US Stock Futures Edge Up Before Jobs as Oil Rises: Markets Wrap

(Bloomberg) — US equity futures posted modest gains ahead of key American jobs data that could clarify the path for interest rates. Oil prices extended their rally as traders tracked the escalation of hostilities in the Middle East.

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Contracts on the S&P 500 were up 0.3%. Treasury yields ticked higher, adding to their sharp increase on Thursday, while an index of dollar strength slipped, still set for the biggest weekly gain in nearly six months.

While investors keep a watchful eye over geopolitical events, they are also assessing the latest signals on the health of the US economy. Friday’s jobs report is expected to show an increase in payrolls for September, while the unemployment rate is forecast to hold steady at 4.2%.

“The slew of data that has come out from the US in the last week or two was so strong that I actually think the market could even tolerate a payrolls number that’s on the low end of the range,” said Elliot Hentov, head of macro policy research at State Street Global Advisors. “The soft landing narrative is very powerful right now and you would have to have more than one data point that’s disappointing to knock us out of that.”

According to Bank of America Corp. strategist Michael Hartnett, risk assets are likely to rally if the report is within the range of market expectations.

The addition of between 125,000 to 175,000 jobs last month would support a soft economic landing and keep bond yields in a range, sparking a risk-on trade, Hartnett wrote in a report.

A “blowout” report showing greater than 225,000 payrolls and an unemployment rate of less than 4.1% would drive the 30-year Treasury yield above 4.5%, the strategist said. Meanwhile, jobs below 75,000 alongside an unemployment rate of above 4.3% would be “recessionary.”

Traders are bracing for extra volatility following the payrolls report. The options market is betting the S&P 500 Index will move roughly 1% in either direction after the data, according to Stuart Kaiser, Citigroup Inc.’s head of US equity trading strategy.

If it happens, that would be roughly in line with the past two jobs prints, and the biggest move in two weeks.

Oil headed for its strongest weekly increase in two years on fears that Israel may decide to strike Iranian petroleum facilities in retaliation for a missile assault on its territory.

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The US and its allies warned of “uncontrollable escalation” in the Middle East after Israel carried out huge bombing raids overnight near Beirut airport aimed at Hezbollah commanders and facilities.

In individual stock moves, shipping companies globally fell after US dockworkers agreed to end a three-day strike that had paralyzed trade on the East and Gulf coasts. In US premarket trading, ZIM Integrated Shipping Services Ltd. slumped more than 7%. In Europe, A.P. Moller-Maersk A/S dropped 6.6% and Hapag-Lloyd AG fell 12%. The stocks had rallied on expectations the strike would lead to increased container rates.

Key events this week:

Some of the main moves in markets:

Stocks

• S&P 500 futures rose 0.3% as of 7:57 a.m. New York time

• Nasdaq 100 futures rose 0.4%

• Futures on the Dow Jones Industrial Average rose 0.2%

• The Stoxx Europe 600 was little changed

• The MSCI World Index was little changed

Currencies

• The Bloomberg Dollar Spot Index was little changed

• The euro was unchanged at $1.1031

• The British pound rose 0.3% to $1.3168

• The Japanese yen rose 0.2% to 146.58 per dollar

Cryptocurrencies

• Bitcoin rose 1% to $61,411.59

• Ether rose 1.8% to $2,384.03

Bonds

• The yield on 10-year Treasuries advanced two basis points to 3.86%

• Germany’s 10-year yield advanced five basis points to 2.19%

• Britain’s 10-year yield advanced six basis points to 4.07%

Commodities

• West Texas Intermediate crude rose 1.4% to $74.71 a barrel

• Spot gold rose 0.2% to $2,662.16 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Sagarika Jaisinghani.

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