LIVE MARKETS That's five straight weeks of losses for Europe

  • Nasdaq, S&P 500 gain, DJI fall; banks outperform
  • Consumer discretion leads major S&P sectors; materials weakest
  • Euro STOXX 600 index falls 1.4%
  • Dollar, bitcoin, crude, gold rise
  • U.S. 10-Year Treasury yield pops to ~1.92%

Feb 4 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

THAT'S FIVE STRAIGHT WEEKS OF LOSSES FOR EUROPE (1202 EST/1702 GMT)

The STOXX 600 (.STOXX) has closed on a weekly loss of 0.7%, its fifth straight week of losses.

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In other words, the pan-European index has never so far in 2022 made it to the weekend with some gains in its pocket.

Five red weeks in a row is a pretty rare occurrence which only last happened during the March 2020 COVID-19 market crash.

Another worrying fact is the 6.8% decline by the STOXX 600 since its Jan. 4 record high of 495.46 points.

It's not a correction yet, but it's getting dangerously close.

Tensions over Ukraine, the uncertainty surrounding tech and the new global monetary tightening cycle make the direction of travel uncertain even if analysts are still revising their expectations upwards for the ongoing earnings season.

European equity markets have been happily co-existing with negative yields on benchmark euro zone government bonds for years now but the European Central Bank's "pivot" moment on Thursday probably marks the end of that era.

This session saw the yield of Germany's Bund reach 0.29%, a first since January 2019 and the country's five-year bond yields turned positive for the first time since 2018.

With money market investors already rushing in to price several ECB rate hikes in 2022 - something President Christine Lagarde said was unlikely only until recently - equity traders may also soon work out how that impacts their equity risk premium models.

We'll probably find out soon.

(Julien Ponthus)

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STRONG JOBS DATA TIGHTENS FED'S OUTLOOK (1109 EST/1609 GMT)

The strong labor market report on Friday was a boost for anyone worried about the strength of the U.S. economy, but it keeps the Fed on a tightrope with the first hurdle whether to hike interest rates by 25 or 50 basis points in March.

Economists and market participants said the upward revisions in the labor report put the jobs trend more in line with how they had seen the economy before the Omicron variant led so many workers to call in sick and cloud the jobs picture.

The strong data highlights the Federal Reserve's gradualist approach to policy and will bring back talk of a 50 bps hike in March, said David Petrosinelli, senior trader at InspereX.

"It's disturbing that the Fed is still buying bonds and hasn't raised rates yet," Petrosinelli told Reuters.

"Does this is increase the probability of a 50 basis points in March? You bet it does. I don't think we're going to get that because I think this Fed has locked themselves in to a gradualist regime and a gradualist approach."

Concerns that the Fed will be forced to act more urgently could come back to the fore and be a headwind for equities, said Matt Peron, director of research at Janus Henderson Investors.

The labor report was especially strong in "re-opening" sectors and together with wage gains continues to spur the inflationary "wall of worry," he said.

"Our fears that the first half of 2022 would be 'choppy' for markets are still holding and we are not out of the woods yet," Peron said.

Morgan Stanley said a Fed in tightening mode historically brings lower returns and great uncertainty for equities.

"We remain sellers of rallies and of the view that S&P 500 fair value remains closer to 4,000 tactically," the bank's research team said. The 4,000 level represents more than a 10% decline from the benchmark's close on Thursday.

The data made it clear that the labor market before Omicron was much stronger than previously believed, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"It's very tempting to argue that the January data mean that all danger of an Omicron hit has passed," he said. "We're a bit more cautious."

Shepherdson noted that the year-over-year wage growth jumped to 5.7%, but the three-month-on-previous-three-month annualized rate rose to a startling 7.7%.

"No matter how bullish you are about productivity growth, the Fed can't live with that pace," Shepherdson said.

The report showed a jump in the labor participation rate to 62.2%, a surprise because Omicron was believed to have put a crunch on people seeking work.

People are more willing to seek work, which should improve the overall labor market landscape if it continues and ease inflationary pressures, said Russell Price, chief economist at Ameriprise Financial Services Inc in Troy, Michigan.

"The wage increases that we've seen are having the positive effect of drawing more people back into the job market," Price said, adding that "it would alleviate some of the upward pressure on inflation."

The results also suggest that businesses have been more willing to hold on to as many seasonal workers as they could as a means of overcoming ongoing labor market tightness, he said.

(Herbert Lash)

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U.S. STOCKS MIXED AS JOBS DATA STIRS THE POT (1009 EST/1509 GMT)

Major U.S. indexes are mixed in early trade on Friday. This as a boost from Amazon.com's results is helping to counter an unexpected jump in U.S. growth in January which is fanning inflation fears.

The U.S. 10-Year Treasury yield has thrust above 1.90%, and is on the verge of its highest weekly close since December 2019.

With this, the Nasdaq (.IXIC) is rising nearly 1%, while the S&P 500 (.SPX) is slightly green. The Dow (.DJI) is down slightly.

Of note, however, both the SPX and the DJI are attempting to use their 200-day moving averages (DMA) as support. Here is the S&P 500's daily chart:

SPX02042022

The SPX hit a low of 4,464.63 and the DJI fell to 34,968.82 before bouncing. Their closely watched longer-term moving averages now reside around 4,444 and 35,000. The Nasdaq is well below its 200-DMA which is at 14,735.

Here is where markets stand in early trade:

earlytrade02042022

(Terence Gabriel)

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U.S. FUTURES PRESSURED AFTER ABOVE ESTIMATES PAYROLLS PRINT (0900 EST/1400 GMT)

U.S. equity index futures are under pressure after the headline jobs number in the January payrolls report came in well above estimates, and the December number was revised sharply higher. With this, wage data came in on the hot side vs estimates :

NFP02042022

Nasdaq 100 futures , which were up more than 2% in overnight trade, with a boost from Amazon.com's results, are now off around 0.5%.

S&P 500 futures and Dow futures are also posting modest declines of around 0.5%.

Meanwhile, the U.S. 10-Year Treasury yield is pushing over 1.90%, and is hitting fresh highs going back to January 2020.

Regarding the jobs data, Sam Stovall, chief investment strategist at CFRA Research, said "With the payroll numbers coming substantially stronger than expected, it will help relieve some economic growth worries at a time the Fed is ready to tap the break."

Stovall added "This definitely would relieve investor worries that a 25 or 50 basis point rate hike in March would be adverse for economic growth and it gives the Fed a reason to start the rate hike cycle at a 50-bps hike and leaves on the table a possibility of four or more rate hikes."

Here is your premarket snapshot:

Premarket02042022

(Terence Gabriel, Shashank S. Nayar)

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Terence Gabriel is a Reuters market analyst. The views expressed are his own

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