By Geoffrey Smith
Investing.com — As has been the case all week, Friday is all about jobs, with the official labour market report coming out at 8:30 AM ET. For those who prefer to focus on inflation – the Eurozone CPI hit 5% in December, raising the pressure on the European Central Bank to step off the gas. GameStop (NYSE:GME) stock is up sharply in premarket after announcing an NFT marketplace initiative, and China continues to grapple with the twin demons of a real estate crisis and Covid-19. Here’s what you need to know in financial markets on Friday, 7th January.
1. All eyes on payrolls
A week of labour market data reaches its climax with the release of the official government jobs report for the month through mid-December at 8:30 AM ET (1330 GMT).
Economists expect a rise of 400,000 in nonfarm payrolls, a bounce from November’s abnormally low 210,000, but with ADP’s private payrolls report having come in at twice that number, the risk is for an upside surprise – all the more so since the cut-off date for the survey is before the first impacts of the Omicron strain of Covid-19.
With the rest of the week’s data all pointing in the direction of higher wages, attention will also be focused on average hourly earnings, which are expected to accelerate to 0.4% growth on the month from 0.3% in November.
2. Eurozone inflation and bonds
Annual inflation in the Eurozone hit 5.0% on the year, raising on the pressure on the European Central Bank to rein in a monetary policy that is still on its pandemic-era setting of maximum stimulus. November’s retail sales also surged past expectations but German and French industrial production fell on the month, a reflection of ongoing supply-chain issues.
The European Central Bank has said inflation is close to peaking, but the rise in prices isn’t confined to volatile energy and food components, or to base effects. Core consumer prices rose 0.4% on the month and 2.6% on the year.
German government 10-year bond yields, which hit their highest in nearly two years on Thursday, were flat, but spreads to peripheral bond markets continued to widen. The saving grace for the ECB is that there are fewer signs of wage pressures building in the regional economy.
3. U.S. stocks set to open higher; NFT marketplace breathes life into GameStop
U.S. stock markets are set to open moderately higher but all will depend on the payrolls report between now and the official open an hour later.
Stocks had extended their declines on Thursday after comments by two regional Federal Reserve officials made hawkish sounding but largely familiar noises about the policy outlook.
By 6:30 AM ET, Dow Jones futures were up 54 points, or 0.2%, while S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 0.4%. Long-term government bond yields were steady after retracing their gains on Thursday – a suggestion that the Fed’s attempts to keep inflation expectations anchored by tough talk are succeeding.
Stocks likely to be in focus later include GameStop (NYSE:GME) stock, which rose 17% in premarket trading after the meme stock company announced plans to launch a marketplace for non-fungible tokens. The combination of meme stock and crypto fever was enough to breathe fresh life into one of last year’s most active speculative assets, which has been in a downward drift for the last eight months as its fundamentals stubbornly refuse to improve. Also in focus will be chip and phone makers, after Samsung (LON:0593xq) Electronics (OTC:SSNLF) said it expects a 50% rise in annual profit in the last quarter of 2021.
4. China urges banks to lend ease property loan squeeze
China’s central bank called on banks to boost property lending and eased a key restriction on real estate companies, according to Bloomberg, a sign that authorities are becoming increasingly concerned about the industry’s liquidity crisis.
In previously unreported window guidance issued last month, regulators told banks to step up lending to developers after at least two quarters of consecutive declines, the agency reported, adding that the central bank will waive its ‘red lines’ on leverage ratios for loans that are used to fund consolidation in the sector.
China’s real estate crisis is taking a back seat to its Covid-19 policy in terms of headline generation so far this year. Tech hub Shenzhen tightened mobility restrictions in an effort to clamp down on a local outbreak of the disease.
5. Oil pushes higher on supply concerns
Crude oil prices continued to push higher amid concerns about the inability of OPEC and its allies to increase production as promised over the coming weeks. Global inventories are still below historic averages, despite a dip in consumption recently due to the cancellation of thousands of flights due to Omicron-variant Covid-19
While there was some relief from the news that a major Libyan export pipeline has returned to normal operations, that doesn’t solve a global problem of underinvestment in the sector to maintain production rates. Baker Hughes’ drilling rig update later will cast light on the U.S. dimension of that problem.
Payrolls Seen Rebounding, Eurozone CPI, GameStop NFTs – What’s Moving Markets