European Stock Futures Edge Higher; U.S. Payrolls in Focus

European stock markets are expected to trade cautiously higher Friday as investors await the release of key U.S. employment data, which could influence future Federal Reserve monetary policy.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% higher, CAC 40 futures in France climbed 0.1% and the FTSE 100 futures contract in the U.K. rose 0.1%.

The main focus Friday will be the publication of U.S. nonfarm payroll data, at 8:30 AM ET (1230 GMT), with hiring likely to have slowed considerably in August to 750,000, after adding 943,000 jobs in July, growing at its fastest pace in nearly a year.

Fed Chair Jerome Powell has made it clear that an improvement in employment numbers is the remaining major prerequisite for the central bank to start reining in its extraordinary monetary stimulus. However, anecdotal evidence has suggested some slowing of the economy in recent weeks as a fresh wave of the pandemic has gained force. Investors will thus be looking to the jobs data for a better sense of the timing and pace of U.S. tapering, given that the Fed’s liquidity creation has been the driving force behind the rally of the last 18 months.

Ahead of this, European markets received a mixed handover from Asia. Japan’s Nikkei gained 2% after Japanese Prime Minister Yoshihide Suga said on Friday he would step down, ending a short reign marred by an unpopular Covid-19 response.

However, Chinese stocks were held back by the country’s services sector entering contraction territory in August, with the Caixin services purchasing managers’ index falling to 46.7, the lowest level since April 2020.

Back in Europe, the day’s main economic data are August services PMIs and July retail sales data for the Eurozone.

Crude prices were mixed Friday, with traders wary of taking large positions ahead of the key payrolls report.

That said, the oil market is headed for a back-to-back weekly gain, supported by a larger-than-expected reduction in U.S. crude inventories in the run-up to the disruption caused by Hurricane Ida.

These gains came even as the Organisation of Petroleum Exporting Countries and their allies, a group known as OPEC+, confirmed its intention to add another 400,000 barrels per day of supply in October. OPEC raised its demand forecasts for next year at the same time.

By 2:05 AM ET, U.S. crude futures traded 0.1% lower at $69.95 a barrel, while the Brent contract rose 0.1% to $73.13. Both contracts gained around 2% Thursday, putting both on track for small gains this week.

Additionally, gold futures rose 0.2% to $1,814.60/oz, while EUR/USD traded 0.1% higher at 1.1878.