(Bloomberg) — U.S. stock futures fell and the dollar weakened as traders braced for jobs data that will be crucial in determining the size of a Federal Reserve interest rate cut later this month.
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Nasdaq 100 futures fell more than 1%, while S&P 500 futures pointed to a fourth day of declines. Europe’s Stoxx 600 fell 0.5% and is on track for its worst week since the early August collapse.
Bloomberg’s dollar gauge retreated for a third straight day amid growing bets that a worse-than-expected monthly nonfarm payrolls report would prompt the Fed to kick off its policy-easing cycle with a massive cut. The 10-year Treasury yield fell 3 basis points to 3.7%.
Friday’s data will help policymakers determine whether the U.S. economy is headed for a soft landing or a recession after a week of mixed numbers that rattled markets. Swap traders are fully pricing in 25 basis points of cuts when Fed officials meet in two weeks, with a roughly 35% chance of a 50 basis point reduction.
U.S. jobs figures “are seen as the key catalyst for confirming or disconfirming these recession concerns, and could well dictate the direction of equities from here,” Barclays Plc strategists led by Emmanuel Cau said in a note.
Forecasters expect the report to show a pickup in hiring and a slight decline in the unemployment rate in August, marking a stabilization after July.
With the dollar on the back foot on heightened rate cut expectations, currency traders have not been this upbeat ahead of a US jobs report in more than a year.
Options used to measure the dollar’s swings against its major trading partners hit their highest level since March 2023. So-called risk reversals, a barometer of market positioning, show bearish sentiment toward the U.S. currency prevails and some traders are avoiding short-term bets altogether.
Currency strategists also see a strong chance the yen will test its August high against the dollar if the payrolls data raises bets on a 50-basis-point move. The yen “is where the action will be” if there are any surprises in the numbers, said Gareth Berry, a strategist at Macquarie Group Ltd. in Singapore.
Oil was on track for its biggest weekly loss in almost a year on concerns about weak demand and abundant supply, even as OPEC+ delayed a planned output increase by two months. Iron ore remained on track for its worst week since March, with little sign of recovery for China’s steel market.
Key events of this week:
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Eurozone GDP, Friday
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US Nonfarm Payrolls, Friday
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Fed’s John Williams speaks on Friday
Some of the main movements in the markets:
Stocks
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The Stoxx Europe 600 was down 0.5% as of 8:47 a.m. London time.
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S&P 500 futures fell 0.7%
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Nasdaq 100 futures fell 1.1%
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Dow Jones Industrial Average futures fell 0.4%
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The MSCI Asia Pacific index rose 0.2%
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The MSCI emerging markets index rose 0.1%
Coins
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The Bloomberg Dollar Spot Index fell 0.2%
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The euro was unchanged at $1.1111.
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The Japanese yen rose 0.8% to 142.25 per dollar.
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The offshore yuan was unchanged at 7.0829 per dollar.
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The pound was unchanged at $1.3180
Cryptocurrencies
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Bitcoin fell 0.8% to $55,651.28
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Ether fell 1.2% to $2,339.9
Captivity
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The yield on 10-year Treasury bonds fell three basis points to 3.70%.
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The yield on 10-year German bonds fell four basis points to 2.17%.
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The yield on 10-year British bonds fell three basis points to 3.88%.
Raw materials
This story was produced with assistance from Bloomberg Automation.
–With assistance from Winnie Hsu, Aya Wagatsuma and Julien Ponthus.
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