European stocks slide, oil recovers, traders await US jobs data

European stocks slide, oil recovers, traders await US jobs data
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LONDON, Aug 5 (Reuters) – European stocks were set for modest but still weekly gains on Friday, while traders awaited U.S. jobs data later in the session for clues on the health of the world’s largest economy.

The MSCI world equity index, which tracks stocks in 47 countries, rose 0.2% and posted a weekly gain of 0.7% – marking its third consecutive week of gains. (.MIWD00000PUS).

Asian stocks rose overnight, but the STOXX 600 was down 0.1% by 0823 GMT (.STOXX)CAC 40 of France (.FCHI) and Germany’s DAX (.GDAXI) it was right. London’s FTSE 100 index fell 0.2% (.FTSE).

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Central banks around the world have raised interest rates to curb rising inflation, but European stocks hit their highest level in nearly two months this week.

“Equity futures have been comforted by the view that interest rate hikes by central banks will be enough to contain inflation over the long term,” said Kiran Ganesh, a very active strategist at UBS.

But other asset classes reflected a slowdown.

The closely watched portion of the U.S. Treasury yield curve, which measures the difference between two- and 10-year Treasury note yields, hit 39.2 basis points on Thursday, the deepest inversion since 2000.

An inverted yield curve is often taken as an indicator of an impending recession.

Oil rose, with prices recovering from the previous session to hit their lowest level since February. Concerns about supply shortages were enough to quell fears of weakening fuel demand. read more

Global crude oil markets remained solidly international, with prices higher than in the coming months, indicating tight supply on the back end.

Investors will look to U.S. jobs data to see if the aggressive pace of interest rate hikes by the U.S. Federal Reserve has led to a slowdown in economic growth.

The data is expected to show that nonfarm payrolls rose by 250,000 jobs last month after rising 372,000 in June.

“So far, markets have responded to stronger economic data as good news. But if the economy remains strong at some point, they will question whether the Fed’s tightening is having the desired effect,” ING economists said in a note to clients.

“At this stage, they may start to worry that rates may go higher or stay higher for longer.”

UBS’s Ganesh said a non-farm payrolls figure of between 200,000 and 300,000 would be consistent with a “softer downturn” for the economy, while a higher figure would mean the Fed would need to raise interest rates more to curb demand.

On Thursday, it showed that the number of Americans filing new claims for unemployment benefits rose last week, suggesting that the weakening of the labor market may already be continuing. read more

Cleveland Fed President Loretta Mester struck a dovish tone Thursday, saying the Fed would need to raise interest rates above 4% to get inflation back on target. read more

The US dollar index rose around 0.2%, while the euro fell 0.2% to $1.02265. The Australian dollar, seen as a liquid proxy for risk appetite, fell 0.1% to $0.6958. read more

The British pound fell 0.1% to $1,215.

The Bank of England raised interest rates to their highest level in 27 years on Thursday and warned of a long recession. read more

European government bond yields were mostly 1-2 basis points higher, with Germany’s 10-year yield at 0.812%.

German industrial production showed an unexpected but slight increase in June.

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Reporting by Elizabeth Howcroft; Edited by Bradley Perrett

Our standards: Thomson Reuters Trust Principles.

Elizabeth Howcroft

Thomson Reuters

Reports on the intersection of finance and technology, including cryptocurrencies, NFTs, virtual worlds, and the money that rules “Web3.”

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