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European stock markets slide ahead of US payroll report amid fears of rising interest rates - Yahoo Finance

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WASHINGTON, DC - DECEMBER 02: Federal Reserve Chairman Jerome Powell listens to a question during a House Financial Services Committee oversight hearing to discuss the Treasury Department's and Federal Reserve's response to the coronavirus (COVID-19) pandemic on December 02, 2020 in Washington, DC. Treasury Secretary Steve Mnuchin is also scheduled to testify.
Traders were left disappointed last night after Federal Reserve chair Jerome Powell did not indicate that the Fed might step up purchases of long-term bonds to hold down longer-term interest rates. Photo: Getty

European stocks mostly fell on Friday amid fears of a rise in interest rates and a continued rotation out of growth stocks into the likes of industrials.

The FTSE 100 (^FTSE) fell sharply after opening but recovered losses by mid-morning thanks to a steep fall in the pound. London's benchmark index is currently trading 0.19% higher.

In the eurozone, the CAC (^FCHI) tumbled 0.56% and the DAX (^GDAXI) was 0.73% lower.

Traders were left disappointed last night after Federal Reserve chair Jerome Powell did not indicate that the Fed might step up purchases of long-term bonds to hold down longer-term interest rates.

Richard Hunter, head of markets at Interactive Investor, said: “The Federal Reserve’s insistence that it believes these inflation moves are transitory was not enough to arrest a further spike in bond yields, as investors fretted that there were no plans to control the longer end of the yield curve.

“At the same time, the perceived threat of higher interest rates arriving earlier than expected washed through to the shares which could be most obviously affected by the resultant slowing of profits.”

READ MORE: Stock market rally 'petering out' on rising government bond yields

Across the pond, S&P 500 futures (ES=F) were down 0.31%, Dow futures (YM=F) shed 0.23%, and Nasdaq futures (NQ=F) were 0.52% lower ahead of the latest US non-farm payrolls report, along with the unemployment rate and average earnings.

The expectation is for 182,000 to have been added in February from January, while the unemployment rate is seen unchanged at 6.4%.

"This is likely to bring some focus back towards the President's proposed stimulus package as the economy fails to fire," Hunter added.

WATCH: US Federal Reserve chair optimistic about recovery

Asian stocks hit a one-month low on Friday as rising US Treasury yields shook equity investors while sending the dollar to a three-month high, dragging the Japanese yen.

MSCI's broadest index of Asia-Pacific shares outside of Japan went to 684.52, the lowest since 1 February.

Japan's Nikkei (^N225) fell 0.23% while Chinese shares were also in the red. The Hang Seng (^HSI) fell 0.35% and the Shanghai Composite (000001.SS) dipped 0.04%.

Meanwhile, oil prices (BZ=F) added to big gains overnight, with Brent Crude hitting $68 a barrel, after the Organisation of Petroleum Exporting Countries (OPEC) and its allies agreed to mostly maintain their supply cuts in April as they await a more solid recovery in demand amid the pandemic.

An increase of 500,000 barrels a day was widely expected, however, Saudi Arabia agreed to maintain a voluntary 1 million barrels per day cut despite calls from some smaller producers to allow a modest loosening.

Saudi’s oil minister Prince Abdulaziz bin Salman, acknowledged that the market had improved since January, but wanted to “urge caution and vigilance,” adding that “…before we take our next step forward, let us be certain that the glimmer we see ahead is not the headlight of an oncoming express train.”

Oil prices are ahead by around 30% year to date, which has in turn propelled the share prices of important FTSE 100 constituents BP (BP.L) and Shell (RDSB.L) by 23% and 16%, respectively.

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European stock markets slide ahead of US payroll report amid fears of rising interest rates - Yahoo Finance
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