Global Markets: Stocks hold ahead of US jobs data, tariff reprieve

Federated Hermes

07/02/2025 09:01

(Updates throughout with European trading)

        * 
      European stocks head for 7th weekly gain
    

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      Yen at two-month high on rate hike bets
    

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      Gold steady near record peak
    

  
    By Amanda Cooper
       LONDON, Feb 7 (Reuters) - Global stocks steadied on
Friday ahead of key U.S. payrolls data, with investors
cautiously optimistic that the world might avoid a full-on trade
war, while the prospect of more rate hikes in Japan this year
drove the yen towards two-month highs.
    In a week that started with Donald Trump kicking off a trade
war and whipping up market volatility, investors have been wary
of making any major moves, given the U.S. president followed
through on his threat to impose duties on China, while granting
Mexico and Canada a one-month reprieve.
    The all-important U.S. jobs report for January is due ahead
of the Wall Street open. Economists expect to see 170,000
workers added to nonfarm payrolls last month, but given the
potential distortions from spells of cold weather and the
California wildfires, the range of forecasts is wide. 
    "The focus for the financial markets in recent weeks has
been very much on Trump and his economic policies, in particular
on trade, but today there is the potential for the jobs data to
influence Fed rate expectations," Derek Halpenny, a currency
strategist at MUFG, said.
    "A pretty large divergence from the consensus is still
likely required to shift expectations notably but extreme
weather at this time of the year has in the past resulted in
sharply weaker NFP readings and weather could impact today’s
report," he said.
    In Europe, the STOXX 600  .STOXX  headed for a seventh
straight week of gains, trading flat on the day after having
traded at record highs earlier this week, following a spate of
strong earnings from the likes of Danish weight-loss drugmaker
Novo Nordisk  NOVOb.CO , German software company SAP  SAPG.DE 
and French lender BNP Paribas  BNPP.PA .    
    European stocks have staged their best performance in a
decade against Wall Street in the first six weeks of 2025, but
the focus is now on whether those gains can be sustained.
    Futures for Nasdaq  NQc1  and S&P 500  EScv1  were down
about 0.1% as shares of Amazon  AMZN.O  slipped on the European
market on the back of weakness in the retailer's cloud unit.
    On the Asian market, tech stocks staged a rally, powered by
Chinese retail investors, who have pounced on the AI theme in
the wake of home-grown start-up DeepSeek's breakthrough.
    
    DELICATE CHINA
    Beijing's seemingly measured response to Trump's tariffs has
left room for negotiations, analysts say, which has helped
repair investor sentiment.
    China's blue-chip stock index  .CSI300  closed 0.4% higher
after touching a one-month high.
    "Whilst there is considerable noise and uncertainty, we
don't see escalating trade tensions as a game changer in the
prospects for the Chinese market," said James Cook, investment
director for emerging markets at Federated Hermes.
    "China's bigger problem is not Trump but the domestic
economy."
    While political uncertainties kept investors wary, fears
have eased that Trump's approach to tariffs could escalate into
a global trade war.
    
  
    Markets are pricing in 43 basis points of easing this year
from the Fed, with a rate cut in July fully priced in, as
policymakers are in no hurry to start the rate-cutting cycle
again.
    The dollar  =USD  is trading flat on the day against a
basket of currencies, having rallied 7% last year, as investors
priced in a far more aggressive policy stance from the Fed this
year, where rate cuts may be few and far between.
    Other central banks are cutting interest rates, while the
Bank of Japan is gearing up for at least another rate hike this
year. Strong wage growth data has beefed up the chances of
tighter monetary policy, which has pushed the yen to two-month
highs against the dollar  JPY=EBS .
    The yen touched 150.96 per dollar in early trading, its
strongest level since December 10 and set for its best weekly
performance since late November, with a gain of over 2%.
    Sterling  GBP=D3  was 0.1% lower at $1.24255 after dropping
0.5% on Thursday as the BoE cut interest rates but warned it
would be cautious going forward.
    In commodities, oil edged up, while gold  XAU=  steadied
above $2,800 an ounce, close to record highs.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Continuing claims and JOLTS hires    https://reut.rs/4aMVb6g
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 (Additional reporting by Ankur Banerjee in Singapore;
additional reporting by Stephen Culp, Marc Jones and Alun John;
editing by Shri Navaratnam, Sam Holmes and Gareth Jones)
 ((stephen.culp@thomsonreuters.com; 646-223-6076;))