Jobs Fade, Earnings Move to Forefront as Markets Weigh Policy Signal

A stronger-than-expected U.S. jobs headline has encouraged investors to pare back bets on an imminent Federal Reserve rate cut, shifting attention to upcoming inflation data and a heavy slate of European earnings. Currency moves, a record European equity close, and uneven corporate earnings forecasts frame a cautious market mood ahead of key data and corporate reports.

Key Points

A stronger-than-expected U.S. headline jobs figure has reduced expectations of a near-term Fed rate cut, shifting focus to Friday's inflation report - impacts bond markets and dollar liquidity.
The yen has strengthened about 3% this week following Prime Minister Sanae Takaichi's election win and reassuring comments on fiscal policy - implications for forex and Japanese asset flows.
European equities rallied to a record close for the STOXX 600, while major corporate earnings from autos, beverages, luxury goods, and cosmetics (Mercedes-Benz, Anheuser-Busch InBev, Herms, L'Oreal) are due and will shape sentiment for the region.

A round of European corporate results will dominate investor focus on Thursday after U.S. employment data delivered a mixed message and altered expectations for Federal Reserve policy. The stronger-than-forecast headline number supported the view that the labour market remains resilient, but a closer breakdown and earlier downward revisions point to underlying fragility.

Market participants have trimmed wagers for an immediate easing by the Fed, with pricing now indicating little to no chance of a rate cut in March and leaving open the possibility of a move in June. Policymakers' near-term path will depend on fresh labour market readings and the consumer price data set for release on Friday, which has become the next focal point for traders.

The change in anticipated U.S. policy acted to strengthen the dollar against most major currencies. One notable exception has been the Japanese yen, which has appreciated about 3% this week following the decisive election victory of Prime Minister Sanae Takaichi. Comments from Takaichi easing concerns over fiscal policy have reinforced investor hopes that the incoming government will be fiscally prudent and less likely to yield to opposition pressures.

Equity markets in Europe have shown resilience. The pan-European STOXX 600 index reached a record closing high on Wednesday, and futures suggested a further positive open as the region prepared for corporate updates.

Company results expected on Thursday include reports from Mercedes-Benz, Anheuser-Busch InBev, and Herms, with L'Oreal also among the names in focus. While LSEG data point to an improvement in the broader corporate outlook in Europe, analysts still expect fourth-quarter earnings to fall, potentially marking the region's weakest quarterly performance in seven quarters.

What to watch on Thursday

Economic release: United Kingdom GDP for the fourth quarter and 2025 outlook
Corporate earnings: Mercedes-Benz, Herms, Anheuser-Busch InBev, and L'Oreal

With markets now looking beyond the headline employment figures to finer details and incoming inflation data, investors will be parsing both macro releases and corporate results for clearer signals on growth, pricing power, and the likely path of monetary policy.

Risks

Uncertainty in labour market details and prior downward revisions suggest fragile employment dynamics - risk for consumer-facing sectors and cyclical industries if weakness persists.
Incoming consumer price data will be pivotal for Fed policy direction; surprises could quickly reprice interest-rate expectations, affecting fixed income and interest-sensitive equities.
Disappointing fourth-quarter corporate results across Europe, where earnings are expected to fall and may mark the weakest quarter in seven, pose downside risk to European equities and sector-specific stocks such as autos and luxury goods.

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Key Points

Risks

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