A man walks under an electronic screen showing Japan’s Nikkei stock price index at a conference room in Tokyo, Japan June 14, 2022. REUTERS/Issei Kato

SYDNEY, July 4 (Reuters) – Global stock markets wobbled on Monday as a string of soft U.S. data suggested downside risks to this week’s June payrolls report, while the hubbub around a possible recession always fueled a rally in government bonds.

The search for safety kept the US dollar near 20-year highs, although early action was light with US markets on vacation.

Treasuries were closed, but futures extended their gains, implying 10-year yields were holding at around 2.88% after falling 61 basis points from their June high. .

MSCI’s broadest Asia-Pacific ex-Japan equity index (.MIAPJ0000PUS) was flat, while Japan’s Nikkei (.N225) gained 0.6%.

Chinese blue chips (.CSI300) were little changed as cities in eastern China tightened COVID-19 restrictions on Sunday amid new coronavirus clusters. Read more

EUROSTOXX 50 futures added 0.5% and FTSE futures added 0.6%. However, S&P 500 and Nasdaq futures were down 0.6%, after stabilizing slightly on Friday.

Goldman Sachs analyst David J. Kostin noted that every energy bar in the S&P 500 sector posted negative returns in the first half of the year amid extreme volatility.

“The current bear market has been all about valuations rather than the outcome of lower earnings estimates,” he added.

“However, we expect the consensus profit margin forecast to fall, which will lead to downward revisions to EPS whether or not the economy falls into recession.”

Earnings season begins on July 15 and expectations are significantly lower given high costs and easing data.

The Atlanta Federal Reserve’s widely followed GDP Now forecast fell to -2.1% annualized for the second quarter, implying that the country was already in a technical recession.

Friday’s payrolls report is expected to show job growth slowing to 270,000 in June, with average earnings slowing slightly to 5.0%.

RATES UP, THEN DOWN

Still, the minutes of Wednesday’s Fed monetary policy meeting will almost certainly sound hawkish given that the committee opted to raise rates by 75 basis points.

The market expects about an 85% chance of another 75 basis point hike this month and rates at 3.25-3.5% by the end of the year.

“But the market has also moved toward an increasingly aggressive rate cut profile for the Fed in 2023 and 2024, consistent with a growing risk of recession,” the NAB analysts noted.

“About 60 basis points of Fed cuts are now priced in for 2023.”

In currencies, investor demand for the most liquid safe harbor has tended to benefit the US dollar, which is near two-decade highs against a basket of competitors at 105.04 .

The euro was steady at $1.0432 and not far off its recent five-year low of $1.0349. The European Central Bank is expected to raise interest rates this month for the first time in a decade, and the euro could be lifted if it decides on a more aggressive half-point move.

The Japanese yen also attracted safe haven flows late last week, bringing the dollar down to 135.05 yen from a 24-year high of 137.01.

A strong dollar and rising interest rates did not help non-performing gold, which was pinned at $1,810 an ounce after hitting a six-month low last week.

Fears of a global economic slowdown also plagued industrial metals, with copper hitting a 17-month low after falling 25% from its March high.

Oil prices eased as investors weighed demand concerns against supply constraints. Production restrictions in Libya and a planned strike among Norwegian oil and gas workers were just the latest blows to production.

Brent slid 34 cents to $111.29, while U.S. crude lost 30 cents to $108.13 a barrel.

Story by Wayne Cole; Editing by Sam Holmes and Shri Navaratnam

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