Markets have reached a temporary pause in selling

A look at the day ahead in European and global markets from Ankur Banerjee

Markets hit the pause button after a sell-off in stocks earlier in the week, but sentiment remained fragile as worries about the outlook for the US economy resurfaced and investors focused squarely on this week’s jobs report.

Labor data on Wednesday suggested the US labor market was losing momentum, raising expectations that the Federal Reserve could resort to deep interest rate cuts, while additional reports, including Friday’s non- agricultural, keep feeling at the limit.

Futures indicated European shares were set for a subdued open after Asian shares rose 0.4 percent on Thursday, recouping some of the week’s losses, although MSCI’s broadest index of Asia-Pacific shares outside Japan down another 2.2% so far this week.

Risk sentiment remained fragile, with the yen holding on to gains for the week as traders sought safe-haven assets, while the dollar was steady in Asia hours after overnight weakness.

Soviet rhetoric from the Bank of Japan also supported the yen after BOJ board member Hajime Takata suggested the central bank should remain on track to raise interest rates.

While the focus this week will be Friday’s US non-farm payrolls report, meanwhile Thursday’s US jobless claims reading and Eurozone retail sales data will keep investors busy.

Markets are eager for clues on whether the data will dictate that the Fed cut interest rates by 25 basis points (bps) or 50 basis points when it meets later this month. Traders added a 50bps discount to the jobs data and are now pricing in a 44% chance, up from 38% a day earlier.

Investors are also pricing in 110 bps of cuts from the Fed’s three other meetings this year, and when you factor in the Fed’s focus on the labor market, it looks like economic data over the next few weeks will be put under the microscope by more and more nervous. investors.

Key developments that could influence markets on Thursday:

Economic events: August retail sales in the euro area; August construction PMI data for Germany, France and the euro area

(By Ankur Banerjee; Editing by Edmund Klamann)