Markets cautiously lower ahead of US payroll reports

European markets opened lower on Friday as investors awaited U.S. non-farm payroll data and news from China regarding its zero-covid policy.

Oil and gas were the most heavily affected sectors, with both falling 1% shortly after the market opened. Meanwhile, the Pan-European Stoxx 600 fell 0.5%. There is a report that the European Union is in the process of tentatively agreeing to a $60 barrel price cap on Russian seaborne oil, which has been seen by Reuters. This price cap, proposed by the Group of Seven, still needs to be approved by all 27 EU governments through a written procedure on Friday to become effective.

European data releases include data on German imports and exports, as well as producer price data for the eurozone. The EUR/USD pair entered a consolidation phase above 1.0500 at the beginning of the trading session on Friday after reaching its highest level since June earlier in the day at 1.0540. Jobs data from the US could cause volatility in the pair in the early American session.

More slowdown was reported in ISM PMI

According to the data released on Thursday by the US Bureau of Economic Analysis, inflation in the US declined to 6% yearly in October, as measured by the Consumer Price Index (CPI) of the Personal Consumption Expenditures (PCE), down from 6.3% in September based on the inflation data. The US Dollar continued to weaken against its competitors due to this reading coming in below market expectations of 6.2%.

Later in the session, the USD selloff gained steam as the ISM reported that the Manufacturing PMI fell to 49 in November from 50.2, pointing to a slowdown in the sector. There is a more important change that should be noted in the PMI survey, which is that the Price Paid component dropped from 49 to 43, indicating a deceleration in the sector's input inflation.

Asian markets eased

There was a slight easing in Asia-Pacific market sentiment on Friday after China signalled a slight relaxation in its strict Covid restrictions, which have been in place since August. The Nikkei 225 and the TOPIX were seen as losing 1.6% and 1.6%, respectively, of their value at the end of the day. After growing public discontent with the country's anti-COVID restrictions, there was a wave of unprecedented protests that broke out across the country this week, and the government relaxed some quarantine and movement restrictions in two major cities as a result.

There are considerable hopes that the government will be forced to relax its COVID policies as a result of recent weak PMI data, which highlighted even more pressure on the Chinese economy in recent months. Despite this, Beijing has not yet given an official response to such a move.

NFP in the spotlight

Stateside, S&P 500 futures were slightly lower as market participants looked ahead to the November jobs report. It is expected that the Labor Department will release its report on non-farm payrolls, the unemployment rate, and hourly earnings at 8:30 a.m. ET on Friday. It is estimated that the economy created 200,000 jobs in November, according to economists. This would be a decrease compared to what it added in October when it gained 261,000 people. This year, the Fed has also targeted some cooling of the labour market to combat inflation. Despite this, Powell warned that U.S. interest rates might peak at higher levels than expected if inflation remains stubbornly high in the country for some time.