US open: Futures mixed ahead of the NFP

US futures

Dow futures +0.05% at 31400

S&P futures -0.15% at 3892

Nasdaq futures -0.4% at 12052

In Europe

FTSE -0.65% at 7140

Dax +0.85% at 12997

Euro Stoxx +1.55% at 3418

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Stocks edge lower

US stocks are pointing to a mixed start in cautious trade ahead of the US non-farm payroll report. Expectations are for the headline figures to slip lower to 270k, down from 390k in May and 436K in April. Essentially this will mark the third month of slowing job creation, which could be considered the start of a trend.

Meanwhile, unemployment is expected to hold steady at 3.6%, and wage growth is still at 5.2%.

Heading into the report, there is no doubt that the Fed and the market are more focused on inflation than the jobs data. But that doesn’t mean a stronger than forecast report can’t move the market. Instead, it is more likely that a weaker-than-expected report is unlikely to drive the market.

It would take a terrible report for the market to re-price its Fed rate hike expectations. According to the CME Fed Watch tool, the market is pricing in expectations of a 75 basis point hike at 94%.

Meanwhile, an upbeat print, combined with solid wage inflation, could, in fact, support a more aggressive path to rate hikes from the Federal Reserve, lifting the USD, potentially hurting the recent momentum in stocks and pulling gold back towards support at $1722

In corporate news:

Twitter trades lower pre-market after The Washington Post reported that Elon Musk is closer to pulling out of his offer to buy the company.

FX markets – USD rises, EUR edges lower

Despite falling yields, USD is pushing higher ahead of the US non-farm payroll report. Some haven flows are evident from weaker futures and a stronger yen.

EURUSD briefly broke below 1.01 taking it a step closer to parity. Recession worries, energy security, and concerns that the ECB is starting to hike rates as the Eurozone heads into recession are all dragging on the common currency.

GBP/USD is falling as the dust settles on Boris Johnson’s resignation. The stepping down of the PM leaves the UK in limbo while a leadership contest takes place, which could take weeks or months. This is at a time when the economic outlook deteriorates, and Brexit remains a mess.

GBP/USD -0.3% at 1.1986

EUR/USD -0.2% at 1.0140

Oil set for weekly decline

Oil prices are holding steady but are set to decline across the week. Recession fears and the impact that slower growth will have on-demand pulled the commodity complex lower this week, apart from Natural gas, which is dealing with its own fundamentals.

Given that central banks are expected to continue hiking rates, the demand outlook could remain in question despite tight supply. With this in mind, the upside for oil could remain limited.

WTI crude trades +0.2% at $100.66

Brent trades +0.04% at $103.10

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Looking ahead

16:00 Fed Williams

18:00 Baker Hughes rig count

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