 75bps per meeting. Meanwhile in France, the 10yr yield was up +3.9bps to 3.39%, the highest since October 2023.

Whilst bonds were selling off, European equities actually put in a much stronger performance, with the STOXX 600 paring back its opening losses to close up +0.42%. The advances were fairly broad, with other indices including the FTSE 100 (+0.83%), the CAC 40 (+0.51%) and the FTSE MIB (+0.59%) all moving higher, although German equities struggled with the DAX (-0.06%) posting a marginal loss.

The next test for markets will now be the US jobs report for December, which is out at 13:30 London time. Indeed, it’s worth noting that one of the catalysts for this week’s selloff was the upside surprise in the “prices paid” component of the ISM services index on Tuesday. So another upside surprise in payrolls would give further momentum to the idea that the Fed should be cautious about cutting rates from here.

In terms of what to expect, our US economists are looking for nonfarm payrolls to come in at +150k in December. That would be beneath the +227k print in November, but that gain was boosted by a bounce back from previous weather disruption and the end of strikes. So a +150k gain would actually be almost in line with the 6-month average, which is currently running at +143k. Otherwise, they see the unemployment rate ticking up a tenth to 4.3%, and if you look to more decimal places, last month it was very close to rounding up already, with a 4.246% reading in November. Click here for our US economists’ full preview and how to subscribe to their subsequent webinar.

Ahead of the jobs report, there wasn’t much to report from US markets yesterday, as the stock market was closed for the funeral of former President Jimmy Carter. Elsewhere, bond markets were open but with an early close, and Treasury yields saw muted moves across the curve. 10yr yields held steady, but the 2yr yield (-1.9bps) fell to 4.26%, leading the 2s10s slope to its steepest since May 2022 at 42bps. In terms of Fed speakers yesterday, a tone of caution on further rate cuts continued to dominate. Philadelphia Fed President Harker did say that “I still see us on a downward policy rate path”. But Kansas City Fed President Schmid noted that rates may already be “very close” to the neutral level, and Fed Governor Bowman said that she continued to “prefer a cautious and gradual approach”, also mentioning that she could’ve supported keeping rates on hold in December.

Overnight in Asia, both equities and bonds are struggling ahead of the US jobs report today. For equities, that’s been led by the Nikkei (-0.90%), but other indices including the Hang Seng (-0.51%), the CSI 300 (-0.52%) and the Shanghai Comp (-0.52%) are also lower. The main exception is South Korea’s KOSPI, which has held steady with a +0.04% gain. Looking forward, US equity futures are negative as well, with those on the S&P 500 pointing to a -0.24% loss as they reopen after Thursday’s closure.

Elsewhere overnight, the People’s Bank of China said they would suspend purchases of government bonds, which has prompted a rise in yields this morning, with China’s 10yr yield up +1.0bps to 1.64%, whilst the 2yr yield is up +6.6bps to 1.19%. Bond yields have risen elsewhere too, with Japan’s 10yr yield trading at its highest level since 2011 this morning.

To the day ahead now, and the main data highlight will be the US jobs report for December. Otherwise, we’ll get the University of Michigan’s preliminary consumer sentiment index for January, along with French industrial production and Italian retail sales for November.