The Friday Market Minute

  • Global stocks are mixed, with Europe bouncing from two-year lows and Asia grinding higher, but U.S. equity futures stuck in the red ahead of Friday's November employment report.
  • Economist expect U.S. employers added 200,000 new jobs last month, with wages rising by an annual 3.1%.
  • Fed Chair Jerome Powell says U.S. labor market remains strong, putting the new "data dependent" Fed in the spotlight ahead of today's non-farm payroll reading.
  • Oil prices extend declines on the final day of OPEC summit as the cartel meets with Russia to hammer out a deal on 2019 production cuts.
  • U.S. equity futures point to more selling on Wall Street, but the tone is improving as European markets hold gains in early trading.

Market Snapshot

Global stocks were mixed Friday, as investors crept back into risk markets following a modestly positive tone at the end of trading on Wall Street yesterday, but maintained a cautious stance ahead of today's U.S. employment report that could have major implications for the Federal Reserve's near-term rate path.

With markets around the world grappling with a host of policy uncertainty, from U.S.-China trade to Brexit to Italy's ongoing budget crisis to OPEC's debate over production cuts, the added questions linked to the Fed's intention on rates, and its view of the strength of the broader domestic economy, are keeping investors from adding to risk positions and holding down markets.

Fed Chairman Jerome Powell signaled a possible change to the central bank's policy path last week, when he suggested it getting closer to neutral Fed Funds rate that would neither accommodate nor choke off growth, but also noted he and his colleagues would be more "data dependent" in order to make that assessment.

With that in mind, today's November non-farm payroll report could provide a key piece to that data puzzle, given its links to the Fed's twin mandate of price stability and full employment. Economists are expecting that U.S. employers added around 200,000 new jobs last month, a move that would keep the headline unemployment rate at 3.7%. Average hourly wages, meanwhile, are likely to have risen by an annual pace of 3.1%.

In brief remarks to a housing conference last night in Washington, Powell said the U.S. economy was "performing very well overall" and noted that "by many national-level measures (the job market) is very strong".

U.S. equity futures suggest good degree of caution ahead of the 8:30 eastern time print, with contracts tied to the Dow Jones Industrial Average I:DJI indicating a 175 point opening bell decline while those linked to the broader S&P 500 I:GSPC are guiding to an 20.2 point pullback. 

Government bond markets in both Europe and the United States will also be in focus both before and after the November jobs data, as investors closely watch the shape of the U.S. yield curve for any further signs of inversion, which could come from a stronger-than-expected reading on wages paired with a modestly weaker headline employment total.

Benchmark 10-year U.S. Treasury notes were seen at 2.883% during the early European trading session, while 2-year notes were quoted at 2.754%, putting the slope of the yield curve at around 13 basis points.

European stocks, curiously, were in a more optimistic mood Friday, with investors lifting stocks around the region from near two-year lows following yesterday's aggressive sell-off, which pushed Germany's DAX performance index into bear market territory and notched the biggest single-day decline since the July 2016 Brexit vote.

The Stoxx Europe 600 was marked 1.4% higher in the opening hours of trading Friday, while benchmarks in Germany and France posted similar percentage gains. Britian's FTSE 100 added 1.55% in the opening minutes in London as the pound held at 12744 against the U.S. dollar, although oil majors such as BP plc (BP) - Get Report and Royal Dutch Shell plc (RDS.A) traded near the top of the benchmark.

Oil markets are likely to remain in focus for much of the morning session as OPEC ministers meet for a third day in Vienna and attempt to hammer out an agreement on production cuts after two days of debate that has, thus far, failed to reach a consensus.

Russia, a non-OPEC member, will join the talks today amid speculation that it is only willing to trim output by 150,000 barrels a day, a figure that would likely leave the so-called OPEC+ alliance with a broad agreement to cut production by 1.1 million barrels per day heading into 2019.

Brent crude contracts for February delivery, the global benchmark, were marked 15 cents higher from their Thursday close in New York and changing hands at $60.21 per barrel while WTI contracts for January delivery, which are more tightly liked to U.S gas prices, were marked 14 cents lower at $51.35 per barrel.