With the labour market still tight, investors are keeping a wary eye on US jobs data with a strong reading likely putting pressure on the Federal Reserve to hike interest rates further

London (AFP) - Wall Street and European stock markets made modest moves Thursday as investors awaited US jobs data that could prompt the Federal Reserve to ramp up interest rate hikes.

Markets were rocked this week by Fed chief Jerome Powell’s warning steeper interest rates hikes should the US economy show no sign of slowing despite its previous efforts to tame stubborn inflation.

Investors fear a strong reading in Friday’s US jobs report for February could prompt the Fed to boost rates by a larger amount at its meeting this month and continue doing so, possibly pushing the economy into recession.

Wall Street’s main indices were showing small gains in late morning trading as jobless claims rose more than expected in a potential sign of weakness, although the level still remains low.

“The back-and-forth week continues, as signs of some weakness in US employment data prompted hopes that perhaps Powell’s hawkishness earlier in the week was misplaced,” said Chris Beauchamp, chief market analyst at online trading platform IG.

In Europe, Frankfurt ended the day flat and Paris dipped 0.1 percent.

But London stocks dropped 0.6 percent as the pound rose and a number of stocks stopped trading with dividends.

Asian stocks closed mostly lower.

“It would appear investors are taking a cautious stance ahead of tomorrow’s jobs report, a little spooked by Powell’s comments in Congress and fearful of being caught on the wrong side of another hot jobs report,” said Craig Erlam, analyst at trading platform OANDA.

“That’s clearly the danger at this point, that we get another hot report that confirms January was no blip and instead indicative of a labour market that not only isn’t cooling but perhaps getting hotter,” he said.

The Fed raised rates by a quarter basis point in December, lower than previous decisions, but some traders are betting on a return to a 50-point hike this month.

Investors are also waiting for the latest US inflation figures due next week.

“If these macro pointers both come in hotter, or at least match expectations, then that could further raise bets over a 50-basis point rate increase at the Fed’s March 22 meeting,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.

Friday sees also a key meeting of the Bank of Japan.

The “BoJ will meet for the last time under Governor Haruhiko Kuroda amid increasing speculation of a ‘legacy’ change to policy”, said Stephen Innes of SPI Asset Management.

The central bank’s longest-serving leader, Kuroda became governor in 2013 and his attempts to boost Japan’s moribund economy have ranged from a negative interest rate to spending vast sums on government bonds.

In the past year, he has held firm, even as other central banks hiked rates to tackle inflation, with the resulting policy gap causing the yen to slump against the dollar.

The yen on Thursday rebounded against the US unit, which was down also versus the euro and pound.

Concerns about rising rates put pressure on oil prices but they crept higher on Thursday.

European wholesale natural gas prices dived to the lowest level since August 2021, as high storage levels eclipsed the impact of colder weather.

The benchmark European contract – Dutch TTF gas futures for the coming month – dropped to 40.50 euros per megawatt hour following heavy falls in recent months.

It later clawed back ground to trade above 43 euros.

- Key figures around 1630 GMT -

New York - Dow: UP 0.1 percent at 32,845.14 points

London - FTSE 100: DOWN 0.6 percent at 7,879.98 (close)

Frankfurt - DAX: FLAT at 15,633.21 (close)

Paris - CAC 40: DOWN 0.1 percent at 7,315.88 (close)

EURO STOXX 50: DOWN less than 0.1 percent at 4,286.12 (close)

Tokyo - Nikkei 225: UP 0.6 percent at 28,623.15 (close)

Hong Kong - Hang Seng Index: DOWN 0.6 percent at 19,925.74 (close)

Shanghai - Composite: DOWN 0.2 percent at 3,276.09 (close)

Euro/dollar: UP at $1.0577 from $1.0547 on Wednesday

Pound/dollar: UP at $1.1916 from $1.1845

Euro/pound: DOWN at 88.75 pence from 89.01 pence

Dollar/yen: DOWN at 136.33 yen from 137.43 yen

Brent North Sea crude: UP 0.6 percent at $83.18 per barrel

West Texas Intermediate: UP 0.7 percent at $77.23 per barrel