A look at the day ahead in European and global markets from Rae

Wee

Closely watched U.S. nonfarm payrolls data on Friday marks

the final piece in an eventful week that's been nothing short of

a boon for the global rate cut rally. The durability of that

optimism depends on whether those jobs figures affirm the case

for a Fed rate cut or not.

Expectations are for the world's largest economy to have

added 185,000 jobs last month - slightly more than April's

175,000, which was the smallest gain in half a year.

With a slew of economic data this week pointing to an easing

of labour market conditions, that puts even more emphasis on

Friday's numbers to reinforce that narrative. So any upside

surprise could deliver a nasty shock to markets.

Investors have already been adding to bets the Fed could

ease rates in September, following similar moves by the European

Central Bank and Bank of Canada this week.

World stocks have rallied, bond yields compressed and the

dollar was headed for a weekly loss.

The two-year U.S. Treasury yield ticked slightly higher on

Friday, having fallen for six straight days in the previous

session.

That's the longest uninterrupted decline going back to late

last year, according to Tradeweb data, or back to March 2020,

according to Reuters/Refinitiv indicative pricing.

LEFT OUT

China, however, was an outlier to the global rally.

Risk sentiment in the world's second-largest economy turned

sour after a group of U.S. lawmakers said leading Chinese

battery companies with ties to Ford Motor and Volkswagen should

be banned from shipping goods to the U.S., the Wall Street

Journal reported.

Chinese blue-chips fell 0.7%, while Hong Kong's

Hang Seng Tech index tumbled 1.4%.

The negative headlines overshadowed domestic data which

showed China's exports grew more quickly and for a second month

in May, providing some relief to the economy as it seeks a

durable recovery amid a protracted property crisis.

Key developments that could influence markets on Friday:

- Germany industrial output (April)

- Germany imports, exports data (April)

- Euro zone revised GDP (Q1)

- U.S. nonfarm payrolls (May)

(Editing by Sam Holmes)