A Look at the Day Ahead in European and Global Markets

By Ankur Banerjee

Markets are taking a breather after a week of equity selloffs, with fragile sentiment looming as concerns about the U.S. economy rise. Investors are focused on upcoming job reports.

Labour data from Wednesday suggested a cooling U.S. job market, heightening the prospects of significant interest rate cuts by the Federal Reserve. Further reports, particularly Friday’s non-farm payrolls data, are keeping investor sentiment on edge.

Futures indicate a muted opening for European markets after Asian shares rose by 0.4% on Thursday, recovering slightly, but the MSCI index of Asia-Pacific shares outside Japan remains down 2.2% for the week.

Risk appetite is weak; the yen retains its gains as traders flock to safe assets, while the dollar holds steady after recent weakness. The Bank of Japan’s hawkish stance also supports the yen, as a board member suggested a continued commitment to raising interest rates.

Attention will turn to Friday’s U.S. non-farm payrolls report, with Thursday’s U.S. jobless claims and Euro zone retail sales data keeping investors occupied. Markets are looking for hints on whether the Fed will cut rates by 25 or 50 basis points during its upcoming meeting, with recent job data increasing bets on a 50 bps cut to 44% from 38% the day before.

Investors are pricing in 110 bps of cuts over the next three Fed meetings, reflecting a keen interest in forthcoming economic data, especially regarding the labour market.

Key Developments That Could Influence Markets on Thursday:

• Economic events: Euro zone August retail sales; August construction PMI data for Germany, France, and the Euro zone.

(By Ankur Banerjee; Editing by Edmund Klamann)