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MORNING BID-A fine balance

· 02/05/2021 02:56
MORNING BID-A fine balance

A look at the day ahead from Sujata Rao

What's not to like? COVID caseloads are falling, U.S. Democrats are working on bypassing Republican roadblocks to pass President Joe Biden's spending plan, U.S. Q4 earnings are bucking forecasts for a decline and the Reddit frenzy has abated.

So world stocks are back near record highs, following Wall Street's 1% gain on Monday. U.S. and European equity futures point to the robust session ahead. And oil is near $60 a barrel, a one-year high.

It's also payrolls Friday in the United States. Economists expect 50,000 jobs added in January but they will want to see a number that's not too weak, yet not strong enough to derail Biden's big fiscal spending push.

And it's a fine balance too on markets. Robust economic data and the stimulus promise are pushing borrowing costs higher, with the 2-year/10-year U.S. yield curve reaching the steepest since 2017.

So far, it's good news for reflation punts such as travel shares, and central banks are still expected to cap extraordinary yield moves.

And little sign the dollar, set for its best week in three months, is disrupting risk-on. Proof? Most emerging market currencies such as the rand or the lira are up 1%-3% on the week.

Finally, palpable relief still on UK assets after the Bank of England appeared to put negative interest rates on the backburner for now -- British 10-year yields have jumped to the highest since last March.

Key developments that should provide more direction to markets on Friday:

-German manufacturing output/industrial orders

-UK Halifax house prices

-U.S non-farm payrolls

-BOE's Bailey to speak

-ECB policymakers Luis de Guindos, Isabel Schnabel, Pierre Wunsch, Olli Rehn and Robert Holzmann speak

-Danish brewer Carlsberg reported Q4 sales below expectations but expects operating profit to grow 3% to 10% in 2021.

-BNP Paribas' BNPP.PA saw pandemic charges erode Q4 earnings; Raiffeisen Quarterly profit beat estimates and it plans to pay a 2020 dividend of 0.48 euro.

-U.S. firms Cardinal, Lazard, Estee Lauder to post results

The patchwork recovery: Jobs by industryhttps://tmsnrt.rs/3jfuSdW

(Reporting by Sujata Rao; editing by)

(( sujata.rao@thomsonreuters.com ; +44 207 542 6176/020 7536 7473/44 7990567646))