Equities on the rise ahead of US jobs report

• European markets on the rise after strong tech earnings
• Markets push higher as we overcome fears around a Fed pushback
• Jobs report in focus, with risks tilted towards the downside for markets

European markets are enjoying an upbeat end to the week, with Amazon and Facebook earnings helping to drive a risk-on period following jitters earlier in the week. Today sees the US jobs report provide the final hurdle for traders to overcome, although the scope for any meaningful shift in market expectations from the FOMC is questionable in the wake of Wednesday’s meeting.

This week brought risks for equity markets, with the Federal Reserve’s push back against the March rate cut ultimately proving a ‘buy the rumour-sell the fact’ event. Helped along the way by yesterday’s Facebook and Meta earnings, we are expecting to see the S&P 500 close out the week at or around record highs. The dollar declines seen in early trade today have brought about a fresh one-week low, with markets looking to have cleared out some major hurdles with an upbeat tone.

Today’s jobs report provides the final obstacle for traders, with market forecasts pointing towards a potential weaker payrolls and increased unemployment rate. The question for markets is what needs to happen to shake the Fed’s view that a March rate cut is largely off the cards. The reality is that both the decline in payrolls and rise in unemployment forecast for this meeting would still see both metrics stay at relatively normal pre-pandemic levels. As such, beyond any particularly shocking collapse in payrolls or a spike in unemployment, it looks unlikely that we will see anything that could force the Fed’s hand. Instead, the risk remains tilted towards the downside for risk assets, with any stronger than expected wage or payrolls figure providing the basis for a more hawkish Federal Reserve in the face of sticky inflation pressures.