After positive open, European stocks turned lower on Friday as investors keep a cautious tone ahead of US jobs data due later today, with payrolls seen adding 650,000 jobs in May. A strong reading is expected to reinforce expectations the Federal Reserve would pare back its stimulus programme quicker than expected. So, better-than-expected figures would be negative for risky assets including stocks. In the Eurozone, retail sales in the Eurozone contracted at a monthly 3.1% in April and expanded nearly 24% over the last twelve months.
Against this backdrop, the UK FTSE 100 sheds 0.26% to 7,045, Italy’s FTSE MIB adds 0.06% to 25,469, France’s CAC 40 is down by 0.04% to 6,505, while the German DAX 30 is flat at 15,631. US stock index futures are little changed ahead of the crucial report. As a reminder, yesterday’s data showed that US jobless claims fell below 400,000 for the first time since the early days of the pandemic.
In currencies, the dollar rallied across the board on Thursday due to a recovery in US 10-year Treasury yields and strong economic data. The resurgent inflation fears sent the safe-haven greenback higher but the upside momentum has waned today, as traders refrain from making trading decisions ahead of the key report. If the result exceeds expectations, the dollar could add to this week’s gains and send its rivals to fresh local lows ahead of the weekend.
As such, EURUSD slipped to mid-May lows just above the 1.2100 figure, with weak Eurozone’s retail sales adding to the negative tone surrounding the common currency. Extending the retreat from local peaks seen around 1.2255 earlier in the week, the pair dipped below the 20-DMA and could target the 100-DMA around 1.2040 if the selling pressure intensifies.
Meanwhile, oil prices retain a bullish bias on Friday, albeit refrain from challenging the $72 barrier last seen more than two years ago. For the week, Brent is on track for a gain of more than 2.8% due to OPEC+ supply discipline and recovering demand. Furthermore, the Energy Information Administration reported on Thursday that crude oil inventories in the United States shed 5.1 million barrels in the week to May 28, adding to the upbeat tone in the market. The agency said that inventories were now at 3% below the five-year average for this time of the year.
Nathan Lambert, Head of Global FX Analytical Department