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World stocks dither, bond yields fall as recession worries weigh

2023-04-06T08:45:40Z

Global stocks drifted on Thursday, following skittish trade in the Asian session, as traders awaited crucial U.S. jobs data that may add to mounting evidence of a U.S. slowdown and the likelihood of a global recession.

The broad MSCI index of world stocks (.MIWO00000PUS) dipped 0.1%, putting it on track for its first weekly decline in three weeks. U.S. Treasuries stood firm and crude oil weakened.

Equity investors were avoiding strong bets with many global markets heading into a holiday for Good Friday, when monthly U.S. non-farm payrolls data that may clarify the outlook for inflation and interest rates is due.

Europe’s Stoxx 600 (.STOXX) share index opened 0.3% higher.

MSCI’s broadest index of Asia-Pacific shares (.MIAP00000PUS) was down 0.4%, trimming some declines from earlier in the trading day.

Following the U.S. Federal Reserve’s most aggressive cycle of interest rate hikes in decades, to battle stubbornly high inflation, traders are positioning for the central bank to turn much more dovish.

Data overnight showed U.S. private employers hired far fewer workers than expected in March, adding to signs from earlier in the week of a loosening labour market.

The country’s services sector also slowed more than expected, while earlier figures showed a stalling at factories as well.

“What we’re seeing this week is those rate hikes having an impact on the broad economy for about the first time,” said Roger Lee, head of UK equity strategy at Investec.

“The market is extrapolating this recent data for conviction that there is going to be a U.S. recession imminently.”

U.S. Nasdaq E-mini futures pointed to a flat restart on Thursday, after the tech stock benchmark slumped 1% overnight. E-mini futures for the broader S&P 500 also indicated a steady start, following Wednesday’s 0.25% slide.

Economists polled by Reuters expect to see U.S. employers added 240,000 new workers in March, down from 311,000 the previous month. Average earnings growth is also expected to have slowed to 4.3% year-over-year, from 4.6% in March.

Money markets now see the odds of a further quarter point hike at the May meeting versus a pause as a coin toss. And 74 basis points of easing are priced by year-end.

“Investors should not rush to buy the pivot, as when the Fed cuts rates, it is too late to prevent a recession,” Barclays chief European equity strategist Emmanual Cau said.

Money managers have taken risk in U.S. government bond markets in the past few weeks, however.

Treasury yields, which move inversely to prices of the debt securities, have fallen. The yield on the 10-year note stood at around 3.29% on Thursday morning in London, sticking close to the nearly seven-month low of 3.266% reached overnight.

Germany’s 10-year bund yield , a benchmark for Eurozone borrowing costs, added 2 basis points to 2.2%.

This German yield now stands far below its level of about 2.7% from early March, before the failure of two U.S. banks and Credit Suisse’s rescue by UBS sparked concerns about banks lending cautiously to safeguard capital, potentially harming growth.

The dollar index was steady against other major currencies at 101.84, continuing its bounce from a two-month low.

Spot gold slipped 0.4% from a one-year high reached on Wednesday, to $2,011 per ounce, but remained more than 2% higher for the week.

Crude oil was also under pressure, despite a surprise output cut decision by OPEC+ producers at the weekend. West Texas Intermediate fell 0.4% to $80.29 a barrel and Brent was similarly off 0.4% at $84.69 a barrel.

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