Stock markets diverge before US jobs data

Traders are awaiting the release of US jobs and wage data, which will give fresh clues about the state of the world's biggest economy

London (AFP) – Stock markets mostly dropped Friday as attention turns to the release of key US jobs data later in the day and high-level China-US trade talks in Beijing.

Company earnings updates kept investors busy awaiting the monthly US employment data, with shares in Societe Generale tumbling 5.7 percent to 42.35 euros in Paris midday deals after the French bank posted weak profits.

On the upside, shares in British-Airways parent IAG jumped 4.9 percent to 671.8 pence in London after it reported a 75-percent jump in operating profits for the first quarter.

In the United States, while the corporate earnings season has been considered a success, analysts are worried that the healthy results have not fired equities as much as expected, with warnings of a mild correction down the line.

Friday’s US non-farm payrolls figures for April will provide the latest snapshot of the world’s top economy. Analysts will be watching wage growth figures closely for signs of rising inflation.

There are growing concerns that with the US economy continuing to perform well, the Federal Reserve could be forced to lift interest rates three more times this year, having done so once already.

This, along with the fading likelihood of any near-term tightening by the European Central Bank and the Bank of England, has boosted the dollar over the past week to multi-month highs against the euro and pound, as well as most other currencies.

“The dollar should continue to make gains against currencies across the board if fundamentals and central bank policy divergence matters,” said Greg McKenna, chief market strategist at AxiTrader.

“I believe it does and I can see a clear slowdown in growth globally at a time when the US seems to be the standout. And with inflation accelerating in the US but lagging elsewhere we have a clear policy divergence between the Fed and many other central banks.

“For me, that means that whatever happens with non-farms tonight… we are at the start of a big turn in the dollar,” McKenna added.

– ‘Very good’ trade talks –

In Beijing, the biggest hitters in Donald Trump’s administration met their Chinese counterparts for a second day of high-stakes trade talks on Friday.

The Chinese government said the talks ended with “big differences”, leaving the world’s two largest economies on the brink of a trade war that could have knock-on effects on the global economy.

Treasury Secretary Steven Mnuchin and top White House economic adviser Peter Navarro, a prominent China critic, led the US delegation.

Xi Jinping’s top economic adviser Vice Premier Liu He is leading the talks for China.

“Both sides recognise there are still big differences on some issues and that they need to continue to step up their work to make progress,” China said in a statement released by the official Xinhua state news agency.

The talks were aimed at forestalling momentum towards the looming conflict, with both sides prepared to pull the trigger on tariffs that could affect trade in billions of dollars of goods.

Oil markets are also awaiting Trump’s decision on the Iran nuclear deal, with speculation rife that he will tear it up, which many fear could spark geopolitical turmoil and put fresh upside pressure on crude prices.

Both main contracts are sitting around levels not seen since late 2014, though data showing rising US production and stockpiles is tempering gains.

 – Key figures around 1040 GMT – 

London – FTSE 100: UP 0.4 percent at 7,533.23 points 

Frankfurt – DAX 30: UP 0.5 percent at 12,750.40 

Paris – CAC 40: FLAT at 5,500.87 

EURO STOXX 50: UP 0.2 percent at 3,536.15

Hong Kong – Hang Seng: DOWN 1.3 percent at 29,926.50 (close)

Shanghai – Composite: DOWN 0.3 percent at 3,091.03 (close)

Tokyo – Nikkei 225: Closed for a public holiday

New York – Dow: FLAT at 23,930.15 (close)

Euro/dollar: DOWN at $1.1966 from $1.1990 at 2100 GMT

Pound/dollar: DOWN at $1.3568 from $1.3571 

Dollar/yen: DOWN at 108.99 yen from 109.19

Oil – Brent North Sea: UP 23 cents at $73.85 per barrel

Oil – West Texas Intermediate: UP 22 cents at $68.65