Payrolls, Eurozone CPI, Huobi woes - what's moving markets

© Reuters

By Geoffrey Smith 

Investing.com -- The U.S. releases its official labor market report for December, and the risks appear to be for an upside surprise to the consensus forecast of a 200,000 net gain in nonfarm payrolls. The Eurozone's headline inflation rate falls sharply in December but underlying price pressures remain strong. Stocks are set to open modestly higher with Tesla (NASDAQ:TSLA) in the firing line again after it cut prices in China. Crypto exchange Huobi is looking more and more like the next domino to fall as it announces mass layoffs, and the U.S., Germany and France are all about to start sending armored fighting vehicles to Ukraine. Here's what you need to know in financial markets on Friday, 6th January. 

1. Jobs report set to highlight labor market tightness

The U.S. releases its December jobs numbers at 08:30 ET (13:30 GMT)  into a market that is slowly realizing how much it has understated the tightness of the labor market. Layoffs may be rising sharply, but those laid off are mostly walking straight into new jobs, especially those whose computer skills are no longer required by Big Tech but are massively in demand at smaller companies. 

The consensus is for nonfarm payrolls to rise 200,000 through the middle of December, but the risk appears to be skewed for an upside surprise, after a strong ADP report on Thursday and the lowest weekly initial jobless claims number in three months.

The jobs report won't be the only game in town though. The Institute of Supply Management's non-manufacturing business survey for December is due at 10:00 ET, along with durable goods and factory orders data for December. The Federal Reserve's Lisa Cook, Raphael Bostic, Esther George and Tom Barkin may all weigh in with their thoughts on the day's developments in the hours following.

2. Eurozone inflation falls thanks to government energy price caps

Eurozone inflation fell surprisingly sharply in December, bolstering hopes that the worst is over and that the European Central Bank can stop hiking interest rates soon.  

However, the decline was due overwhelmingly to government measures to cap household energy bills, an expensive stunt that will be hard to repeat but may at least persuade many across the region not to push too hard for wage increases that would only stoke inflation further.

Headline inflation fell to 9.2% from 10.1% thanks to a 0.3% drop in prices on the month. But the ‘core’ CPI measure that strips out food, alcohol, tobacco and energy accelerated to 5.2%, more than twice the ECB’s target. The euro was largely unimpressed, trading down 0.1% against the dollar.  

3. Stocks set to tread water ahead of payrolls data; Tesla under pressure after China price cuts

U.S. stock markets are set to open with a modest bounce. They had fallen by more than 1% on Thursday in response to data that did little to support expectations of a first Federal Reserve rate cut this year.

By 06:30 ET, Dow Jones futures were up 43 points, or 0.1%, while S&P 500 futures were up less than 0.1% and Nasdaq 100 futures were down 0.1%.

Tech was once again under pressure after South Korean chip giant Samsung (KS:005930) said its operating profit is likely to have fallen by nearly 70% in the fourth quarter due to sharp drops in demand for memory chips, yet more evidence of the post-pandemic bust in electronics and appliances.

Also under pressure was Tesla stock, which shed another 5% after it announced cuts of between 6% and 13% on its Model 3 and Model Y prices in China, after being outsold by local rival BYD (HK:1211) and – shock, horror! – General Motors’ (NYSE:GM) local EV unit in December.

4. Huobi to cut staff as viability doubts grow

Huobi, one of the world’s largest crypto exchanges, is to lay off 20% of its 1,100 staff, in an effort to conserve cash after the implosion of FTX led to a slump in trading volumes.

Fears for Huobi’s viability have been visible in the slow decline of USDD, an algorithmic stablecoin devised by advisory board member Justin Sun and his associates, which has been actively traded on Huobi in the past. It has increasingly struggled to defend its peg against the dollar in recent days, falling to 98.00c as of 06:45 ET.

Crypto research house Arkham Intelligence noted blockchain evidence that Sun had been going to unusual lengths to avoid putting pressure on the Tron network that he set up in 2014. The pressure on USDD increased after Thursday’s news that Silvergate, a bank used by most of the largest U.S. crypto exchanges, had suffered an $8 billion deposit run.

5. Ukraine closer to getting western tanks

It’s the Orthodox church’s Christmas, and Ukraine has two very different presents. Russian President Vladimir Putin on Thursday ordered a 36-hour ceasefire along the whole of the front in Ukraine.

However, Ukrainian President Volodymyr Zelensky appears to prefer the gifts from France, the U.S. and Germany, all of which have promised to deliver modern armored fighting vehicles in the coming weeks and months.

That represents a significant step up in the kind of military hardware that the West is sending to Ukraine, ahead of an expected Russian offensive in the spring. It brings the NATO alliance closer to shipping what Ukraine has repeatedly asked for – the state-of-the-art Leopard, Abrams and Leclerc battle tanks.