Global Stocks Recoup Losses Ahead of U.S. Jobs Data

By Jon Sindreu and Kenan Machado Features Dow Jones Newswires

Global stocks recouped some of their earlier losses Friday, ahead of a key jobs report that could pave the way for the Federal Reserve to raise interest rates in June.

Continue Reading Below

In the European afternoon, futures pointed to a 0.1% opening gain for the S&P 500.

Before that, a decline in commodity prices had dented investors' appetite for risk and dragged down global stocks. The Stoxx Europe 600 was down 0.1% on the day, following declines in all the main Asian bourses.

Investors' focus is on U.S. employment figures for April -- analysts polled by The Wall Street Journal expect the data to show nonfarm payrolls increased by 188,000, which would be a sign of a strengthening labor market. This week, the Federal Reserve brushed off concerns about the U.S. economy's soft first-quarter patch, which suggests that officials are increasingly committed to tightening monetary policy.

Over the last week, the WSJ Dollar Index has gained 0.2%, and 10-year Treasury yields have edged up to 2.364% from 2.281%.

Traders now assign a 74% probability that the Fed will raise interest rates in June to 1.25%-1% from their current 0.75%-1% range, futures markets suggest. Economic data will be crucial to gauge how much tightening is in store later in the year.

Continue Reading Below

"The most important part of the report is no longer the monthly figures or the unemployment rate -- it's the wage number," said Scott Clemons, chief investment strategist at Brown Brothers Harriman. If we see further acceleration...that gives the Fed the green light on labor market health and a warning light on inflation."

The price of crude stabilized during the trading day after sharp overnight falls, provided a lifeline to stocks in the oil and gas sectors, which rose 0.2%, reversing steep losses when the market opened. Brent crude futures were up 0.1% from the previous day's close to trade at $48.44 a barrel, while WTI futures were down 0.2% at $45.42 a barrel.

U.S. crude prices are still down more than 7% from a week ago, hitting their lowest since November, when the Organization of the Petroleum Exporting Countries agreed to cut output for six months. This caps a bad week for commodities and damped investors' hunger to take on risk.

"There are a lot of concerns out there on [oil] oversupply," said Andrew Sullivan, managing director of sales trading at Haitong International Securities, noting the risk that lower oil and energy consumption could indicate slack demand, threatening the global economic recovery.

Hong Kong's Hang Seng and the Shanghai Composite Index both closed down 0.8%. Australia's S&P/ASX 200 lost 0.7%. Markets in Japan and South Korea were closed for holidays.

Nevertheless, major stock indexes in the U.S. and Europe have climbed over the past few weeks, on positive corporate earnings.

Leading European stocks Friday, shares in Pearson PLC went up 13% after the world's largest education company announced a review of its struggling U.S. products. Marks & Spencer Group PLC and International Consolidated Airlines Group SA -- owner of British Airways and Iberia -- both gained roughly 5% after M&S announced the appointment of a new nonexecutive chairman and IAG reported better-than-expected first-quarter figures.

Investors are also confident that companies in the energy sector are now more resistant to falls in the price of crude.

"The amount of investment that has gone on in the last several years into production efficiency" makes these companies attractive, said Rob Bartenstein, chief executive of Kestra Private Wealth Services, who owns stocks in oil giants Exxon Mobil Corp. and Royal Dutch Shell PLC.

Still, metals have been battered throughout the week, on fears that China's crackdown on speculation and borrowing could hurt metals demand. Iron ore traded on the Dalian Commodity Exchange closed down 8%, the daily trading limit. Nickel fell to its lowest level in nearly a year in London, while copper tumbled in the U.S.

"Financial market regulatory scrutiny certainly appears to be driving liquidation across a range of asset classes onshore," said Bill Bowler, a Chinese equities trader at Forsyth Barr in Asia.

Yifan Xie

and Riva Gold contributed to this article.

Write to Jon Sindreu at jon.sindreu@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

May 05, 2017 08:35 ET (12:35 GMT)