MORNING quote AMERICAS-Bonds simmer as payrolls use reality check

A look at the day ahead in U.S. and global markets from Mike Dolan After a torrid start to the year for U.S. Treasuries and worldwide sovereign bonds at big, Friday tests the 'hot economy' thesis by revealing simply how tight U.S. labor markets still are as a. new administration takes office in Washington this month.

The release on Friday of the U.S. December work report. ties up a range of tasks market updates this week - with. something of a combined image so far.

The weekly jobless series released on Wednesday was a. standout, as it indicated the most affordable unemployment claims in. 8 months. November task openings also increased. However personal. sector payroll growth missed out on forecasts and Thursday saw data. showing both employing and layoffs slowed last month.

With the nationwide payrolls report possibly a decider on. all the above, agreement expectations are for tasks development to. have softened in general in December to some 160,000 - with an. unemployment rate stable at 4.2%.

If that turns out, the Federal Reserve will likely feel. justified with a position of more cautious rate cuts ahead. Its. policymakers have shown just two more quarter point. decreases for this year, although futures markets price. marginally less than that - some 41 basis points since Friday. and with the very first 25bp not coming till June.

On Thursday, the current Fed speakers slanted hawkish.

Kansas City Federal Reserve President Jeff Schmid signified a. reluctance to cut rates of interest again. I think we are near. the point where the economy needs neither restriction nor. assistance and that policy must be neutral, Schmid stated.

Fed guv and well-known hawk Michelle Bowman stated she. supported last month's interest rate cut as the final step in. the central bank's financial policy recalibration.

With Thursday's market closures for the funeral of former. President Jimmy Carter acting as something of a firebreak in an. anxious first full trading week of the year, long-dated Treasury. yields stay raised ahead of the. payrolls report.

At 4.94%, the 30-year 'long bond' yield is still stalking 5%. for the very first time since October 2023, while 10-year standard. yields at 4.70% stay near this week's 8-month highs.

Stimulated in part by some severe winter snaps across. the Northern hemisphere, oil costs stay an aggravator and. U.S. crude struck its greatest because October.

The dollar index also remains pumped up near the. two-year high set last week.

With Wall Street stock markets closed on Thursday, futures. there are somewhat at a loss ahead of Friday's. resuming.

Naturally the payrolls report addresses just among the bond. market issues, with anxiety and unpredictability about the degree. of President-elect Donald Trump's organized tax cuts, tariff walkings. and migration curbs still a wildcard.

But to the degree that any or all of those policy guarantees. are inflationary - in a currently sticky inflation environment -. the work report sets the tone ahead of Trump's. inauguration on Jan. 20.

For stock markets, the concentrate on bonds may start to shift. rather as the fourth-quarter incomes season gets underway -. with S&P 500 companies on aggregate expected to have clocked 10%. earnings development in 2015 and analysts pencilling an additional 14%. gain in 2025.

Delta Airlines, Walgreens Boots Alliance and Constellation. Brands kick off the reporting season on Friday - with the huge. banks due next week.

For tech companies there was great news from Taiwan, with the. world's largest agreement chipmaker TSMC reporting. fourth-quarter revenue that quickly beat projections as it enjoyed. the benefit of artificial intelligence demand.

Overseas, the bond market ructions have rippled across the. world today too - with Britain's government bond market in. the crosshairs as 30-year gilt yields there struck 27-year highs. and 10-year benchmarks reaching levels not seen. because 2008.

Even though those gilt yield increases are mostly just in line. with what's happened in U.S. Treasuries a distressing. development in the UK is that sterling has. turned tail too and stopped following domestic yields greater.

Gilts remained on edge first thing Friday, however yields. stayed below the week's peaks and the pound recovered some. ground from Thursday's 14-month low versus the dollar.

Stocks in Asia were under pressure, with the main Chinese. and Japanese indexes down more than 1% each.

Inflation numbers from China on Thursday showed the country. still fighting pervasive deflationary pressures.

China's central bank is anticipated to deploy this year its. most aggressive monetary tactics in a years as it tries to. promote the economy and soften the blow of impending U.S. tariff hikes - however in doing so it risks tiring its. firepower.

Friday's statement by the People's Bank of China that it. has actually suspended treasury bond purchases due to the property's. shortage highlighted the constraints of its resources as it. challenges a progressively difficult financial environment. Key advancements that should offer more instructions to U.S. markets in the future Friday:. * US December employment report, University of Michigan January. consumer sentiment survey, Canada Dec work report. * US corporate earnings: Delta Airlines, Walgreens Boots. Alliance, Constellation Brands. * Britain's financing minister Rachel Reeves will go to China

(source: Reuters)