Stocks Down Ahead of NFP

January Hangover? 

European stock markets slipped in early trading Friday, pushing the main indices firmly into the red in the first week of trading in 2024 as the data paints a picture of weakening economic activity and higher inflation. Weak PMI data for the Euro area was confirmed, whilst German consumer inflation surged higher as energy subsidies faded. German’s inflation hit 3.8% in December, up from 2.3% in Nov.  

No Rate Cuts Yet 

Final inflation data for the Eurozone as a whole is due at 10am, expected up to 3.0% from 2.4%. Meanwhile FOMC minutes earlier this week suggested the Fed is not quite so close to cutting rates; the US 10yr Treasury yield broke above 4%, helping the dollar hit its highest since the middle of December and keeping the pressure on risk assets.  

Paint the Town  

Shares in London, Frankfurt and Paris all retreated by around one percent on Friday morning, with the US jobs report in focus. The Nasdaq notched its fifth straight daily decline on Thursday, whilst the S&P 500 dropped for a fourth session in a row with Apple suffering again on another downgrade. For the week, the FTSE 100 is off about three-quarters of a percent, held up relative to peers with oil firmer, whilst the DAX is down 1.4% and CAC is 2% lower with luxury taking a bit of a bashing on China fears.   

Payrolls Day 

After the FOMC minutes confirmed our view that the Fed is not quite so close to cutting rates as the market has been pricing, today’s payrolls numbers will be of some importance once more. The consensus estimate is +170k, with a range +80k to +225k. Meanwhile, the unemployment rate is seen ticking up to 3.8% from 3.7% and wages are seen down a tad at +3.9% year-over-year from 4.0%.   

Strong Payrolls 

Yesterday’s ADP was strong yesterday. December payrolls +164k vs. +125k estimate, up from +101k prior. This was the largest increase since last August. ADP has a sketchy record when it comes to predicting the BLS nonfarm data of course. GS: “We left our nonfarm payroll forecast unchanged at +190k ahead of tomorrow’s release, above consensus of +171k.”