European equities edged higher and US stock futures rose following the worst day on Wall Street for almost a year in the previous session.
The Stoxx 600 share index gained 0.3 per cent, having closed 1.8 per cent lower on Thursday, as investors remained cautious amid bets of impending interest rate rises by the European Central Bank and the Bank of England.
Futures markets implied a larger rebound on Wall Street later in the day. Contracts that track the US Nasdaq 100 index gained 1.9 per cent, signaling a recovery for technology stocks that had plunged on Thursday in response to a disappointing update by Facebook owner Meta.
Shares in Amazon surged in post-market trading after the ecommerce market leader raised the price of its popular Prime membership scheme.
Meta lost more than $ 230bn of its stock market value on Thursday in an unprecedented single-day loss for a public company, as traders warned of a decline in liquidity prompted by volatile trading conditions that is contributing to outsized intraday market swings.
Snap, a social media group that had been caught up in the Meta-driven sell-off, rose by more than 50 per cent in Wall Street’s after hours session, a time of day when brokers can struggle to match buyers and sellers.
Daily reversals in stock market mood have been common this year, while the general trend has been lower, with the FTSE All-World index having dropped almost 5 per cent so far this year.
Jefferies strategist Christopher Wood cautioned that a “bear market thesis” would remain dominant as long as the US Federal Reserve maintained a “commitment to engage in meaningful monetary tightening.”
The Fed has signaled a rapid cycle of interest rate rises this year as it brings its pandemic-era monetary stimulus to a close.
“The key point right now is that the latest US data has offered no respite,” Wood said, for central bankers that are under pressure to battle soaring inflation.
Official job data later on Friday are expected to show US employers added 150,000 new roles in January, in a decline from the previous month as the Omicron coronavirus variant spread. But average earnings, according to economists polled by Reuters, are forecast to have increased 5.2 per cent from the same time last year.
Government bonds, which have been under pressure all year as prospects of higher interest rates and inflation lessened the appeal of the fixed income-paying securities, continued to fall in price ahead of the closely watched non-farm payrolls report.
The yield on the two-year US Treasury note, which moves inversely to its price and closely tracks interest rate expectations, rose 0.02 percentage points to 1.21 per cent. The yield on the benchmark 10-year Treasury note, which underpins debt costs worldwide, was steady at 1.83 per cent.
Germany’s 10-year Bund yield rose 0.02 percentage points to 0.17 per cent, having only recently traded above zero for the first time since May 2019. The UK’s 10-year gilt yield added about 0.03 percentage points to 1.39 per cent, around its highest in more than three years.
On Thursday, the Bank of England bumped up its inflation forecast to an April peak of 7.25 per cent, citing soaring energy prices and bottlenecks in global supply chains disrupted by coronavirus shutdowns.
Markets have now also priced in a significant move by the European Central Bank to lift its main deposit rate close to zero by the end of the year. The ECB introduced negative interest rates in 2014 in an effort to stimulate lending and spending. But eurozone inflation hit a record 5.1 per cent in January.
The euro rose 0.1 per cent against the dollar to $ 1,145.