Stocks are in waiting position ahead of Nonfarm data

U.S. stocks will open higher Friday as we expect U.S. Nonfarm Payrolls figures for June to come out higher than estimated by economists following the footsteps of yesterday’s ADP figures.

U.S. job data might show that the economy is coming out of the fog
S&P 500 Index futures are currently unchanged ahead of the open. Today’s and maybe this week’s most important event is U.S. Nonfarm Payrolls in June expected (12:30 GMT) to come out at 105K up significantly from May’s disappointing figures of only 54K. We believe the probability of Nonfarm figures coming out better than anticipated to be skewed to the upside despite ADP employment change figures are normally not a very good predictor of Nonfarm Payrolls figures. As we wrote in our latest quarterly outlook we expect the economy to pickup somewhat in the second half following the recent months’ weak economic data.

Adding jobs in the range 100-150K will take the U.S. economy many years to return to its structural unemployment rate level so the labour market is still, combined with the housing market, the two weakest chain links in the U.S. economy. However, if the economy picks up in the second half, Nonfarm Payrolls rolling six months average might begin climbing towards 175K MoM in net change.

PIIGS bonds under pressure again, U.K. sees inflationary pressure
In Europe, the Euro STOXX 50 Index futures are currently down 0.2 percent driven by declines in Banco Santander (-1.4%), BNP Paribas (-1.8%) and BBVA (-2.4%) as financials are still under pressure due to the structural problems in Europe’s PIIGS sovereign credit markets. 10 year government bonds in Italy and Spain are falling in today’s session with yields now standing at 5.29 and 5.64 percent respectively.

Inflationary pressures are still showing its ugly face in the U.K. as the country’s PPI figures for June came out higher than expected at 5.7 percent YoY and prior periods figures were also revised up. Not the kind of data Mervyn King at the Bank of England wishes to see as BoE continues to keep interest rates low compared to the ECB that hiked rates yesterday.