Global stocks fluctuated, and bonds steadied as recession fears weighed

LONDON/TOKYO (Reuters) – Global stocks fell on Thursday and U.S. Treasury yields hovered near multi-month lows as traders awaited crucial U.S. jobs data that could add to growing concerns about a global economic slowdown.

With equity investors avoiding aggressive bets, ahead of the Good Friday holiday when the market-moving monthly non-farm payrolls report is also released in the US, the MSCI Broad Index of World Equities (.MIWO00000PUS) traded flat.

The European stock index Stoxx 600 (.STOXX) rose 0.3%, supported by data showing German industrial output rose more than expected in February. But recession fears weighed on US stock futures and crude oil.

Nasdaq E-mini futures in the United States indicated a decline of 0.5% in the New York open, after the technical stock index fell 1% overnight. E-mini futures for the broader S&P 500 index were down 0.1% after Wednesday’s drop of 0.25%.

After the US Federal Reserve’s most aggressive rate hikes in decades, to stubbornly fight high inflation, traders are now bracing for the central bank to shift to a more dovish stance.

Data released overnight showed that US private sector employers hired far fewer workers than expected in March, adding to signs earlier in the week that the labor market was weakening.

The service sector in the country also slowed more than expected, while previous figures showed a halt in factories as well.

“What we’re seeing this week is that those interest rate increases are having an impact on the overall economy for almost the first time,” said Roger Lee, head of UK equity strategy at Investec.

“The market is extrapolating this latest data to believe that there will be an imminent US recession.”

Economists polled by Reuters expect to see US employers adding 240,000 new workers in March, down from 311,000 in the previous month. Average earnings growth is also expected to slow to 4.3% year-over-year, from 4.6% in March.

Financial markets now see the potential for another quarter-point rally at the May meeting in return for a pause as a coin toss. The 74 basis points facility is priced in by the end of the year.

“Investors should not rush to buy the pivot point, as when the Fed cuts interest rates, it is too late to prevent a recession,” said Emmanuel Cao, chief European equity analyst at Barclays.

Treasury yields, which move inversely to debt securities prices, have fallen a lot in recent weeks as traders have added risk in the bond markets rather than stocks.

The yield on the 10-year note was around 3.29% Thursday morning in London, close to a nearly seven-month low of 3.266% reached overnight.

The German 10-year bond yield, a benchmark for borrowing costs in the eurozone, added 2 basis points to 2.2%.

That German yield now stands well below its level of around 2.7% from early March, before the failure of two US banks and a Credit Suisse bailout by UBS stoked concerns about banks lending cautiously to protect capital, which could hurt growth.

The dollar index settled against other major currencies at 101.84, up around a two-month low.

Spot gold fell 0.1% from a one-year high reached on Wednesday, to $2019 an ounce, but remained 2% higher for the week.

Oil was also under pressure, despite the sudden production cut decision by OPEC+ producers over the weekend. Brent crude, the global benchmark, fell 0.3 percent to $84.76 a barrel.

(Reporting by Kevin Buckland in Tokyo and Naomi Rovnik in London). Editing by Christopher Cushing, Edmund Kelman, Sonali Paul and Andrew Heavens

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