US markets look for signal from nonfarm payrolls

The US recorded a steep drop in the number of announced job cuts in February with data from Challenger, Gray and Christmas reporting 48k layoffs compared with more than 100k a month earlier. Hiring plans also improved in February although at just 13k were well below levels recorded at the same time last year. Elsewhere on the US labour data, initial jobless claims were relatively steady at 213k last week while continuing claims for the week earlier increased to 1.87m from 1.83m a week earlier.

Fed vice chair Michelle Bowman said the labour market was showing signs of “stabilization” and hoped that the “fragility” in the labour market in the second half of 2025 would begin to recede. Markets are assigning virtually no chance of a rate cut at the March 17-18 FOMC meeting with fewer than two 25bps cuts priced in before the end of the year.

GCC economies withstood another barrage of Iranian drone and missile attacks overnight though the tempo of attacks has substantially lessened. Emirates in Dubai is now operating at a reduced schedule of flights while Etihad will resume a limited schedule from 6 March.

Today’s Economic Data and Events

17:30 US retail sales advance m/m Jan: forecast -0.3%

17:30 US nonfarm payrolls Feb: forecast 55k

17:30 US unemployment rate Feb: forecast 4.3%

Fixed Income

US Treasury yields continued to push higher overnight as markets price in solely an inflation impact of the conflict in the Gulf. Yields on the 2yr UST rose another 3bps to 3.5764% while the 10yr yield was higher by about 4bps at 4.1363%. So far the US has not taken any direct measures to alleviate the energy inflation risks of the war such as tapping strategic petroleum reserves.

GCC credit staged a modest bounce-back overnight after several days of selling pressure. High-yield names showed the most gains with a 0.5% rise in a GCC wide index while there were broad gains across all sectors and nearly all geographies.

Global bond markets continued to sell off with yields rising between 9-11bps in European markets while emerging markets broadly continue to see higher yields. Turkish bonds, however, rallied in local currency with the 10yr TRY government bond yield lower by 45bps.

FX

Currency markets have begun to show some signs of divergence in the last few days with the US dollar no longer a one-way gainer. The dollar was higher against many peers overnight, reversing some losses from a day previously. EURUSD settled lower by 0.2% at 1.1609 while USDJPY pushed up by 0.3% to 157.59. GBPUSD fell by 0.1% to 1.3357 while commodity currencies were broadly weaker. In early trade today, however, the US dollar has been losing ground against developed market peers.

In emerging markets, INR was the standout yesterday with USDINR down 0.6% at 91.605 while Turkish lira was modestly weaker at 44.0258 and EGP steadied at slightly more than 50 against the USD.

Equities

Global equity markets fell overnight with the Dow Jones down 1.6% and the S&P 500 off by 0.6%. Consumer goods was the sector taking the largest brunt of the selling pressure as markets price in a worsening inflation outlook as a result of the conflict.

Equity markets in the UAE extended their decline overnight with the DFM index lower by 1.3% and the ADX 15 off by 1.8%. In Saudi Arabia the Tadawul managed a gain of 0.8% while other regional markets were broadly higher.

Commodities

Oil prices continued to push higher overnight with the market squarely focused on the security of the Strait of Hormuz. Brent rallied nearly 5% to UDS 85.41/b and WTI was higher by 8.5% to USD 81.01/b. Time spreads at the front of the Brent curve are in an enormously steep backwardation as markets price in an expected shortage of oil on markets. The 1-2 month spread has increased to more than USD 4/b having spent most of last week around USD 0.2/b.

Oil product prices are continuing to show more volatility than crude with European gasoil futures up more than 11% overnight while jet fuel prices have surged.

Gold prices touched lower overnight at USD 5,082/oz, dragging the rets of the precious metals complex with it. Industrial metals look to have been underwhelmed by the Chinese government setting a modest growth target of 4.5-5% for the year.