Global stocks ease, bonds steady as recession worries weigh

  • Waves of weak US data stoke recession fears
  • US jobs data on Friday, when many markets are off
  • Stocks, bonds and the dollar firm when oil is weak
  • Gold in weekly profit

LONDON/TOKYO, April 6 (Reuters) – Global stocks slipped on Thursday and U.S. Treasury yields edged near multi-month lows as traders awaited key U.S. jobs data.

MSCI’s broadest index of world shares (.MIWO00000PUS) traded flat ahead of the Good Friday holiday, when the market-moving monthly US non-farm payrolls report is released, as equity investors avoided stronger challenges.

Europe’s Stoxx 600 (.STOXX) stock index added 0.3%, boosted by data showing German industrial production rose significantly more than forecast in February. But recession fears weighed on U.S. stock futures and crude oil.

US Nasdaq e-mini futures pointed to a 0.5% drop at the New York open, after the tech stock benchmark fell 1% overnight. E-mini futures for the broader S&P 500 fell 0.1%, following Wednesday’s 0.25% decline.

Following the U.S. Federal Reserve’s most aggressive cycle of interest rate hikes in decades, traders are now positioning the central bank to make things worse to combat stubbornly high inflation.

Overnight data showed U.S. private employers hired fewer workers than expected in March, adding to signs of a loose week in the labor market.

The country’s services sector also slowed more than expected, while earlier figures showed factories also stalled.

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

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“The market is basing this latest data on the belief that there is going to be an immediate US recession.”

Economists polled by Reuters showed U.S. employers added 240,000 new workers in March, down from 311,000 in the previous month. Average earnings growth is expected to slow to 4.3% year-on-year from 4.6% in March.

Money markets now see the odds suspended as a coin toss against a further quarter-point hike at the May meeting. A further 74 basis points of easing has been priced in by year-end.

“Investors should not rush to buy the central bank, and when the central bank cuts rates, it’s too late to prevent a recession,” said Emmanuel Gao, chief European equity strategist at Barclays.

Treasury yields, which move inversely to bond prices, have fallen sharply in recent weeks as traders add risk to bond markets instead of stocks.

The yield on the 10-year note was around 3.29% in London on Thursday morning, after hitting a nearly seven-month low of 3.266% overnight.

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

The German yield is 2.7% below its level since early March, before the failure of two US banks and the rescue of Credit Suisse by UBS.

The dollar index was steady at 101.84 against other major currencies, hitting a two-month high.

Spot gold fell 0.1% to $2,019 an ounce from a one-year high hit on Wednesday, but was 2% higher on the week.

Oil remained under pressure despite a sudden decision by OPEC+ producers to cut production over the weekend. Brent crude, the global benchmark, was down 0.3% at $84.76 a barrel.

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Reporting by Kevin Buckland in Tokyo and Naomi Rovnik in London; Editing: Christopher Cushing, Edmund Claman, Sonali Paul and Andrew Heavens

Our Standards: Thomson Reuters Trust Principles.

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