European stocks struggle ahead of US jobs data

LONDON (Reuters) – European shares opened slightly lower on Friday and struggled to gain after the shooting of the former Japanese prime minister sent Asian shares tumbling, while investors waited for key U.S. jobs data later in the session.

Investor sentiment was positive earlier in the session, which analysts said was due to attempts by US federal policy makers to ease recession fears and news of Chinese fiscal stimulus.

US indexes closed positive on Thursday after Federal Reserve Governor Christopher Waller called recession fears “exaggerated,” while St. Louis Fed President James Bullard said he saw a “good chance” of a soft landing for the economy. Read more

But Asian stocks gave up some of their gains and the Japanese yen rose as a safe haven after news that Shinzo Abe was in serious condition, after being shot while campaigning for a parliamentary election. Read more

Abe stepped down in 2020 due to ill health, but he has remained a dominant presence in the ruling Liberal Democratic Party, controlling one of its main factions.

The long-term impact of the shooting on the markets was not clear, said Guillaume Paillat, multi-asset portfolio manager at Aviva Investors, adding that he did not think it would affect the Japanese elections this weekend.

At 0751 GMT, the MSCI World Stock Index, which tracks stocks in 50 countries, is down 0.1% on the day, but is poised for a weekly gain of 1.4% overall. (.MIWD00000PUS).

Europe’s STOXX 600 Index is up 0.1% (.stoxx)While the French CAC 40 was 0.2% higher. (.fchi) Germany’s DAX fell 0.1%. (.GDAXI).

MSCI’s broadest index of Asia Pacific shares outside Japan (MIAPJ0000PUS.) It was still 0.3% higher on the day, but pulled back from an 8-day high hit earlier in the session.

The Japanese yen rose as much as 0.5% immediately after news of Abe’s shooting, before settling around 135,835. Read more

The latest indicator of the health of the US economy is due later in the day with the release of US non-farm payrolls data. A consensus is expected for 268,000 jobs added in May.

“Employment is important because job security underpins economic recovery,” Paul Donovan, chief economist at UBS Global Wealth Management, wrote in a note to clients.

“Today’s data should show some slowdown in job creation, but lately payroll and hourly numbers have remained completely inconsistent with any notion of a recession.”

The dollar index rose ahead of the data, up 0.6 percent on the day at its highest level since 2002.

The British pound fell 0.7% against the strong dollar after the resignation of British Prime Minister Boris Johnson on Thursday. ING analysts said the markets were likely to welcome the change in leadership but it was too early to tell the impact on the pound.

The euro was at 1.00895 dollars. It has slipped toward parity with the dollar as investors fear that an energy crisis caused by uncertainty over gas supplies from Russia could push the continent into recession.

“Europe may still be in a vulnerable position due to the uncertainty on the energy issue,” said Aviva’s Bailat.

The benchmark German 10-year bond was down 2 basis points at 1.275%, while the US 10-year yield was around 2.9798%.

The two-year and 10-year Treasury yield curve portion inverted on Tuesday for the first time in three weeks. A reversal in this part of the curve is seen as a reliable indicator that a recession will follow within one to two years. .

Oil prices fell, with Brent and US West Texas Intermediate futures expected to incur a weekly loss. Read more

(Elizabeth Hawcroft reports). Editing by Kim Coogle

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