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US stock futures trade nervously ahead of the key December jobs report, following a more hawkish-sounding Fed

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  • Tech index futures inched up on Friday, trading cautiously ahead of potentially robust jobs data.
  • The Nasdaq 100 is already on course for its weakest performance in the first week of the year since 2016.
  • A strong jobs number could ramp up pressure on the Federal Reserve to speed up monetary tightening.
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US technology stocks looked set for modest respite from this week’s intense pressure on Friday, ahead of key jobs data that could push the Federal Reserve to step up the pace of raising interest rates, delivering a blow to risk assets such as growth stocks and cryptocurrencies.

Futures on the Nasdaq 100 pared early losses to trade 0.1% higher in European trading, suggesting a third day of losses on the tech-heavy index may not materalize. The Nasdaq 100 has dropped 3.4% so far this week and is heading for its biggest loss for the first week of the year since 2016.

S&P 500 futures were steady, while those on the Dow Jones rose 0.2%. 

The Bureau of Labor Statistics releases the December employment report later in the day. The data is expected to show 400,000 workers were added to non-farm payrolls last month, a far cry from November’s meager 210,000 increase. The jobless rate is expected to have fallen to 4.1%, its lowest since February 2020. 

A reading of private payrolls Thursday showed an increase of 807,000 last month, the most since May 2021, which could stoke expectations for a big beat in non-farm payrolls. But the correlation between the two is notoriously volatile. 

“A strong slate of jobs data is likely to further spur market expectations of near-term Fed tightening, particularly in light of Wednesday’s minutes. Hence, we may be back to a situation where good economic news is bad news for risk assets, as it results in a more rapid withdrawal of policy stimulus,” Michael Brown, head of market intelligence at Caxton FX, said. 

Elsewhere, the Stoxx 600 index fell 0.3%, as European blue chips sagged, while London’s FTSE 100 was broadly steady on the day. In Asia, the Shanghai Composite fell 0.2%, as Chinese authorities raced to halt outbreaks of Covid-19 in major cities ahead of the Beijing Winter Olympics.

Fed minutes released earlier in the week showed policymakers are now looking for three rate rises this year, and thst they discussed the possibility of starting to shrink the central bank’s massive balance sheet by selling the assets it bought as part of its multitrillion-dollar quantitative easing program. 

The US central bank is grappling with inflation running at a three-decade high, a super-tight labor market, and an economy under threat from the surge in the Omicron coronavirus variant. Friday’s jobs report could throw some light on the real effects of the outbreak on hiring. 

“The Omicron wave sweeping across the US and the consumer caution resulting from that has led us to cut our forecast for 1Q 2022 GDP to just below 1.5% from a little above 4%,” ING economist Carsten Brzeski said.

“In addition, increased worker absences mean more bottlenecks and supply-chain strains that will hamper economic activity and keep price pressures intense through the first half of the year,” he said.

Technology stocks and cryptocurrencies have been among the biggest casualties of this week’s shift in interest-rate expectations. Meanwhile, Treasury yields have soared as investors ditched assets that typically lose out in the twin effect of higher inflation and interest rates.

The benchmark 10-year note has risen by 21 basis points this week alone, for its largest one-week increase since June 2020. The yield was last steady on the day at around 1.72% on Friday, close to its highest level since last March. 

Bitcoin fell for a sixth straight day, losing around 1.8% to trade at $42,2291 on Coinbase. The price hit an overnight trough of $41,000, to touch its lowest level since late September.

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