Here are the top five things you need to know in financial markets on Friday, February 1:
1. Wage inflation in focus for employment report
Focus on Friday’s economic calendar will center on the U.S. Labor Department’s January nonfarm payrolls report at 8:30AM ET (13:30GMT).
The consensus forecast is that the data will show jobs growth of 184,000, after rising by 148,000 in December. The unemployment rate is forecast to hold steady at 4.1%. Most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.3% after gaining 0.3% a month earlier.
That would lift the year-on-year increase in average hourly earnings to 2.6% from 2.5% in December.
The anticipated rise in wages will reflect increases in the minimum wage which came into effect in 18 states last month. Wages could also get a lift from the tax cut. Companies like Starbucks Corp (NASDAQ:SBUX) and FedEx Corp (NYSE:FDX) have said they will use some of the savings from lower taxes to boost wages for workers.
Annual wage growth remains below the 3% that economists say is needed to push inflation towards the Federal Reserve’s 2% target. Fed officials on Wednesday expressed optimism that inflation will rise toward its target this year.
Markets are currently pricing in three rate hikes this year in March, June and December, according to Investing.com’s Fed Rate Monitor Tool.
In other economic data, market participants will also keep an eye on December factory orders and the revision to the University of Michigan’s consumer sentiment index for January, both due at 10:00AM ET (15:00GMT).
2. Company earnings expected to move stocks
A deluge of key firms are showing large moves in pre-market trade Friday after reporting earnings after the market close a day earlier.
Visa (NYSE:V) dropped around 1.5% after the credit card firm admitted that it sees higher full-year expenses and slower revenue growth in the current quarter.
3. Stocks headed for a nose-dive ahead of NFP
U.S. futures pointed to a steep decline on Friday ahead of the jobs report with eyes on rising bond yields.
The increase in bond yields come under growing expectations for economic activity. On Thursday, the Atlanta Federal Reserve predicted that the U.S. economy would see a 5.4% expansion in the first quarter of this year.
Yields, which move inversely to bond prices, reacted as the economic strength stoked speculation that the Fed would increase interest rates as at a faster pace due to the improved outlook. Investors are also concerned that higher yields may cause a capital rotation out of stocks and into bonds.
Elsewhere, European shares were also under selling pressure Friday and heading for their worst week since August as German lender Deutsche Bank (DE:DBKGn) reported a larger-than-expected loss, driving its shares sharply lower and dampening spirits in the European financial sector.
Earlier, Asian stocks closed on Friday with mixed signs, following Wall Street’s lead as investors watched rising bond yields and waited for U.S. nonfarm payrolls data for clues on the path of Fed rate hikes in 2018.
4. Bitcoin headed for worst week since 2013
Bitcoin slumped 12.7% at $8,425.00 by 5:51AM ET (10:51GMT) on the Bitfinex exchange.
Since hitting a record high last December near $20,000, Bitcoin has lost more than half its value amid a flurry of mounting concerns about the future of the industry.
Setbacks included escalating regulatory scrutiny from authorities worldwide including India, South Korea, China and the U.S., a record $500 million heist at Japanese exchange Coincheck Inc., fears of price manipulation and Facebook’s ban on cryptocurrency ads.
Japanese authorities raided Coincheck’s offices Friday morning, a week after the robbery, hauling out documents and computers as evidence.
5. Oil weighs battle between OPEC compliance and U.S. output
Oil prices saw mixed trade on Friday as traders weighed positive news about Organization of the Petroleum Exporting Countries’ (OPEC) compliance in agreed output curbs and waited for the latest indicator on increasing production in the U.S.
OPEC production rose 100,000 barrels per day in January, increasing slightly from what had been an eight-month low as higher output from Nigeria and Saudi Arabia offset a further decline in Venezuela and strong compliance with a supply reduction pact.
Regardless, the Reuters survey revealed that compliance by major oil producers who have agreed to limit output increased to 138%, from the 137% seen in December.
Later on Friday, market participants will keep an eye on U.S. shale production when Baker Hughes releases its most recent weekly rig count data.
Last week the oil services provider said that oil rigs operating in the U.S. rose by 12 to 759, its largest increase since March, underlining concerns that escalating output stateside will offset OPEC’s attempts to rebalance global markets.