European shares edge higher ahead of US jobs report

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European shares rose on Friday and Wall Street stock futures were subdued ahead of the latest US labour market report, which will offer further clues about how aggressively the Federal Reserve may raise interest rates to curb inflation.

The regional Stoxx Europe 600 gauge added 0.4 per cent in early dealings, having closed the previous session 0.6 per cent higher. Germany’s Dax rose 0.5 per cent. UK markets were closed for a public holiday, as were markets in Hong Kong and mainland China.

Those moves followed on from stronger than expected economic data from Germany, with the country’s exports rising by 4.4 per cent between March and April. That figure topped expectations of a 1.5 per cent rise and marked a significant improvement from a drop of 3 per cent the previous month. Imports rose to 3.1 per cent, against forecasts of a 0.2 per cent increase.

“A surprise surge in April exports softens fears of a contraction of the entire German economy in the second quarter,” wrote analysts at ING, although “exports are still facing several headwinds”. There is a “high risk” that Russia’s war in Ukraine “accelerates the trend of deglobalisation and high energy and commodity prices for longer,” they added, meaning “today’s export revival could turn out to be a flash in the pan”.

Meanwhile, futures contracts tracking the US’s broad S&P 500 index edged down 0.1 per cent while those tracking the technology-heavy Nasdaq 100 dipped 0.3 per cent. Both indices had made strong gains on Thursday, even as the Fed’s vice-chair Lael Brainard warned that the US central bank may find it necessary to extend half-percentage-point interest rate rises into September if inflation does not decelerate adequately.

Jobs data later in the day are expected to show that US employers added 325,000 new positions last month, compared with 428,000 in April. Signs of the temperature rising in the labour market may indicate the need for the Fed to maintain a more aggressive stance, while weaker than anticipated figures could lessen the perceived requirement for extra-large increases in borrowing costs.

Government bonds were broadly steady in advance of Friday’s labour market figures, with the yield on the benchmark 10-year Treasury note flat at 2.92 per cent. Germany’s equivalent Bund yield rose 0.01 percentage point to 1.25 per cent. Bond yields rise as their prices fall.

Brent crude slipped 0.5 per cent lower to $117 a barrel, after rising in the previous session despite Opec and its allies reaching an agreement to accelerate oil production in July and August.

The dollar index, which measures the US currency against a basket of six others, was steady.

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