US Payrolls Report Looms as Bond Yields Surge

US Treasury yields are nearing an eight-month high, with a pivotal payrolls report expected to drive them past 4.739%. The dollar remains near two-year highs, as the British pound slumps to a 14-month low of $1.2303. Market focus is on the upcoming payrolls report, with forecasts expecting 160,000 new jobs in December, which could influence the Fed's rate-cut expectations and broader market sentiment.

Equities

The FTSE 100 index rose 0.8% to reach a near four-week high amidst ongoing volatility in global markets. Leading this uptrend were mining giants like Antofagasta, Anglo American, and Rio Tinto, each gaining between 1.8% and 3.3% as metal prices edged higher.

Among UK companies, Marks and Spencer reported better-than-expected food sales over the Christmas period, yet its shares fell sharply by 8.4% due to concerns over economic headwinds and rising costs. Tesco, Britain's largest supermarket chain, saw its stock dip 0.5% despite maintaining its profit outlook.

Turning to the US, both Nasdaq and S&P 500 futures fell 0.3%, reflecting cautious sentiment ahead of the US nonfarm payrolls report. Companies like Apple and Amazon, pivotal in the tech sector, faced downward pressure. Meanwhile, Wall Street paused trading to honour former President Jimmy Carter's funeral.

In Asia, Japan's Nikkei fell 0.9%, marking a weekly loss of 1.6%, while China's blue-chip stocks slipped 0.4%. Hong Kong's Hang Seng dropped 0.5% amidst concerns over tightening liquidity as Chinese government bond yields climbed.

The bond market's focus remains on the upcoming US jobs data, with expectations that a stronger-than-expected report could drive 10-year Treasury yields to 13-month highs. This anticipation has supported the US dollar, which is nearing two-year peaks, having gained for six consecutive weeks.

Forex & Commodities

The US dollar remained strong, maintaining its gains as it approached a six-week streak of increases. The dollar index rose 0.4%, heading for its sixth consecutive weekly gain, bolstered by rising bond yields and strong expectations for US jobs data. The dollar gained 0.5% against the yen, trading at 158.405 yen, and nearly 1% against the ailing British pound, which fell to a 14-month low of $1.2239. Sterling continued its downward trajectory, losing 0.23% to $1.2278.

Gold prices edged higher, up by 0.2% to $2,675.49 per ounce, as investors awaited the US nonfarm payrolls report. Gold's rise came amid uncertainty surrounding President-elect Donald Trump’s policies, which could influence the Federal Reserve's approach to rate cuts. Silver followed suit, rising 0.3% to $30.2 per ounce.

Oil prices climbed in early trading, with Brent crude futures rising 0.9% to $77.61 a barrel and West Texas Intermediate (WTI) up 0.9% at $74.58. This marked a third straight week of gains, supported by rising fuel demand due to cold weather in the US and Europe. Analysts also attributed the rally to supply concerns linked to sanctions against Russia and Iran.

Markets are closely monitoring the US nonfarm payrolls report, due later today, which is expected to show a gain of 160,000 jobs in December. Stronger-than-expected data could bolster the dollar further and impact expectations for future interest rate cuts by the Federal Reserve.