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Stock and Oil Prices Hover as Investors Brace for U.S. Jobs Data

February 5, 2016

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A trader sits in front of computer trading system.Photo by Bloomberg Bloomberg — Getty Images

The wait for U.S. monthly jobs numbers steadied stock markets on Friday and allowed the dollar to recover after its worst week in more than six years.

Oil prices were down by 0.5 to 1% and a mixed mood in Asia spread to European stock markets. London and Paris both gained; Frankfurt fell around half a percent.

January was the worst opening to a year for shares since the aftermath of the 2008 financial crisis. The outlook did not improve this week, as doubts grew about both the U.S. and the world economy.

Short-term U.S. interest rates fell again—two-year yields are down 10 basis points on the week—driving the dollar to its worst performance since late 2009.

A solid non-farm payrolls report might restore some optimism. The consensus forecast of economists polled by Reuters was that 190,000 new jobs were created last month.

“There is a general skepticism towards a proper rate hike cycle by the Fed—that’s been driving down the dollar (but) there’s probably not that much room left for dollar weakness,” Commerzbank currency strategist Thulan Nguyen, in Frankfurt. “A better labour market report could bring back some confidence in the rate cycle.”

The dollar gained just over 0.1% on the day against both the euro and yen, to $1.1192 and 116.925 yen respectively . Against a basket of currencies, it is down 1.3% on the week.

After a weak sentiment report on Wednesday and dovish comments from New York Federal Reserve chief William Dudley, U.S short-term market rates now predict no rise in official rates this year. Earlier, the Federal Reserve’s own forecasting called for four increases.

That reflects growing concern the world is heading back into recession. But it also bolsters expectations for more support for global asset prices from stimulus measures by the world’s central banks.

Hong Kong’s Hang Seng rose 0.6% and Malaysian and Singapore stocks also gained. Tokyo, Shanghai and various commodity prices all fell.

Strategists said European bond markets looked to be pricing in a softer read from the U.S. payrolls report.

“We doubt that even a strong non-farm payrolls number will have the potential to alter the course,” said RBC’s chief European macro strategist, Peter Schaffrik.

“More importantly even, particularly for the fixed income market: The Fed seemingly is reacting to the equity market weakness, fearing the feed through into the real economy through a tightening in financial conditions.”