LONDON, July 8 (Reuters) – European shares opened slightly lower on Friday and struggled to pare gains after the shooting of Japan’s former prime minister sent Asian shares retreating as investors awaited key U.S. jobs data more late in the session.
Investor sentiment was positive earlier in the session, which analysts said was due to efforts by US Federal Reserve policymakers to ease recession fears and news of Chinese fiscal stimulus.
U.S. indexes closed higher on Thursday after Fed Governor Christopher Waller called recession fears “overblown,” while St. Louis Fed President James Bullard said he saw a “good chance” of a soft landing for the economy. Read more
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But Asian shares gave up some of their gains and the Japanese yen rose on news that Shinzo Abe was in serious condition after being shot while campaigning for a parliamentary election. Read more
Abe stepped down in 2020, citing ill health, but he retained a dominant presence over the ruling Liberal Democratic Party (LDP), controlling one of its main factions.
The longer-term impact of the shooting on markets is unclear, said Guillaume Pailla, multi-asset portfolio manager at Aviva Investors, adding that he did not think it would affect Japan’s election this weekend.
At 0751 GMT, the MSCI world equity index, which tracks shares in 50 countries, was down 0.1 percent on the day, but expected a weekly total of 1.4 percent (.MIWD00000PUS).
Europe’s STOXX 600 was up 0.1% (.STOXX), while France’s CAC 40 was up 0.2% (.FCHI) and Germany’s DAX was down 0.1% (.GDAXI).
MSCI’s broadest index of Asia-Pacific shares outside Japan ( .MIAPJ0000PUS ) was still up 0.3 percent on the day, but retreated from an 8-day peak hit earlier in the session.
The Japanese yen rose as much as 0.5% immediately after the news of Abe’s firing before stabilizing around 135.835. Read more
The latest indicator of the health of the US economy is expected later in the day with the release of US non-farm payrolls. The consensus expectation is for 268,000 jobs to be added in May.
“Employment matters because job security is at the heart of the economic recovery,” Paul Donovan, chief economist at UBS Global Wealth Management, wrote in a note to clients.
“Today’s data should show some slowdown in job creation, but recent wage and hour numbers remain completely inconsistent with any notion of a recession.”
The dollar index rose ahead of the data, rising 0.6% on the day to its highest level since 2002.
The British pound fell 0.7 percent against a stronger dollar after British Prime Minister Boris Johnson resigned on Thursday. Analysts at ING said markets likely welcomed the change in leadership, but that it was too early to tell the impact on the pound.
The euro was $1.00895. It slipped to parity with the dollar as investors worry that an energy crisis triggered by uncertain gas supplies from Russia could tip the continent into recession.
“Europe is still perhaps on the back burner because of the uncertainty surrounding the energy issue,” said Aviva’s Paylat.
Germany’s benchmark 10-year bond was two basis points lower at 1.275 percent, while the U.S. 10-year yield was around 2.9798 percent.
The two-year and 10-year portions of the Treasury yield curve inverted on Tuesday for the first time in three weeks. An inversion in this part of the curve is seen as a reliable indicator that a recession will follow in one to two years. .
Oil prices fell, with Brent crude futures and US West Texas Intermediate crude futures set for weekly losses. Read more
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Reporting by Elizabeth Howcroft; Editing by Kim Coghill
Our standards: The Thomson Reuters Trust Principles.
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