FILE PHOTO: Monitors displaying the stock index prices and Japanese yen exchange rate against the U.S. dollar are seen after the New Year ceremony marking the opening of trading in 2022 at the Tokyo Stock Exchange (TSE), amid the coronavirus disease (COVID-19) pandemic, in Tokyo, Japan January 4, 2022. REUTERS/Issei Kato
January 7, 2022
By Huw Jones
LONDON (Reuters) – Global shares largely held their ground on Friday after nerves steadied on Wall Street while investors waited to see if U.S. payroll numbers alters the pace of interest rate hikes expected from the Federal Reserve this year.
Oil was headed for its best weekly gains since mid-December, fuelled by supply worries amid escalating unrest in Kazakhstan, where an Internet shutdown hitting global computing power of the bitcoin network helped to send the cryptocurrency tumbling to its lowest level since September.
The MSCI All Country stock index was flat at 744.71 points, also down 2% from a record high on Tuesday.
In Europe, the STOXX index was off 0.5% at 485 points, down 2% from its record high on Tuesday. Key euro zone inflation data was due at 1000 GMT.
The stellar start to 2022 went into reverse on Wednesday after minutes from the Fed’s December meeting signalled the central bank may have to raise interest rates sooner than expected.
Some Fed policymakers also want to shrink the central bank’s $8 trillion-plus balance sheet as well as raise rates, the minutes showed.
Wall Street steadied by Thursday evening, though analysts at ING bank said the minutes were still reverberating across markets, driving bond yields higher, hitting growth stocks and keeping the dollar reasonably well-supported.
“We have non-farm payrolls today and will that have an effect on rate hike expectations? I don’t think it will”, said Michael Hewson, chief market analyst at CMC Markets. “The Fed is on a course to start gradual, incremental rate increases and the key question will be how many the markets will allow them to get away with and a lot of that will be down to guidance.”
Non-farm payrolls likely increased by 400,000 jobs last month after rising 210,000 in November, according to a Reuters survey of economists.
Goldman Sachs said its expects an above consensus rise of 500,000.
S&P 500 e-mini stock futures were slightly weaker.
CRUDE RALLIES, BITCOIN SLUMPS
Asian shares mostly rose on Friday, snapping two days of losses.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.7%, boosted by gains in Australia where the local benchmark climbed 1.3%, led by bank stocks. Japan’s Nikkei was little changed.
China and Hong Kong stocks edged higher on hopes that Beijing will roll out more support measures to prioritise economic stability.
An index of Hong Kong-listed mainland property stocks jumped 4.6% on media reports that Chinese policymakers plan to exclude debt accrued from acquiring distressed assets when assessing debt ratio compliance.
Investors are likely adjusting to “attractive, cheaper” Asian stocks as the year kicks off, said Jim McCafferty, joint head of APAC equity research at Nomura.
“With rates about to go up, from a global risk diversification point of view, investors are likely moving their money from U.S. markets into Asian markets, specifically China because it’s increasingly independent of what the U.S. does,” he said.
U.S. Treasury yields paused for breath, having risen sharply this week after the Fed minutes.
The yield on benchmark 10-year Treasury notes was last at 1.7249% having reached 1.7530% overnight, its highest since April 2021 and up sharply from its 2021 close of 1.5118%.
The dollar was set to notch broad weekly gains, hitting a five-year peak on the yen at 116.35 on Tuesday, hovering around 115.87 on Friday.
Oil prices rallied, which some analysts linked to news that Russian paratroopers had arrived to quell unrest in Kazakhstan, though production in the OPEC+ producer country remains largely unaffected so far.
Brent crude futures rose 0.48% to $82.38 a barrel, and U.S. crude rose 0.5% to $79.83.
Spot gold stood at $1,789 an ounce after touching a two-week low of $1,788.25 on Thursday, as rising U.S. Treasury yields hurt demand for the non-interest bearing metal.
Bitcoin dropped 2.3% to around $42,095 after hitting its lowest since late September as the hawkish Fed minutes also sapped appetite for riskier appetites.
(Reporting by Kanupriya Kapoor in Singapore, Stella Qiu in Beijing and Alun John in Hong Kong; Editing by Kenneth Maxwell, Edwina Gibbs, Elaine Hardcastle)
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