The Friday Market Minute

  • Global stocks steady ahead of July non-farm payroll report as U.S. dollar hits two-week high.
  • China shares extend year-to-date declines as data shows further weakness in world's second-largest economy.
  • European stocks edge higher as euro trades a two-week low, earnings mixed around the region.
  • Benchmark 10-year Treasury yields near 3% as investors prep for jobs report at 8:30 eastern.
  • Wall Street futures flat, with payrolls and earnings from Berkshire Hathaway and Kraft Heinz in focus.

Market Snapshot

Global stocks steadied Friday, with the U.S. dollar rising to a two-week high, as investors continue to trade cautiously around signals that suggest China's economy is showing further signs of weakness amid its ongoing trade dispute with the United States.

President Donald Trump's decision to escalate the war of words between Washington and Beijing earlier this week by unveiling the prospect of a 25% tariff on $200 billion worth of China-made goods, suggest he's willing to follow-though on remarks from a few weeks ago when he insisted he's "ready to go to "$500 billion" and that "now is the time" to push China hard on trade and security.

Since those comments, made in an interview with CNBC, official data from China has shown consistent signs of a slowdown, with figures from the Caixin/Markit Services PMI index showing the weakness pace of growth in four months, as new orders slump to the lowest level in two and a half years. 

China's offshore yuan, which trades more freely than the tightly-controlled onshore currency, hit a fresh 13-month low of 6.9050 in Asia trading following the release, a move that again suggests concern for capital flight from the world's second-largest economy. China stocks also extended declines, with the Shanghai Composite falling 0.77% into the close of the session while the bluechip CSI 300 was marked 1.42% to the downside.

That move was reversed late in the Asia session, however, when the People's Bank of China stepped in and slapped a 20% reserve requirement for companies trading yuan in the forward foreign exchange market.

European stocks, however, reversed that trend, with a stronger U.S. dollar making export-focused assets more attractive as the euro traded at a two-week low of 1.1572 against a resurgent U.S. dollar. The region-wide Stoxx 600 index, the broadest measure of regional share prices, was marked 0.7% to the upside by mid-day in Frankfurt as benchmarks in Germany and France clawed back some of yesterday's steep declines amid some better-than-expected corporate earnings and improved market sentiment.

The euro weakness, however, was not only linked to the greenback's overnight surge, which took the dollar index to a two-week high of 95.25 against a basket of six global currencies, but also renewed concerns over the heath of government finances in Italy, where the new administration is attempting to put together a budget proposal that will satisfy voters who were promised tax cuts and spending increases, while remaining in-line with Brussels' regulations on deficits.

U.S. stock futures were relatively flat in early European dealing, which reflects some investor caution ahead of today's July jobs report from the Bureau for Labor Statistics at 8:30 eastern time, which is expected to show that employers added 193,000 new jobs last month.

Futures contracts tied to the Dow Jones Industrial Average I:DJI were marked 73 points to the upside, however, while those linked to the broader S&P 500 I:GSPC  suggested a 7.3 point gain, with the Nasdaq Composite I:IXIC prices for a 33 point bump at the opening bell.

Benchmark 10-year U.S. Treasury bond yields were marked at 2.98% heading in to the start of the European session, althought the July payroll data will could provide a firm market catalyst for both the dollar and bond yields to rise further, however, potentially snuffing out near-term equity market gains now that corporate earnings season is winding down for the summer.

The CME Group's FedWatch tool, for example, suggests traders are pricing in a 66.7% chance of a December rate hike, a move that would take the Fed's key lending rate to a rate of 2.25% to 2.50%. That's up from 64.2% yesterday and just 45.9% a month ago, as investors note the continued strength of the U.S. economy and focus on the central interest rate signalling over the President's criticism of Fed policy.

Global oil prices were modestly softer in early European trading, with markets focused on this week's buildup in U.S. crude supplies and the prospect of weaker end demand from key energy consumers such as China.

Brent crude contacts for September delivery, the global benchmark, were seen 30 cents lower from their Thursday close in New York at $73.15 in early European trading while WTI contracts for the same month were marked 25 cents lower at $68.71 per barrel.