US stock futures fall as traders brace for Friday's crucial job report ahead of Federal Reserve interest rate cut

US stock futures fell and the dollar weakened as traders prepared for jobs data that will be critical in determining the size of a Federal Reserve interest rate cut later this month.

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Nasdaq 100 contracts were down more than 1% while S&P 500 futures pointed to a fourth day of declines. Europe’s Stoxx 600 dropped 0.5% and is on course for its worst week since the meltdown of early August.

Bloomberg’s gauge of the greenback retreated for a third day amid mounting bets that a worse-than-expected monthly nonfarm payrolls report would spur the Fed to kick off its policy easing cycle with a jumbo cut. The yield on 10-year Treasuries dropped 3 basis points to 3.7%.

Friday’s data will help policymakers determine whether the US economy is heading for a soft landing or a recession after a week of mixed numbers that whipsawed markets. Swap traders are fully pricing in 25 basis points of cuts when Fed officials meet in two-weeks time, with a roughly 35% chance of a 50 basis-point reduction.

The US jobs numbers are “thus seen as the key catalyst to confirm or not these recession worries, and may well dictate the direction of travel for equities from here,” Barclays Plc strategists led by Emmanuel Cau, said in a note.

Forecasters anticipate the report will show a bounce in hiring and a tick lower in the unemployment rate in August, marking a stabilization after July.

With the dollar in retreat on the back of raised rate cut expectations, currency traders haven’t been this animated before a US jobs report in more than a year.

Options used to gauge swings in the dollar versus its main trading partners hit the highest level since March 2023. So-called risk reversals, a barometer of market positioning, show bearish sentiment prevails for the US currency, and some traders are steering clear of short-term bets altogether.

Currency strategists also see a strong chance the yen will test its August high versus the dollar if the payrolls data boost bets for a 50 basis-point move. The yen “is where the action will be” if there is any surprise in the figures, said Gareth Berry, a strategist at Macquarie Group Ltd. in Singapore.

Oil headed for its biggest weekly loss in almost a year on concerns about soft demand and ample supply, even as OPEC delayed a planned increase in output by two months. Iron ore remained on track for its worst week since March, with few signs of a recovery for China’s steel market.

Key events this week:

• Eurozone GDP, Friday
• US nonfarm payrolls, Friday
• Fed’s John Williams speaks, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 fell 0.5% as of 8:47 a.m. London time
• S&P 500 futures fell 0.7%
• Nasdaq 100 futures fell 1.1%
• Futures on the Dow Jones Industrial Average fell 0.4%
• The MSCI Asia Pacific Index rose 0.2%
• The MSCI Emerging Markets Index rose 0.1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.2%
• The euro was unchanged at $1.1111
• The Japanese yen rose 0.8% to 142.25 per dollar
• The offshore yuan was little changed at 7.0829 per dollar
• The British pound was unchanged at $1.3180

Cryptocurrencies

• Bitcoin fell 0.8% to $55,651.28
• Ether fell 1.2% to $2,339.9

Bonds

• The yield on 10-year Treasuries declined three basis points to 3.70%
• Germany’s 10-year yield declined four basis points to 2.17%
• Britain’s 10-year yield declined three basis points to 3.88%

Commodities

• Brent crude rose 0.4% to $72.98 a barrel
• Spot gold was little changed

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